What changed in this filing

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Item 9A. Controls and Procedures

2025-09-05 compared with 2024-09-06 · 501 added, 382 removed, 1289 unchanged (41% of the section changed)

14 unchanged sentences

Based upon such evaluation, the Company’s management concluded that its internal control over financial reporting was effective as of June 30, 2025.

For purposes of evaluating the Company’s internal control over financial reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting, the Company did not include the internal controls of TD Finland Oy and Katsa Oy (collectively, “Katsa”), which the Company acquired on May 31, 2024, and which are included in the consolidated balance sheets of the Company as of June 30, 2024, and the related consolidated statements of operations and comprehensive income, cash flows, and changes in shareholders’ equity, for the year then ended.

The Company reports Katsa’s operations on a one-month lag.

Therefore, only the opening balance sheet and a bargain purchase gain impact the fiscal year 2024 results.

Katsa constitutes 12.7% of total assets as of June 30, 2024, and 0% and 0% of net sales and income from operations, respectively, for the year then ended.

For purposes of evaluating the Company’s internal control over financial reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting, the Company did not include the internal controls of Kobelt, which the Company acquired on February 14, 2025, and which are included in the consolidated balance sheets of the Company as of June 30, 2025, and the related consolidated statements of operations and comprehensive income, cash flows, and changes in shareholders’ equity, for the year then ended.

RSM US LLP, an independent registered public accounting firm, has audited the Company’s internal control over financial reporting as of June 30, 2025, as stated in their report which appears herein.

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Committee Membership” in the Proxy Statement for the Annual Meeting of Shareholders to be held October 30, 2025, which is incorporated into this report by reference.

For information with respect to the Company’s Insider Trading Policy, see “Insider Trading Policy” in the Proxy Statement for the Annual Meeting of Shareholders to be held October 30, 2025, which is incorporated into this report by reference.

For information regarding compliance with Section 16(a) of the Securities Exchange Act of 1934, see “Delinquent Section 16(a) Reports” in the Proxy Statement for the Annual Meeting of Shareholders to be held October 30, 2025, which is incorporated into this report by reference.

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Certain Relationships and Related Transactions, Director Independence

For information with respect to transactions with related persons and policies for the review, approval or ratification of such transactions, see “Corporate Governance – Review, Approval or Ratification of Transactions with Related Persons” in the Proxy Statement for the Annual Meeting of Shareholders to be held October 31, 2024, which is incorporated into this report by reference.

For information with respect to transactions with related persons, see “Corporate Governance – Transactions with Related Persons” in the Proxy Statement for the Annual Meeting of Shareholders to be held October 30, 2025, which is incorporated into this report by reference.

For information with respect to director independence, see “Corporate Governance – Board Independence” in the Proxy Statement for the Annual Meeting of Shareholders to be held October 30, 2025, which is incorporated into this report by reference.

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Report of Independent Registered Public Accounting Firm

Shareholders and the Board of Directors of Twin Disc, Incorporated

To the Shareholders and the Board of Directors of Twin Disc, Incorporated

Opinion on the Internal Control Over Financial Reporting

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We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements of the Company and our report dated September 5, 2025 expressed an unqualified opinion.

As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded TD Finland Oy and Katsa Oy, (collectively, “Katsa”) from its assessment of internal control over financial reporting as of June 30, 2024 because it was acquired by the Company in a purchase business combination in the fourth quarter of fiscal 2024.

We have also excluded Katsa from our audit of internal control over financial reporting.

Katsa is a wholly owned subsidiary whose total assets, net sales and income from operations represent approximately 12.7%, 0.0% and 0.0%, respectively, of the related consolidated financial statement amounts as of and for the year ended June 30, 2024.

As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded Kobelt Manufacturing Co.

(“Kobelt”) from its assessment of internal control over financial reporting as of June 30, 2025 because it was acquired by the Company in a purchase business combination in the third quarter of fiscal 2025.

We have also excluded Kobelt from our audit of internal control over financial reporting.

Kobelt is a wholly owned subsidiary whose total assets, net sales and income from operations represent approximately 6.0%, 1.4% and 0.9%, respectively, of the related consolidated financial statement amounts as of and for the year ended June 30, 2025.

Basis for Opinion

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Report of Independent Registered Public Accounting Firm

Shareholders and the Board of Directors of Twin Disc, Incorporated

To the Shareholders and the Board of Directors of Twin Disc, Incorporated

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Twin Disc, Incorporated (the Company) as of June 30, 2024 and 2023, the related consolidated statements of operations and comprehensive income, changes in equity and cash flows for each of the two years in the period ended June 30, 2024, and the related notes to the consolidated financial statements and schedule (collectively, the financial statements).

We have audited the accompanying consolidated balance sheets of Twin Disc, Incorporated and its subsidiaries (the Company) as of June 30, 2025 and 2024, the related consolidated statements of operations and comprehensive income, changes in equity and cash flows for each of the two years in the period ended June 30, 2025, and the related notes to the consolidated financial statements and schedule (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2025, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of June 30, 2025, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated September 5, 2025 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Emphasis of Matter

As discussed in Note A to the consolidated financial statements, the Company elected to change its method of accounting for actuarial gains and losses related to its pension and other postretirement benefit plans during the prior year ended June 30, 2023.

The Company adopted this change on a retrospective basis.

Basis for Opinion

39 unchanged sentences

151,951 130,484

Assets held for sale

Prepaid expenses

Other current assets

19,914 16,870

Total current assets

7 unchanged sentences

Deferred income taxes

Other noncurrent assets

$ 355,562 $ 312,058

3 unchanged sentences

$ 3,000 $ 2,000

Current maturities of right-of use operating lease obligations

Accounts payable

6 unchanged sentences

28,446 23,811

Operating lease obligations

Right-of-use operating lease obligations

14,357 14,376

10 unchanged sentences

125,414 129,592

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

3,730 ( 6,905 )

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246,433 208,709

Cost of goods sold - Sale of boat management system product line and related inventory

Cost of goods sold - other

92,726 83,319

2 unchanged sentences

Restructuring expenses

Other operating income

Income from operations

11,479 16,060

Other Income (expense):

2 unchanged sentences

Bargain purchase gain

Other income, net

Other (expense) income, net

( 5,472 ) 1,607

Income before income taxes and noncontrolling interest

( 8,118 ) 3,888

Income before income taxes and noncontrolling interest

Income tax expense

Net (loss) income

( 1,599 ) 11,246

1 unchanged sentence

( 295 ) ( 258 )

Net income attributable to Twin Disc, Incorporated

Net (loss) income attributable to Twin Disc, Incorporated

$ ( 1,894 ) $ 10,988

Dividends per share

Income per share data:

Basic income per share attributable to Twin Disc, Incorporated common shareholders

$ 0.16 $ 0.12

Diluted income per share attributable to Twin Disc, Incorporated common shareholders

(Loss) income per share data:

Basic (loss) income per share attributable to Twin Disc, Incorporated common shareholders

$ ( 0.14 ) $ 0.80

Diluted (loss) income per share attributable to Twin Disc, Incorporated common shareholders

$ ( 0.14 ) $ 0.79

Weighted average shares outstanding data:

4 unchanged sentences

Comprehensive income

Net (loss) income

$ ( 1,599 ) $ 11,246

2 unchanged sentences

Foreign currency translation adjustment

Unrealized gain on hedges, net of income taxes of $ 0 and 0 , respectively

Unrealized (loss) gain on hedges, net of income taxes of $ 0 and $ 0 , respectively

Comprehensive income

8 unchanged sentences

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income

$ ( 1,599 ) $ 11,246

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization

Gain on disposal of assets

Gain on sale of assets

( 98 ) ( 91 )

Loss on write-down of industrial product inventory

Loss on sale of boat management system product line and related inventory

Bargain purchase gain on Katsa, OY acquisition

Restructuring expenses

Gain on Katsa acquisition

Restructuring charges

Provision for deferred income taxes

17 unchanged sentences

( 15,157 ) ( 8,707 )

Acquisition of Katsa, OY, less cash acquired

Proceeds from sale of fixed assets

Acquisition of Kobelt, less cash acquired

Acquisition of Katsa, less cash acquired

Proceeds from sale of property, plant, and equipment

( 653 ) ( 184 )

Net cash used by investing activities

1 unchanged sentence

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings under long-term debt agreement

Borrowings under revolving loan arrangements

7 unchanged sentences

Dividends paid to shareholders

( 2,284 ) ( 1,695 )

Dividends paid to noncontrolling interest

2 unchanged sentences

( 1,256 ) ( 1,791 )

Net cash provided (used) by financing activities

Net cash (used) provided by financing activities

( 965 ) 2,754

Effect of exchange rate changes on cash

2,406 ( 2,237 )

Net change in cash

( 3,961 ) 6,807

Beginning of period

12 unchanged sentences

Comprehensive

Balance at June 30, 2022 (As Adjusted)

(Loss) Income

Balance at June 30, 2023

$ 42,855 $ 120,299 $ ( 5,570 ) $ ( 12,491 ) $ 424 $ 145,517

10,988 258 11,246

Dividends paid to shareholders

( 1,695 ) ( 254 ) ( 1,949 )

Translation adjustments

1 unchanged sentence

Benefit plan adjustments, net of tax

Unrealized gain on hedges, net of tax

Cash dividends

( 2,114 ) ( 2,114 )

Unrealized gain on hedges, net of tax

Compensation expense

3 unchanged sentences

41,798 129,592 ( 6,905 ) ( 9,783 ) 352 155,054

Net (loss) income

( 1,894 ) 295 ( 1,599 )

5 unchanged sentences

( 3,399 ) ( 3,399 )

Unrealized gain on hedges, net of tax

Unrealized loss on hedges, net of tax

( 1,851 ) ( 1,851 )

Compensation expense

10 unchanged sentences

Twin Disc designs, manufactures and sells marine and heavy duty off‑highway power transmission equipment.

The Company has manufacturing locations in the United States, Belgium, Finland, Italy, the Netherlands, and Switzerland.

The Company has manufacturing locations in the United States, Belgium, Canada, Finland, Italy, the Netherlands, and Switzerland.

In addition to these countries, it has distribution locations in Singapore, China, Australia and Japan.

Products offered include:

marine transmissions, azimuth drives, surface drives, propellers and boat management systems as well as power-shift transmissions, hydraulic torque converters, power take-offs, industrial clutches and controls systems.

The Company sells its products to customers primarily in the pleasure craft, commercial and military marine markets, as well as in the energy and natural resources, government and industrial markets.

The Company sells its products to customers primarily in the pleasure craft, commercial and military marine markets, as well as in the energy and natural resources, government, military, and industrial markets.

The Company's worldwide sales to both domestic and foreign customers are transacted through a direct sales force and a distributor network.

On February 14, 2025, the Company completed the acquisition of 100 % of the outstanding common stock of Kobelt Manufacturing Co.

Based in Surrey, British Columbia, Canada, Kobelt is a manufacturer of controls, propulsion, steering, and braking systems to the marine, oil and gas, and industrial markets.

The provisional fair value estimates of Kobelt's deferred income taxes, property, plant and equipment, net and intangible assets, net, are pending final review by the Company, and Kobelt is included in the Company's manufacturing segment.

On May 31, 2024, the Company completed the acquisition of 100 % of the outstanding common stock of Katsa Oy (“Katsa”).

1 unchanged sentence

Katsa also provides a wide range of after-sales services, including spare part deliveries, reverse engineering, modeling, and gearbox refurbishment.

Basis of Presentations ‑‑The consolidated financial statements and information included in this Annual Report on Form 10 -K (“Form 10 -K”) include the financial results of Katsa (the opening balance sheet and operations on a one -month lag), and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission.

Katsa is included in the Company’s manufacturing segment.

Basis of Presentations ‑‑The consolidated financial statements and information included in this Annual Report on Form 10 -K (“Form 10 -K”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission.

The financial statements have been prepared in accordance with Generally Accepted Accounting Principles of the United States of America.

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Consolidation Principles ‑‑The consolidated financial statements include the accounts of Twin Disc, Incorporated and its wholly-owned domestic and foreign subsidiaries.

One foreign subsidiary is included based on a fiscal year ending May 31, to facilitate prompt reporting of consolidated results.

All significant intercompany transactions have been eliminated.

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subsidiaries that use the local currency as their functional currency are translated using the current exchange rate for assets and liabilities, the weighted-average exchange rate for the year for revenues and expenses, and the historical exchange rate for the year for equity.

The resulting translation adjustments are recorded as a component of accumulated other comprehensive loss, which is included in equity.

The resulting translation adjustments are recorded as a component of accumulated other comprehensive income (loss), which is included in equity.

Gains and losses from foreign currency transactions are included in earnings.

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Any cost or equity method interest that the Company holds in the acquired company prior to the acquisition is re-measured to fair value at acquisition with a resulting gain or loss recognized in income for the difference between fair value and the existing book value.

As of June 30, 2024, there were no operational results from Katsa included in the fiscal 2024 results of the Company.

Cash --The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalent.

3 unchanged sentences

The Company has not experienced any losses and does not believe that significant credit risk exists as a result of this practice.

Accounts Receivable --These represent trade accounts receivable and are stated net of an allowance for credit losses of $ 1,383 and $ 1,221 at June 30, 2024 and 2023, respectively.

Accounts Receivable, net --These represent trade accounts receivable and are stated net of an allowance for credit losses of $ 1,548 and $ 1,383 at June 30, 2025 and 2024, respectively.

The Company records an allowance for credit losses for certain customers where a risk of default has been specifically identified as well as provisions determined on a general basis when it is believed that some default is probable and estimable.

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If measured at fair value in the financial statements, long-term debt (including any current portion) would be classified as Level 2 in the fair value hierarchy.

Inventories ‑‑Inventories are valued at the lower of cost or net realizable value (or lower of cost or market where appropriate).

Inventories, net ‑‑Inventories are valued at the lower of cost or net realizable value (or lower of cost or market where appropriate).

Cost has been determined by the last‑in, first‑out (LIFO) method for the majority of inventories located in the United States, and by the first‑in, first‑out (FIFO) or average cost methods for all other inventories.

Management specifically identifies obsolete products and analyzes historical usage, forecasted production based on future orders, demand forecasts, and economic trends, among others, when evaluating the adequacy of the reserve for excess and obsolete inventory.

Assets Held for Sale-- Assets that will be recovered principally through sale rather than in its continuing use in operations are reclassified out of property, plant and equipment and into assets held for sale if all of the following criteria are met:

(a) management, having the authority to approve the action, commits to a plan to sell the asset(s);

(b) the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets;

(c) an active program to locate a buyer, and other actions required to complete the plan to sell the asset have been initiated;

(d) the sale of the asset is probable and the transfer of the asset is expected to qualify for recognition as a completed sale within a year;

(e) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value;

and (f) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that plan will be withdrawn.

Assets held for sale are carried at fair value less costs to sell, or net book value, whichever is lower.

The Company ceases to record depreciation expense at the time of designation as held for sale.

During fiscal 2023, the Company classified as and sold certain assets held for sale and recorded a net gain of approximately $ 4.1 million recorded in other operating income.

During fiscal 2024, the Company reclassified its former corporate headquarters previously classified as held for sale to property, plant and equipment as an idle asset.

The Company continues to market the assets for sale and expects to eventually sell these assets, however, it’s not probable that a sale will occur within one year.

As such, the assets are considered permanently idled and the Company has not resumed depreciation expense during the year ended June 30, 2024.

Property, Plant and Equipment and Depreciation ‑‑Assets are stated at cost.

Property, Plant and Equipment, net and Depreciation ‑‑Assets are stated at cost.

Expenditures for maintenance, repairs and minor renewals are charged against earnings as incurred.

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Fully depreciated assets are not removed from the accounts until physically disposed.

At June 30, 2024, the Company owned one permanently idled facility with a book value of $ 3.0 million.

At June 30, 2025 and 2024, the Company owned one permanently idled facility with a book value of $ 3.0 million.

This facility is assessed for impairment quarterly and depreciation has ceased.

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however, other methods may be used to determine the fair value, including third party valuations when necessary.

Intangible Assets -- Intangible assets primarily consist of customer relationships, technology know-how, and tradenames, all of which are definite-lived.

Intangible Assets, net -- Intangible assets primarily consist of customer relationships, technology know-how, and tradenames, all of which are definite-lived.

They were initially valued at fair value at acquisition, and are amortized over their respective useful lives on the basis of straight line or accelerated, as appropriate.

Goodwill -- The Company reviews goodwill for impairment on a reporting unit basis annually as of the first day of the Company’s fourth fiscal quarter, and whenever events or changes in circumstances (“triggering events”) indicate that the carrying value of goodwill may not be recoverable.

A significant amount of judgment is involved in determining if an indicator of impairment has occurred.

Such indicators may include, among others:

a significant decline in expected future cash flows;

a sustained, significant decline in the Company’s stock price and market capitalization;

a significant adverse change in legal factors or in the business climate;

unanticipated competition;

the testing for recoverability of a significant asset group within a reporting unit;

and slower growth rates.

Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on the Company’s consolidated financial statements.

Goodwill impairment charges are recorded using a simplified one -step approach.

The fair value of a reporting unit, as defined, is compared to the carrying value of the reporting unit, including goodwill.

The fair value is primarily determined using discounted cash flow analyses which is driven by projected growth rates, and which applies an appropriate market-participant discount rate;

the fair value determined is also compared to the value obtained using a market approach from guideline public company multiples.

If the carrying amount exceeds the fair value, that difference is recognized as an impairment loss.

The Company conducted its annual assessment for goodwill impairment as of June 30, 2025 using updated inputs, including appropriate risk-based, country and company specific weighted average discount rates for the Company’s reporting unit with goodwill.

The Company completed its impairment testing as of June 30, 2025 and concluded there were no impairments.

Changes in circumstances, existing at the measurement date or at other times in the future, or in the numerous estimates associated with management’s judgments, assumptions and estimates made in assessing the fair value of goodwill, could result in an impairment charge in the future.

The Company will continue to monitor all significant estimates and impairment indicators, and will perform interim impairment reviews, as necessary.

Derivative Financial Instruments - - The Company has written policies and procedures that place all financial instruments under the direction of the Company’s corporate treasury department and restrict all derivative transactions to those intended for hedging purposes.

5 unchanged sentences

The Company designates certain financial instruments as net investment hedges to reduce the exposure in its foreign currency denominated net investments in wholly-owned subsidiaries.

See Note R, Derivative Financial Instruments, for additional information.

See Note S, Derivative Financial Instruments, for additional information.

Pension and Other Postretirement Benefits Plans -- 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 various actuarial assumptions such as discount rates, expected return on plan assets, compensation increases, retirement and mortality tables, and health care cost trend rates as of that date.

Change in Accounting Method

During the fourth quarter of fiscal year 2023, the Company changed its accounting method related to the recognition of actuarial gains and losses for the Company’s pension and postretirement benefit plans (the “Accounting change”).

Prior to the Accounting change, actuarial gains and losses were recognized as a component of accumulated other comprehensive loss upon annual remeasurement and were amortized into earnings in future periods when they exceeded the accounting corridor, a defined range within which amortization of net gains and losses is not required.

Under the Accounting change, the accounting corridor of 10% of the greater of the projected benefit obligation and plan assets was modified to add full, immediate recognition above a second 20% threshold.

Although the decision to make the Accounting change occurred in the fourth quarter of fiscal year 2023, the actual accounting method change was applied to all calculations for fiscal year end 2023 presented in this Form 10 -K.

Under the new accounting method, actuarial gains and losses are recognized in net periodic benefit cost through a Modified Mark-to-market (“MMTM”) (expense) benefit upon annual remeasurement in the fourth quarter, or on an interim basis as triggering events warrant remeasurement.

The method for recognizing prior service credits (charges) as a component of accumulated other comprehensive loss and amortized into earnings in future periods is not changing.

With respect to the recognition of actuarial gains and losses, while the historical principle was acceptable, the Company believes the Accounting change is preferable as it better aligns with fair value principles by recognizing the effects of economic and interest rate changes in plan assets and liabilities in the year in which the gains and losses are incurred to the degree such accumulated gains and losses exceed the new 20% threshold in addition to amortizing the amounts between the 10% and 20% thresholds over time.

Income Taxes --The Company recognizes deferred tax assets and liabilities for the expected future income tax consequences of events that have been recognized in the Company’s financial statements.

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Goods sold under bill and hold arrangements are recorded as revenue when control has been transferred to the customer and when the reason for the arrangement is substantive, when the product is identified as the customer’s asset, when the product is ready for delivery to the customer, and when the Company cannot use the product or redirect the product to another customer.

While significant customer deposits are collected at certain locations, the Company’s payment terms are short-term in nature and therefore do not include a significant financing component.

In the table below, contract assets are accounts receivable, trade and contract liabilities are customer deposits.

Contract balances for the years ended June 30, 2024, 2023, and 2022 are as follows:

While significant customer deposits are collected at certain locations, the Company’s payment terms are generally short-term in nature and therefore do not include a significant financing component.

At June 30, the Company reported the following contract assets and liabilities, which are presented within trade accounts receivable, net and accrued liabilities on the consolidated balance sheets, respectively.

Deferred revenue represents billings in excess of cost based on milestone billings in the contract.

Contract Assets

Contract Liabilities

Costs in Excess

of Billings, Net

Trade Accounts

Receivable, Net

Total Contract

$ - $ 54,760 $ 54,760 $ 22,937 $ - $ 22,937

1 unchanged sentence

$ 6,988 $ 58,941 $ 65,929 $ 13,538 $ 29,664 $ 43,202

Our contracts are short term in nature, and therefore, the amount included in contract liabilities at the beginning of the year was recognized as revenue in the reporting period.

Our contracts are generally short term in nature, and therefore, the amount included in contract liabilities at the beginning of the year was recognized as revenue in the reporting period.

Shipping and Handling Fees and Costs --The Company records revenue from shipping and handling costs in net sales.

The cost associated with shipping and handling of products is reflected in cost of goods sold.

Recently Issued Not Yet Adopted Accounting Standards -- In December 2023, the FASB issued guidance ASU 2023 - 09, Improvements to Income Tax Disclosures (“ASU 2023 - 09” ), which includes requirements that an entity disclose specific categories in the rate reconciliation and provide additional information for reconciling items that are greater than five percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income rate.

Recently Issued Not Yet Adopted Accounting Standards -- In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2024 - 03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures” (“ASU 2024 - 03” ) to expand expense disclosures by requiring disaggregated disclosure of certain income statement expense line items, including those that contain purchases of inventory, employee compensation, depreciation and amortization.

ASU 2024 - 03 is effective for fiscal years beginning after December 15, 2026, or the Company’s fiscal 2028, and subsequent interim periods, with early adoption permitted.

The amendments should be applied prospectively, but retrospective application is permitted.

The Company is currently assessing the impact of the requirements on our Condensed Consolidated Financial Statements.

In December 2023, the FASB issued guidance ASU 2023 - 09, Improvements to Income Tax Disclosures (“ASU 2023 - 09” ), which includes requirements that an entity disclose specific categories in the rate reconciliation and provide additional information for reconciling items that are greater than five percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income rate.

The standard also requires that entities disclose income (or loss) from continuing operations before income tax expense (or benefit) and income tax expense (or benefit) disaggregated between domestic and foreign.

1 unchanged sentence

The Company is currently evaluating the impact of adopting this standard on its financial statement disclosures.

Recently Adopted Accounting Standards -- In June 2016, the FASB issued updated guidance (ASU 2016 - 13 ) and also issued subsequent amendments to the initial guidance under ASU 2018 - 19, ASU 2019 - 04, ASU 2019 - 05 and ASU 2019 - 10 (collectively ASC 326 ).

ASC 326 requires the measurement and recognition of expected credit losses for financial assets held at amortized cost.

This replaces the existing incurred loss model with an expected loss model and requires the use of forward-looking information to calculate credit loss estimates.

The amendments in this guidance are effective for filers, excluding smaller reporting companies, for fiscal years beginning after December 15, 2019, and for smaller reporting companies for fiscal years beginning after December 15, 2022 ( the Company’s fiscal 2024 ), with early adoption permitted for certain amendments.

ASC 326 must be adopted by applying a cumulative effect adjustment to retained earnings.

The adoption of this guidance did not have a material impact on the Company’s financial statements.

Recently Adopted Accounting Standards -- In November 2023, the FASB issued guidance ASU 2023 - 07, "Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures," which is intended to improve reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses.

In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment and contain other disclosure requirements.

The Company adopted the new annual disclosures as required for fiscal 2025 and will adopt the interim disclosures as required beginning with the first quarter of fiscal 2026.

Special Note Regarding Smaller Reporting Company Status -- Under SEC Release 33 - 10513;

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The Company will continue to determine whether to provide additional scaled disclosures of financial or non-financial information in future quarterly reports, annual reports and/or proxy statements if it remains a smaller reporting company under SEC rules.

ACQUISITION OF KATSA OY

On May 31, 2024, the Company completed the acquisition of 100 % of the outstanding common stock of Katsa Oy (“Katsa”).

Kobelt Manufacturing Co., Ltd., Inc.

On February 14, 2025, the Company completed the acquisition of 100 % of the outstanding common stock of Kobelt.

Based in Surrey, British Columbia, Kobelt is a Canadian manufacturer of controls, propulsion, steering, and braking systems to the marine, oil and gas, and industrial markets.

This acquisition was pursuant to a Sale and Purchase Agreement (“Purchase Agreement”) entered into by Twin Disc Canada Holdings Ltd, a wholly-owned subsidiary of the Company, with the prior owners, on February 14, 2025.

Immediately following the acquisition, Kobelt and Twin Disc Canada Holdings Ltd amalgamated to continue a wholly-owned subsidiary of the Company, retaining the Kobelt name.

Under the terms of the Purchase Agreement, the Company paid an aggregate of approximately $ 17,236 in cash at closing, which included a base payment plus adjustments for net cash, working capital, and earnout.

The Company paid an additional $ 516 for the net working capital adjustment.

The amount is still subject to a final determination of the earnout calculation.

The transaction is considered a taxable stock acquisition.

The Company, in part, financed the payment of the cash consideration through borrowings of $ 6,500 under a new credit agreement entered into on February 14, 2025 with Bank of Montreal (the “Credit Agreement”).

The Credit Agreement is further discussed in Note K, Debt.

Kobelt brings a complementary range of products that enhance and diversify the Company's portfolio, reinforcing Twin Disc’s position as a global leader in power transmission solutions.

Kobelt's in-house foundry and expertise in bronze die casting, precision machining, assembly and testing ensure complete quality control, which aligns perfectly with the Company's commitment to engineering excellence.

With over 60 years of experience designing and manufacturing high-quality products, Kobelt is a well-suited addition to the Twin Disc family.

This acquisition opens new opportunities for growth and partnerships, leveraging the Company's global sales and service teams to drive even greater success.

Since the acquisition date, the Company included in its consolidated statement of operations and comprehensive income net sales and earnings (loss) for Kobelt of $ 4,870 and ($ 164 ), respectively.

Purchase Price Allocation

The acquisition of Kobelt met the criteria for a business combination to be accounted for using the acquisition method under ASC 805, Business Combinations (“ASC 805” ), with the Company identified as the legal and the accounting acquirer.

The Company recognized approximately $ 0.7 million of acquisition-related costs which were expensed in the consolidated statement of operations for the quarter ended March 28, 2025.

The following table details the allocation of the purchase price of the assets acquired and liabilities assumed in connection with the acquisition of Kobelt.

Cash purchase price

Total consideration

Assets acquired:

Trade accounts receivable

Other current assets

Property, plant and equipment

Intangible assets

Total assets acquired

Liabilities assumed :

Accounts payable

Accrued liabilities

Deferred tax liability

Total liabilities assumed

Total identified net assets acquired:

Purchase price consideration

Fair Value Estimate of Assets Acquired and Liabilities Assumed

The Company is continuing its review of the fair value estimate of assets acquired and liabilities assumed during the measurement period, which will conclude as soon as the necessary information regarding the facts and circumstances that existed as of the acquisition date is obtained, or otherwise not available.

This measurement period will not exceed one year from the acquisition date.

At the effective date of the acquisition, the assets acquired and liabilities assumed are required to be measured at fair value.

The fair value estimates are pending completion of some elements, including the finalization of an independent appraisal and final review by the Company.

Accordingly, until the fair values are final, there could be material adjustments to the Company’s consolidated financial statements, including changes to depreciation and amortization expense related to the valuation of property and equipment and intangible assets acquired and their respective useful lives, among other adjustments.

Upon the final determination of the fair value of assets acquired and liabilities assumed, the excess of the purchase price over such fair values is allocated to goodwill.

The final determination of the purchase price, fair values and resulting goodwill may differ significantly from what is reflected in these consolidated financial statements.

The following summarizes the preliminary estimate of fair value of the assets acquired and liabilities assumed at the acquisition date:

Assets acquired and liabilities assumed:

Trade accounts receivable

Inventories, net

Other current assets

Property, plant and equipment

Intangible assets, net

Accounts payable

Accrued liabilities

Deferred tax liability

Total identified net assets acquired:

Purchase price consideration

The following information provides further details about the preliminary estimated net step-up in fair value and/or the estimated fair value at the acquisition date for some key balance sheet items.

Accounts receivable represent contractual amounts receivable from customers.

The amounts approximate fair value.

Inventory consists of:

Raw materials

Work in progress at fair value

Finished goods at fair value

Inventories at fair value

Inventories at book value

The value of property, plant and equipment is estimated at:

Dies, tools and fixtures

Machinery and equipment

Property, plant and equipment at fair value

Property, plant and equipment at book value

Intangible assets consist of :

Estimated average

Customer relationship

Computer Software - External

Developed technology

The amounts approximate fair value.

The Company recorded goodwill of $ 2,806 associated with the acquisition.

The fair value of the purchase price of the business exceeded the fair value of the identifiable assets acquired and liabilities assumed.

On May 31, 2024, the Company completed the acquisition of 100 % of the outstanding common stock of Katsa.

Based in Finland, Katsa is a European manufacturer of custom-designed, high-quality power transmission components and gearboxes for industrial and marine end-markets for a broad range of end market applications.

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This acquisition was pursuant to a Sale and Purchase Agreement (“Purchase Agreement”) entered into by TD Finland Holding Oy, a wholly-owned subsidiary of the Company, with Timo Salli and Jouko Salli, the prior owners, on March 5, 2024.

Under the terms of the Purchase Agreement, the Company paid an aggregate of approximately $ 25.5 million in cash at closing, which included a base payment plus adjustments for net cash and working capital, and transactions costs of $ 0.4 million.

Under the terms of the Purchase Agreement, the Company paid an aggregate of approximately $ 25,522 in cash at closing, which included a base payment plus adjustments for net cash and working capital, and transactions costs of $ 377 .

This amount was subject to a final determination of working capital adjustments.

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The acquisition of Katsa met the criteria for a business combination to be accounted for using the acquisition method under ASC 805, Business Combinations (“ASC 805” ), with the Company identified as the legal and the accounting acquirer.

The Company recognized approximately $ 0.7 million of acquisition-related costs which were expensed in the consolidated statement of operations for the year ended June 30, 2024.

The Company recognized approximately $ 745 of acquisition-related costs which were expensed in the consolidated statement of operations for the year ended June 30, 2024.

The following table details the allocation of the purchase price of the assets acquired and liabilities assumed in connection with the acquisition of Katsa.

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Purchase price consideration

The fair value of the identifiable assets acquired and liabilities assumed of $ 29.6 million exceeded the purchase price of the business, and additional expected working capital adjustment, of $ 25.9 million.

The fair value of the identifiable assets acquired and liabilities assumed of $ 29,608 exceeded the purchase price of the business, and additional expected working capital adjustment, of $ 25,884 .

As a result, the Company reassessed the recognition and measurement of identifiable assets acquired and liabilities assumed and concluded that the valuation procedures and resulting measurements were appropriate.

Accordingly, the acquisition has been accounted for as a bargain purchase and as a result, the Company recognized a gain of $ 3.7 million, net of income tax of $ 2.5 million associated with the acquisition.

Accordingly, the acquisition has been accounted for as a bargain purchase and as a result, the Company recognized a gain of $ 3,724 , net of income tax of $ 2,435 .

associated with the acquisition.

The amount is recorded in other income in the consolidated statements of operations and comprehensive income.

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Intangible assets consist of (in millions):

Estimated fair Estimated

Estimated fair

Customer relationships

1 unchanged sentence

The amounts approximate fair value.

The Company recognized a bargain purchase gain of $ 3.7 million, net of income tax expense of $ 2.5 million associated with the acquisition.

The Company recognized a bargain purchase gain of $ 3,724 , net of income tax expense of $ 2,435 associated with the acquisition.

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Any changes to the initial estimates of the fair value of assets and liabilities will impact the bargain purchase gain and may affect future earnings.

INVENTORIES, NET

The major classes of inventories at June 30 were as follows:

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The sale was completed in the second quarter of fiscal year 2024.

The second quarter of fiscal year 2025 includes the impact of a non-cash inventory write-down of $ 1,579 .

This write-down reflects the results of a product rationalization exercise of the Company’s industrial product line following the acquisition of Katsa.

Inventories stated on a LIFO basis represent approximately 24 % and 31 % of total inventories at June 30, 2025 and 2024, respectively.

The approximate current cost of the LIFO inventories exceeded the LIFO cost by $ 31,877 and $ 30,680 at June 30, 2025 and 2024, respectively.

Inventories were reduced during 2024 and 2023, resulting in a liquidation of LIFO inventory layers that were carried at a lower cost prevailing from a prior year, as compared with current costs in the current year (“LIFO decrement”).

Inventories in the United States were reduced during fiscal 2025 and 2024, resulting in a liquidation of LIFO inventory layers that were carried at a lower cost prevailing from a prior year, as compared with current costs in the current year (“LIFO decrement”).

A LIFO decrement results in the erosion of layers created in earlier years, and, therefore, a LIFO layer is not created for years that have decrements.

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The Company had reserves for inventory obsolescence of $ 16,016 and $ 12,693 at June 30, 2025 and 2024, respectively.

PROPERTY, PLANT AND EQUIPMENT

PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment at June 30 were as follows:

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Depreciation expense for the years ended June 30, 2025 and 2024 was $ 10,042 and $ 6,707 , respectively.

At June 30, 2024, the Company owned one permanently idle facility with a book value of $ 3.0 million.

At June 30, 2025 and 2024, the Company owned one permanently idle facility with a book value of $ 3.0 million.

The asset is presented within property, plant, and equipment, net on the Consolidated Balance Sheets.

No impairment losses were recorded in fiscal 2025 or 2024.

INTANGIBLE ASSETS

On May 31, 2024, the Company acquired intangible assets in the amount of $ 3.4 million consisting of customer relationships, a tradename, and technology know-how as part of the acquisition of Katsa.

GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill represents the excess of the consideration transferred net of the acquisition-date fair values of the identifiable assets acquired and the liabilities assumed.

On February 14, 2025, as discussed in Note B, the Company acquired goodwill in the estimated amount of $ 2,806 and intangible assets in the estimated amount of $ 2,847 as part of the acquisition of Kobelt.

As of June 30, 2025, changes in the carrying amount of goodwill is summarized as follows:

Balance at June 30, 2024

Translation adjustment

Balance at June 30, 2025

At June 30, the following acquired intangible assets have definite useful lives and are subject to amortization:

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Net Book Value By Asset Type

Gross Carrying

Amortization /

Gross Carrying Amount

Accumulated Amortization / Impairment

Net Book Value

Relationships

Customer Relationships

Technology Know-how

Balance at June 30, 2023

9 unchanged sentences

- ( 3,959 ) ( 3,959 ) ( 1,341 ) ( 1,312 ) ( 281 ) ( 1,025 ) ( 3,959 )

- ( 3,273 ) ( 3,273 ) ( 1,245 ) ( 1,280 ) - ( 748 )

Translation adjustment

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Accrued liabilities at June 30 were as follows:

Deferred Revenue

$ 29,664 $ 2,025

Customer deposits

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Credit Agreement Debt :

On June 29, 2018, the Company entered into a Credit Agreement (the “Credit Agreement”) with BMO Harris Bank N.A.

(“BMO”) that provided for the assignment and assumption of the previously existing loans between the Company and Bank of Montreal (the “2016 Credit Agreement”) and subsequent amendments into a term loan (the “Term Loan”) and revolving credit loans (each a “Revolving Loan” and, collectively, the “Revolving Loans,” and, together with the Term Loan, the “Loans”).

Pursuant to the Credit Agreement, BMO agreed to make the Term Loan to the Company in a principal amount not to exceed $ 35.0 million and the Company may, from time to time prior to the maturity date, enter into Revolving Loans in amounts not to exceed, in the aggregate, $ 50.0 million (the “Revolving Credit Commitment”), subject to a Borrowing Base based on Eligible Inventory and Eligible Receivables.

Subsequent amendments to the Credit Agreement reduced the Term Loan to $ 20.0 million, extended the maturity date of the Term Loan to April 1, 2027, and require the Company to make principal installment payments on the Term Loan of $ 0.5 million per quarter.

In addition, under subsequent amendments to the Credit Agreement, BMO’s Revolving Credit Commitment is currently $ 45.0 million.

The Credit Agreement also allows the Company to obtain Letters of Credit from BMO, which if drawn upon by the beneficiary thereof and paid by BMO, would become Revolving Loans.

Current 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”).

There were no significant financing costs associated with the credit agreement.

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.

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 currently runs through April 1, 2027.

Under the Credit Agreement as amended, interest rates are based on either the secured overnight financing rate (“SOFR”) or the euro interbank offered rate (the “EURIBO Rate”).

Loans are designated either as “SOFR Loans,” which accrue interest at an Adjusted Term SOFR plus an Applicable Margin, or “Eurodollar Loans,” which accrue interest at the EURIBO Rate plus an Applicable Margin.

Amounts drawn on a Letter of Credit that are not timely reimbursed to the Bank bear interest at a Base Rate plus an Applicable Margin.

The Company also pays a commitment fee on the average daily Unused Revolving Credit Commitment equal to an Applicable Margin.

Currently, the Applicable Margins are between 2.00 % and 3.50 % for Revolving Loans and Letters of Credit;

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 (the “CORRA”).

Loans under the Credit Agreement are designated as either as “SOFR Loans,” which accrue interest at an Adjusted Term SOFR 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 Margins are between 2 % and 3.5 % for Revolving Loans and Letters of Credit;

2.125 % and 3.625 % for Term Loans;

and 0.15 % and 0.30 % for the Unused Revolving Credit Commitment (each depending on the Company’s Total Funded Debt to EBITDA ratio).

The Credit Agreement, as amended, requires the Company to meet certain financial covenants.

and .15% and .3% for the Unused Revolving Credit Commitment (each depending on the Company’s Total Funded Debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio).

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 the Katsa acquisition, as well as pro-forma EBITDA of Katsa as permitted by the Bank.

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 personal property, including accounts receivable, inventory, machinery and equipment, and intellectual property.

The Company has also pledged 100 % of its equity interests in certain domestic subsidiaries and 65 % of its equity interests in certain foreign subsidiaries.

The Company also entered into a Collateral Assignment of Rights under Purchase Agreement for its acquisition of Veth Propulsion.

To effect these security interests, the Company entered into various amendment and assignment agreements that consent to the assignment of certain agreements previously entered into between the Company and the Bank of Montreal in connection with the 2016 Credit Agreement.

The Company also amended and assigned to BMO a Negative Pledge Agreement that it has previously entered into with Bank of Montreal, pursuant to which it agreed not to sell, lease or otherwise encumber real estate that it owns except as permitted by the Credit Agreement and the Negative Pledge Agreement.

The Company has also entered into a Deposit Account Control Agreement with the Bank, reflecting the Bank’s security interest in deposit accounts the Company maintains with the Bank.

The Bank may not provide a notice of exclusive control of a deposit account (thereby obtaining exclusive control of the account) prior to the occurrence or existence of a Default or an Event of Default under the Credit Agreement or otherwise upon the occurrence or existence of an event or condition that would, but for the passage of time or the giving of notice, constitute a Default or an Event of Default under the Credit Agreement.

Upon the occurrence of an Event of Default, BMO may take the following actions upon written notice to the Company:

Borrowings under the Credit Agreement 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 various amendment 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 a Security Agreement, IP Security Agreement, Pledge Agreement, Perfection Certificate, and Assignment as to Liens and Encumbrances.

The Company also amended and assigned to the Bank a Negative Pledge Agreement, pursuant to which it agreed not to sell, lease or otherwise encumber 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.

Upon the occurrence of an Event of Default, the Bank may take the following actions upon written notice to the Company:

( 1 ) terminate its remaining obligations under the Credit Agreement;

( 2 ) declare all amounts outstanding under the Credit Agreement to be immediately due and payable;

and ( 3 ) demand the Company to immediately Cash Collateralize L/C Obligations in an amount equal to 105 % of the aggregate L/C Obligations or a greater amount if BMO determines a greater amount is necessary.

If such Event of Default is due to the Company’s bankruptcy, BMO may take the three actions listed above without notice to the Company.

On April 1, 2024, the Company entered into Amendment No.

10 to Credit Agreement (the “Tenth Amendment”) that amended and extended the Credit Agreement.

The Tenth Amendment increased the Revolving Credit Commitment from $ 40.0 million to $ 45.0 million, and also increased the Borrowing Base for Revolving Loans from the sum of (a) 85 % of outstanding unpaid Eligible Receivable and (b) the lesser of $ 30.0 million and 50 % of Eligible Inventory to the sum of (a) 85 % of outstanding unpaid Eligible Receivables and (b) the lesser of $ 35.0 million (reduced to $ 32.5 million beginning with the first quarter of the 2026 fiscal year) and 60 % of Eligible Inventory (reduced to 55 % of Eligible Inventory beginning with the third quarter of the 2025 fiscal year, and 50 % of Eligible Inventory beginning with the first quarter of the 2026 fiscal year).

The Company used the increased borrowing capacity under the Credit Agreement to help finance its acquisition of Katsa by TD Finland Holding Oy, a wholly-owned subsidiary of the Company.

The Tenth Amendment specifically permits the Company to use Revolving Loans for the Katsa acquisition

The Tenth Amendment also extended the Credit Agreement through April 1, 2027 and extended the maturity date of the Term Loan and the Term Loan Commitment Date to April 1, 2027.

The Tenth Amendment also increased the Applicable Margins under the Credit Agreement for purposes of determining interest rates on Revolving Loans, Letters of Credit, Term Loans, and the Unused Revolving Credit Commitment.

Prior to the Tenth Amendment, the Applicable Margins were between 1.25 % and 2.75 % for Revolving Loans and Letters of Credit;

1.375 % and 2.875 % for Term Loans;

and .10% and .15% for the Unused Revolving Credit Commitment (each depending on the Company’s Total Funded Debt to EBITDA ratio).

Under the Tenth Amendment, the Applicable Margins are between 2 % and 3.5 % for Revolving Loans and Letters of Credit;

2.125 % and 3.625 % for Term Loans;

and ( 3 ) demand the Company to immediately Cash Collateralize 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.

If such Event of Default is due to the Company’s bankruptcy, the Bank may take the three actions listed above without notice to the Company.

Prior Credit Agreement

The Prior Credit Agreement, which was replaced by the Credit Agreement on February 14, 2025, provided for the assignment and assumption of the previously existing loans under a 2016 credit agreement between the Company and Bank of Montreal (as amended, the “2016 Credit Agreement”) into a term loan (the “Prior Term Loan”) and revolving credit loans (each a “Prior Revolving Loan” and, collectively, the “Prior Revolving Loans,” and, together with the Prior Term Loan, the “Prior Loans”).

Pursuant to the Prior Credit Agreement, BMO agreed to make the Prior Term Loan to the Company in a principal amount not to exceed $ 35.0 million and the Company could, from time to time prior to the maturity date, enter into Prior Revolving Loans in amounts not to exceed, in the aggregate, $ 50.0 million (the “Prior Revolving Credit Commitment”), subject to a Borrowing Base based on Eligible Inventory and Eligible Receivables.

Subsequent amendments to the Prior Credit Agreement reduced the Prior Term Loan to $ 20.0 million, extended the maturity date of the Prior Term Loan to April 1, 2027, and required the Company to make principal installment payments on the Prior Term Loan of $ 0.5 million per quarter.

Subsequent amendments to the Prior Credit Agreement (prior to the Tenth Amendment to the Prior Credit Agreement discussed below) incrementally decreased BMO’s Prior Revolving Credit Commitment to $ 40.0 million.

The Prior Credit Agreement also allowed the Company to obtain Letters of Credit from BMO, which if drawn upon by the beneficiary thereof and paid by BMO, would become Prior Revolving Loans.

Under the Prior Credit Agreement, the Company was prohibited from paying cash dividends on its common stock in excess of $ 5.0 million in any fiscal year.

Under the Prior Credit Agreement as amended, interest rates were based on either the SOFR or the EURIBO Rate.

Prior Loans were designated either as “SOFR Loans,” which accrued interest at an Adjusted Term SOFR plus an Applicable Margin, or “Eurodollar Loans,” which accrued interest at the EURIBO Rate plus an Applicable Margin.

Amounts drawn on a Letter of Credit that were not timely reimbursed to the Bank bore interest at a Base Rate plus an Applicable Margin.

The Company also paid a commitment fee on the average daily Unused Revolving Credit Commitment equal to an Applicable Margin.

Immediately prior to February 14, 2025, the Applicable Margins were between 2 % and 3.5 % for Prior Revolving Loans and Letters of Credit;

2.125 % and 3.625 % for Prior Term Loans;

and 0.15 % and 0.3 % for the Unused Revolving Credit Commitment (each depending on the Company’s Total Funded Debt to EBITDA ratio).

The Tenth Amendment also increased the amount of Restricted Payments that the Company may make in the form of cash dividends, distributions, purchases, redemptions, or other acquisitions of its common stock from $ 3.0 million to $ 5.0 million in any fiscal year.

The Prior Credit Agreement, as amended, required the Company to meet certain financial covenants.

Specifically, the Company’s Total Funded Debt to EBITDA ratio could not exceed 3.50 to 1.00, and the Company’s Fixed Charge Coverage Ratio could not be less than 1.10 to 1.00.

In determining whether the Company was in compliance with its Total Funded Debt/EBITDA Ratio, the Company’s EBITDA included transaction expenses of up to $ 0.6 million for the Katsa acquisition, as well as pro-forma EBITDA of Katsa as permitted by the Bank.

The Company’s Tangible Net Worth could 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 Prior Credit Agreement were secured by substantially all of the Company’s personal property, including accounts receivable, inventory, machinery and equipment, and intellectual property.

The Company had also pledged 100 % of its equity interests in certain domestic subsidiaries and 65 % of its equity interests in certain foreign subsidiaries.

The Company had also entered into a Collateral Assignment of Rights under Purchase Agreement for its acquisition of Veth Propulsion.

The Company had also entered into a Deposit Account Control Agreement with the Bank, reflecting the Bank’s security interest in deposit accounts the Company maintains with the Bank.

The Bank could not provide a notice of exclusive control of a deposit account (thereby obtaining exclusive control of the account) prior to the occurrence or existence of a Default or an Event of Default under the Credit Agreement or otherwise upon the occurrence or existence of an event or condition that would, but for the passage of time or the giving of notice, constitute a Default or an Event of Default under the Prior Credit Agreement.

Upon the occurrence of an Event of Default, BMO could take the following actions upon written notice to the Company:

( 1 ) terminate its remaining obligations under the Prior Credit Agreement;

( 2 ) declare all amounts outstanding under the Prior Credit Agreement to be immediately due and payable;

If such Event of Default is due to the Company’s bankruptcy, BMO could take the three actions listed above without notice to the Company.

On April 1, 2024, the Company had entered into Amendment No.

10 to Prior Credit Agreement (the “Tenth Amendment”) that amended and extended the Prior Credit Agreement.

The Tenth Amendment increased the Prior Revolving Credit Commitment from $ 40.0 million to $ 45.0 million, and also increased the Borrowing Base for Prior Revolving Loans from the sum of (a) 85 % of outstanding unpaid Eligible Receivable and (b) the lesser of $ 30.0 million and 50 % of Eligible Inventory to the sum of (a) 85 % of outstanding unpaid Eligible Receivables and (b) the lesser of $ 35.0 million (reduced to $ 32.5 million beginning with the first quarter of the 2026 fiscal year) and 60 % of Eligible Inventory (reduced to 55 % of Eligible Inventory beginning with the third quarter of the 2025 fiscal year, and 50 % of Eligible Inventory beginning with the first quarter of the 2026 fiscal year).

The Company used the increased borrowing capacity under the Tenth Amendment to help finance its acquisition of Katsa by TD Finland Holding Oy, a wholly-owned subsidiary of the Company.

The Tenth Amendment specifically permitted the Company to use Prior Revolving Loans for the Katsa acquisition.

In addition, in determining whether the Company is in compliance with its Total Funded Debt/EBITDA Ratio, the Company’s EBITDA included transaction expenses of up to $ 0.6 million for the Katsa acquisition, as well as pro-forma EBITDA of Katsa as permitted by the Bank.

The Tenth Amendment also extended the Prior Credit Agreement through April 1, 2027 and extended the maturity date of the Prior Term Loan and the Prior Term Loan Commitment Date to April 1, 2027.

The Tenth Amendment also increased the Applicable Margins under the Prior Credit Agreement for purposes of determining interest rates on Prior Revolving Loans, Letters of Credit, Prior Term Loans, and the Prior Unused Revolving Credit Commitment.

Prior to the Tenth Amendment, the Applicable Margins were between 1.25 % and 2.75 % for Prior Revolving Loans and Letters of Credit;

1.375 % and 2.875 % for Prior Term Loans;

and .10% and .15% for the Prior Unused Revolving Credit Commitment (each depending on the Company’s Total Funded Debt to EBITDA ratio).

Under the Tenth Amendment, the Applicable Margins were between 2 % and 3.5 % for Prior Revolving Loans and Letters of Credit;

2.125 % and 3.625 % for Prior Term Loans;

and .15% and .3% for the Prior Unused Revolving Credit Commitment (each depending on the Company’s Total Funded Debt to EBITDA ratio).

During fiscal year 2025, the average interest rate was 7.07 % on the Term Loan, and 5.39 % on the Revolving Loans.

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During the fourth quarter of fiscal 2021, the Company designated its euro denominated Revolving Loan as a net investment hedge to mitigate the risk of variability in its euro denominated net investments in wholly-owned foreign companies.

Effective upon the designation, all changes in fair value of the euro Revolving Loan are reported in accumulated other comprehensive loss along with the foreign currency translation adjustments on those foreign investments.

Effective upon the designation, all changes in fair value of the euro Revolving Loan are reported in accumulated other comprehensive income (loss) along with the foreign currency translation adjustments on those foreign investments.

This net investment hedge is included in the disclosures in Note S, Derivative Financial Instruments.

The aggregate scheduled maturities of outstanding long-term debt obligations in subsequent years are as follows:

The PPP Loan:

On April 17, 2020, the Company entered into a promissory note (the “PPP Loan”) evidencing an unsecured loan in the amount of $ 8,200 made to the Company under the Payment Protection Plan ("PPP").

The PPP is a liquidity facility program established by the U.S.

government as part of the CARES Act in response to the negative economic impact of the COVID- 19 outbreak.

The PPP Loan is funded by the Small Business Administration (“SBA”) and administered by BMO.

The PPP Loan has a two -year term and bears interest at a rate of 1.0% per annum.

Monthly principal and interest payments were deferred until April 2022.

The PPP Loan is a forgivable loan to the extent proceeds are used to cover qualified documented payroll, mortgage interest, rent, and utility costs over a 24 -week measurement period (as amended) following loan funding.

For the loan to be forgiven, the Company was required to formally apply for forgiveness, and potentially, could be required to pass an audit that it met the eligibility qualifications of the loan.

In accounting for the terms of the PPP Loan, the Company is guided by ASC 470 Debt , and ASC 450 - 30 Gain contingency .

Accordingly, it recorded the proceeds of the PPP Loan of $ 8,200 as debt and derecognized the liability when the loan was forgiven.

The Company believed that the possibility of loan forgiveness was to be regarded as a contingent gain and therefore did not recognize the gain (and derecognize the loan) until all uncertainty was removed (i.e., all conditions for forgiveness are met).

The Company applied for forgiveness, and on June 16, 2021, it was notified by BMO that the SBA remitted funds to BMO to repay the PPP Loan in full, evidencing that the PPP Loan was fully forgiven.

The Company removed the balance of the PPP Loan from its consolidated balance sheet and recorded $ 8,200 in income from extinguishment of loan in its consolidated statement of operations in fiscal 2021.

While the loan has been formally forgiven, under the terms of the PPP Loan, the Company remains subject to an audit by the SBA for a period of six years after forgiveness.

The audit is intended to confirm the Company’s eligibility for the PPP loan and the appropriateness of the PPP loan forgiveness.

In accordance with ASC 450 Contingencies , the Company assessed the probability of failing the audit and being required to repay all or any portion of the PPP Loan.

The Company is aware of the requirements and has retained all necessary documentation in support of its eligibility, including gross receipts calculations, supporting payroll expenses and related information.

The Company believes that it has materially complied with all the requirements of the PPP and reasonably assured it would satisfy the requirements of an audit.

Other lines of credit:

3 unchanged sentences

The following table provides a summary of leases recorded on the consolidated balance sheet at June 30.

Balance Sheet Location

Operating lease right-of-use assets

Condensed Consolidated Balance Sheet Location

Right-of-use operating lease assets

$ 17,250 $ 16,622

Finance lease right-of-use assets

Right-of-use finance lease assets

Property, plant and equipment, net

Lease Liabilities

Operating lease liabilities

Accrued liabilities

Right-of use operating lease liabilities, current

Current maturities of right-of use operating lease obligations

$ 3,393 $ 2,521

Operating lease liabilities

Operating lease obligations

Right-of use operating lease liabilities, non-current

Right-of use operating lease obligations

14,357 14,376

Finance lease liabilities

Right of use finance lease liabilities, current

Accrued liabilities

Finance lease liabilities

Right of use finance lease liabilities, non-current

Other long-term liabilities

The components of lease expense for the years ended June 30 were as follows:

Finance lease cost:

Amortization of right-of-use assets

Interest on lease liabilities

Operating lease cost

Short-term lease cost

Variable lease cost

Total lease cost

Sublease income

( 111 ) ( 81 )

Net lease cost

$ 6,012 $ 5,187

Other information related to leases was as follows:

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As of June 30, 2025 and 2024, 315,000 shares remain authorized for purchase.

Cash dividends per share was $ 0.12 and $ 0.00 in fiscal 2024 and 2023.

Cash dividends per share were $ 0.16 and $ 0.12 in fiscal 2025 and 2024.

The Company is authorized to issue 200,000 shares of preferred stock, none of which have been issued.

The Company has designated 150,000 shares of the preferred stock as Series A Junior Preferred Stock.

The components of accumulated other comprehensive loss included in equity as of June 30, 2024 and 2023 are as follows:

The components of accumulated other comprehensive income (loss) included in equity as of June 30, 2025 and 2024 are as follows:

Translation adjustments

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Net gain on cash flow hedge derivatives, net of income taxes of ($ 210 ) and ($ 210 ), respectively

Net gain on net investment hedge derivatives, net of income taxes of $ 103 and $ 103 , respectively

Accumulated other comprehensive loss

Net (loss) gain on net investment hedge derivatives, net of income taxes of $ 103 and $ 103 , respectively

( 129 ) 1,502

A reconciliation for the changes in accumulated other comprehensive loss, net of tax, by component for the years ended June 30, 2024 and June 30, 2023 is as follows:

Accumulated other comprehensive income (loss)

$ 3,730 $ ( 6,905 )

A reconciliation for the changes in accumulated other comprehensive income (loss), net of tax, by component for the years ended June 30, 2025 and June 30, 2024 is as follows:

Net Investment

2 unchanged sentences

Other comprehensive loss before reclassifications

Plan merger remeasurement adjustment

Amounts reclassified from accumulated other comprehensive loss

Amounts reclassified from accumulated other comprehensive income (loss)

- ( 2,114 ) ( 184 ) 230

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Other comprehensive loss before reclassifications

Amounts reclassified from accumulated other comprehensive loss

Return on plan assets

Amounts reclassified from accumulated other comprehensive income (loss)

( 1,591 ) ( 220 ) ( 1,631 )

3 unchanged sentences

$ 15,036 $ ( 11,461 ) $ 284 $ ( 129 )

A reconciliation for the reclassifications out of accumulated other comprehensive loss, net of tax, for the year ended June 30, 2024 is as follows:

Reconciliation for the changes in benefit plan adjustments, net of tax for the year ended June 30, 2025 is as follows:

Changes in benefit plan items

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Transition asset and prior service benefit

Return on plan assets

Total amortization

Total changes, net of tax

A reconciliation for the reclassifications out of accumulated other comprehensive loss, net of tax, for the year ended June 30, 2023 is as follows:

Reconciliation for the changes in benefit plan adjustments, net of tax for the year ended June 30, 2024 is as follows:

Changes in benefit plan items

Actuarial income

Actuarial loss

Transition asset and prior service benefit

Plan merger remeasurement adjustment

MMTM adjustment

Total amortization

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The Company sells to both domestic and foreign customers in a variety of market areas, principally pleasure craft, commercial and military marine markets, energy and natural resources, government, and industrial markets.

Net sales by product group is summarized as follows:

Net sales by product group for the years ended June 30 is summarized as follows:

$ 41,502 $ 25,668

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manufacturing and distribution.

Its segment structure reflects the way management makes operating decisions and manages the growth and profitability of the business.

It also corresponds with management’s approach of allocating resources and assessing the performance of its segments.

Its segment structure reflects the way the chief operating decision-maker (“CODM”) makes operating decisions and manages the growth and profitability of the business.

It also corresponds with the CODM’s approach of allocating resources and assessing the financial performance of its segments.

The Company’s CODM is the Chief Executive Officer, who reviews financial information presented on a consolidated basis.

The accounting practices of the segments are the same as those described in the summary of significant accounting policies.

Transfers among segments are at established inter-company selling prices.

Management evaluates the performance of its segments based on net earnings.

Information about the Company's segments, before intercompany eliminations, is summarized as follows:

The CODM evaluates the performance of its segments based on net sales, gross profit, operating income (loss), and net earnings (loss).

The following table presents the selected financial information with respect to the Company’s reportable segments for the year ended June 30, 2025:

Manufacturing

Elimination and

$ 295,550 $ 130,956 $ - $ ( 85,768 ) $ 340,738

3 unchanged sentences

( 52,691 ) ( 4,821 ) - 57,512 -

Interest income

Interest expense

Total consolidated net sales

$ 235,646 $ 105,092 $ - $ - $ 340,738

Cost of goods sold:

Cost of goods sold

$ 229,807 $ 104,165 $ - $ 85,576 $ 419,548

Depreciation and amortization

Intra-segment cost of goods sold

( 7,213 ) ( 21,043 ) - ( 28,256 ) ( 56,512 )

Net income attributable to Twin Disc

Inter-segment cost of goods sold

( 52,691 ) ( 4,821 ) - ( 57,512 ) ( 115,024 )

Total consolidated cost of goods sold

$ 169,903 $ 78,301 $ - $ ( 192 ) $ 248,012

Expenditures for segment assets

$ 65,743 $ 26,791 $ - $ 192 $ 92,726

Manufacturing

Marketing, engineering and administrative expenses

$ 41,388 $ 14,796 $ 26,247 $ - $ 82,431

Intra-segment sales

Restructuring expenses

252 93 63 - 408

Inter-segment sales

Operating income (loss)

$ 24,103 $ 11,902 $ ( 26,310 ) $ 192 $ 9,887

Other (income) expense:

Interest income

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5,900 7 68 ( 3,329 ) 2,646

Other (income) expense

14,725 6,537 ( 15,818 ) 95 5,539

Depreciation and amortization

Total consolidated other (income) expense

$ 19,580 $ 5,994 $ ( 17,551 ) $ 95 $ 8,118

Net income attributable to Twin Disc

Pretax earnings (loss)

$ 4,523 $ 5,908 $ ( 8,759 ) $ 97 $ 1,769

Income tax expense (benefit)

1,476 2,151 ( 228 ) ( 31 ) 3,368

Net earnings (loss)

$ 3,047 $ 3,757 $ ( 8,531 ) $ 128 $ ( 1,599 )

Minority interest

- ( 295 ) - - ( 295 )

Net earnings (loss) attributable to Twin Disc, Incorporated

$ 3,047 $ 3,462 $ ( 8,531 ) $ 128 $ ( 1,894 )

Total consolidated assets

$ 487,114 $ 66,087 $ ( 186,291 ) $ ( 11,348 ) $ 355,562

Depreciation and amortization

$ 13,282 $ 353 $ 1,264 $ - $ 14,899

Expenditures for segment assets

11,590 1,902 1,665 - 15,157

The following is a reconciliation of reportable segment net sales and net income to the Company’s consolidated totals:

Total net sales from reportable segments

The following table presents the selected financial information with respect to the Company’s reportable segments for the year ended June 30, 2024:

Manufacturing

Elimination and

$ 250,934 $ 148,919 $ - $ ( 104,726 ) $ 295,127

Elimination of inter-company sales

Intra-segment sales

( 6,974 ) ( 15,661 ) - 22,635 -

Inter-segment sales

( 77,978 ) ( 4,113 ) - 82,091 -

Total consolidated net sales

$ 165,982 $ 129,145 $ - $ - $ 295,127

Net income attributable to Twin Disc, Incorporated:

Total net income from reportable segments

Cost of goods sold:

Cost of goods sold

$ 196,140 $ 122,505 $ - $ 102,615 $ 421,260

Other adjustments and corporate expenses

Intra-segment cost of goods sold

( 6,974 ) ( 15,661 ) - ( 22,635 ) ( 45,270 )

Total consolidated net income attributable to Twin Disc

Inter-segment cost of goods sold

( 77,978 ) ( 4,113 ) - ( 82,091 ) ( 164,182 )

Corporate expenses pertain to certain costs that are not allocated to the reportable segments, primarily consisting of corporate overhead costs, including administrative functions and global functional expenses.

Other significant items:

Total consolidated cost of goods sold

$ 111,188 $ 102,731 $ - $ ( 2,111 ) $ 211,808

$ 54,794 $ 26,414 $ - $ 2,111 $ 83,319

Marketing, engineering and administrative expenses

$ 31,801 $ 15,340 $ 24,481 $ - $ 71,622

Restructuring expenses

149 41 28 - 218

Operating income (loss)

$ 22,844 $ 11,033 $ ( 24,509 ) $ 2,111 $ 11,479

Other (income) expense:

Interest income

2 unchanged sentences

1,987 11 60 ( 615 ) 1,443

Other (income) expense

( 4,285 ) 1,341 ( 3,812 ) 1,489 ( 5,267 )

Depreciation and amortization

Total consolidated other (income) expense

$ ( 2,633 ) $ 1,008 $ ( 3,752 ) $ 1,489 $ ( 3,888 )

Pretax earnings (loss)

$ 25,477 $ 10,025 $ ( 20,757 ) $ 622 $ 15,367

Expenditures for segment assets

Income tax expense

1,244 2,164 311 402 4,121

Interest income

Net earnings (loss)

$ 24,233 $ 7,861 $ ( 21,068 ) $ 220 $ 11,246

Interest expense

Minority Interest

- ( 258 ) - - ( 258 )

Net earnings (loss) attributable to Twin Disc, Incorporated

$ 24,233 $ 7,603 $ ( 21,068 ) $ 220 $ 10,988

Depreciation and amortization

Total consolidated assets

$ 456,731 $ 58,351 $ ( 194,730 ) $ ( 8,296 ) $ 312,058

Depreciation and amortization

$ 8,606 $ 341 $ 1,034 $ - $ 9,981

1 unchanged sentence

7,304 730 673 - 8,707

All adjustments represent inter-company eliminations and corporate amounts.

Geographic information about the Company is summarized as follows:

Geographic information about the Company for the years ended June 30 is summarized as follows:

United States

14 unchanged sentences

11,426 10,270

15,660 14,362

Other Countries

$ 89,583 $ 77,402

No one customer accounted for 10% of consolidated net sales in fiscal year 2024.

There was one customer, an authorized distributor of the Company, that accounted for 10 % of consolidated net sales in fiscal year 2023.

No one customer accounted for 10% of consolidated net sales in fiscal year 2025 and 2024.

Disaggregated revenue:

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STOCK-BASED COMPENSATION

In fiscal 2022, the Company adopted the Twin Disc, Incorporated 2021 Long-Term Incentive Plan (the “2021 LTI Plan”).

Benefits under the 2021 LTI Plan may be granted, awarded or paid in any one or a combination of stock options, stock appreciation rights, restricted stock awards, restricted stock units, cash-settled restricted stock units, performance stock awards, performance stock unit awards, performance unit awards, and dividend equivalent awards.

There is reserved for issuance under the Plan an aggregate of 715,000 shares of the Company’s common stock, which may be authorized and unissued shares or shares reacquired by the Company in the open market or a combination of both.

The aggregate amount is subject to proportionate adjustments for stock dividends, stock splits and similar changes.

In fiscal 2021, the Company adopted the Twin Disc, Incorporated 2020 Stock Incentive Plan for Non-Employee Directors (the “2020 Directors' Plan”) a plan to grant non-employee directors’ equity-based awards.

Benefits under the 2020 Directors’ Plan may be granted, awarded or paid in any one or a combination of stock options, restricted stock awards, or cash-settled restricted stock units.

Under the 2020 Directors’ Plan, non-employee directors may elect to receive all or a portion of their base cash retainer in the form of restricted stock.

There is reserved for issuance under the 2020 Directors’ Plan an aggregate of 750,000 shares of the Company's common stock, which may be authorized and unissued shares or shares reacquired by the Company in the open market or a combination of both.

In the first quarter of fiscal 2025, the Company adopted the Twin Disc, Incorporated Amended and Restated 2021 Omnibus Incentive Plan (the “Omnibus Plan”), which was subsequently approved by the Company’s shareholders.

The Omnibus Plan amended and restated the Twin Disc, Incorporated 2021 Long-Term Incentive Plan (the “2021 LTI Plan”), and effectively replaced the Twin Disc, Incorporated 2020 Stock Incentive Plan for Non-Employee Directors (the “2020 Directors' Plan”).

Benefits under the Omnibus Plan may be granted, awarded or paid in any one or a combination of stock options, stock appreciation rights, restricted stock awards, restricted stock units, cash-settled restricted stock units, performance stock awards, performance stock unit awards, performance unit awards, and dividend equivalent awards.

The Omnibus Plan is designed to benefit key employees and consultants of the Company and its subsidiaries, as well as non-employee directors of the Company.

There is reserved for issuance under the Plan an aggregate of 1,636,550 shares of the Company’s common stock, which consists of the previously-approved 715,000 shares of common stock reserved for issuance under the 2021 LTI Plan prior to its amendment and restatement to become the Omnibus Plan; 521,550 shares of common stock that remained available for issuance under the 2020 Directors' Plan; and 400,000 newly authorized shares of common stock.

Shares issued under the Omnibus Plan may be authorized and unissued shares or shares reacquired by the Company in the open market or a combination of both.

The aggregate amount is subject to proportionate adjustments for stock dividends, stock splits and similar changes.

1 unchanged sentence

2020 Directors' Plan

521,550 560,531

2021 LTI Plan

41,439 233,270

Performance Stock Awards ( “ PSA ” )

In fiscal 2025 and 2024, the Company granted a target number of 116,091 and 119,349 PSAs, respectively, to various employees of the Company, including executive officers.

The PSAs granted in fiscal 2024 will vest if the Company achieves performance-based target objectives relating to average return on invested capital and cumulative EBITDA (as defined in the PSA Grant Agreement), in the cumulative three fiscal year period ending June 30, 2026.

The PSAs granted in fiscal 2025 will vest if the Company achieves performance-based objectives relating to average return on invested capital and cumulative EBITDA (as defined in the PSA Grant Agreement), in the cumulative three fiscal year period ending June 30, 2027.

These PSAs are subject to adjustment if the Company’s return on invested capital and cumulative EBITDA falls below or exceeds the specified target objective, and the maximum number of performance shares that can be awarded if the target objective is exceeded is 227,610 .

Based upon actual results to date, the Company is currently accruing compensation expense for these PSAs.

The PSAs granted in fiscal 2023 will vest if the Company achieves performance-based target objectives relating to average return on invested capital and cumulative EBITDA (as defined in the PSA Grant Agreement), in the cumulative three fiscal year period ending June 30, 2025.

The PSAs granted in fiscal 2024 will vest if the Company achieves performance-based objectives relating to average return on invested capital and cumulative EBITDA (as defined in the PSA Grant Agreement), in the cumulative three fiscal year period ending June 30, 2026.

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The fair value of the PSAs (on the date of grant) is expensed over the performance period for the shares that are expected to ultimately vest.

The compensation expense for the year ended June 30, 2024 and 2023, related PSAs, was $ 1,648 and $ 1,218 , respectively.

The tax benefit from compensation expense for the year ended June 30, 2024 and 2023, related to PSAs, was $ 386 and $ 286 , respectively.

A total of 2,286 and 0 shares of performance stock awards were forfeited during fiscal 2025 and 2024, respectively.

The compensation expense for the year ended June 30, 2025 and 2024, related to PSAs, was $ 1,951 and $ 1,648 , respectively.

The tax expense from compensation expense for the year ended June 30, 2025 and 2024, related to PSAs, was $ 417 and $ 386 , respectively.

The weighted average grant date fair value of the unvested awards at June 30, 2025 was $ 12.63 .

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The PSUAs entitle an individual to shares of common stock of the Company or cash in lieu of shares of Company common stock if specific terms and conditions or restrictions are met through a specified date.

During fiscal 2024 and 2023 , the Company granted a target number of 10.5 and 0 PSUAs, respectively, to various individuals in the Company.

The fiscal 2024 PSUAs will vest if the Company achieves performance-based target objectives relating to average return on invested capital and cumulative EBITDA (as defined in the PSUA Grant Agreement), in the cumulative three fiscal year period ending June 30, 2026.

These PSUAs are subject to adjustment if the Company’s return on invested capital and cumulative EBITDA falls below or exceeds the specified target objective, and the maximum number of performance shares that can be awarded if the target objective is exceeded is 20.9 .

The compensation expense for the year ended June 30, 2024 and 2023, related PSAs, was $ 40 and $ 0 , respectively.

These PSUAs are subject to adjustment if the Company’s return on invested capital and cumulative EBITDA falls below or exceeds the specified target objective, and the maximum number of PSUAs that can vest if the target objective is exceeded totals 16,006 .

During fiscal 2025 and 2024 , the Company granted a target number of 0 and 10,473 PSUAs, respectively, to various individuals in the Company.

A total of 2,470 and 0 shares of PSUAs were forfeited during fiscal 2025 and 2024, respectively.

There were 8,003 and 10,473 unvested PSUAs outstanding at June 30, 2025 and 2024, respectively.

The compensation expense for the year ended June 30, 2025 and 2024, related to PSUAs, was $ 24 and $ 40 , respectively.

The tax expense from compensation expense for the year ended June 30, 2025 and 2024, related to PSUAs, was $ 6 and $ 9 , respectively.

The weighted average grant date fair value of the unvested PSUAs at June 30, 2025 was $ 12.15 .

At June 30, 2025, the Company had $ 33 of unrecognized compensation expense related to the unvested PSUAs that would vest if the specified target objective was achieved for the fiscal 2025 and 2024 awards.

The total fair value of PSUAs vested in fiscal 2025 and fiscal 2024 was $ 0 .

Restricted Stock Awards ( “ RS ” )

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Restricted Stock Unit Awards ( “ RSU ” )

The RSUs entitle an individual to shares of common stock of the Company or cash in lieu of shares of Company common stock if specific terms and conditions or restrictions are met through a specified date, generally three years from the date of grant or when performance conditions have been met.

In fiscal 2025 and 2024, the Company granted 77,395 and 7,089 RSUs, respectively, to various employees of the Company, including executive officers.

The RSUs granted in fiscal 2023 will vest if the employee remains employed by the Company through a specified date from the date of grant.

The fair value of the RSUs (on the date of grant) is recorded as compensation expense over the vesting period.

The RSUs granted in fiscal 2023 will vest if the employee remains employed by the Company through June 30, 2025 and if the Company achieves performance-based target objectives relating to average return on invested capital and cumulative EBITDA (as defined in the RSU Grant Agreement), in the cumulative three fiscal year period ending June 30, 2025.

These RSUs are subject to adjustment if the Company’s return on invested capital and cumulative EBITDA falls below or exceeds the specified target objective, and the maximum number of shares that can be earned if the target objective is exceeded is 144,752 .

Based upon actual results to date, the Company is currently accruing compensation expense for these RSUs.

A total of 1,601 and 0 shares of restricted stock unit awards were forfeited during fiscal 2025 and 2024, respectively.

There were 82,883 and 134,989 unvested RSUs outstanding at June 30, 2025 and June 30, 2024, respectively.

1 unchanged sentence

The tax benefit from compensation expense for the year ended June 30, 2025 and 2024, related to these service-based awards, was $ 203 and $ 116 , respectively.

The total fair value of restricted stock grants vested in fiscal 2025 and 2024 was $ 1,779 and $ 0 , respectively.

The weighted average grant date fair value of the unvested awards at June 30, 2025 was $ 12.79 .

3 unchanged sentences

Research and development costs charged to operations totaled $ 2,699 and $ 2,629 in fiscal 2025 and 2024, respectively.

Total engineering and development costs were $ 9,843 and $ 8,741 in fiscal 2024 and 2023, respectively, and are primarily recorded within Marketing, engineering and administration expenses on the consolidated statements of operations and comprehensive income.

Total engineering and development costs were $ 12,236 and 9,843 in fiscal 2025 and 2024, respectively, and are primarily recorded within marketing, engineering and administrative expenses on the consolidated statements of operations and comprehensive income.

PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

1 unchanged sentence

Domestic plan benefits are based on years of service, and, for salaried employees, on average compensation for benefits earned prior to January 1, 1997, and on a cash balance plan for benefits earned from January 1, 1997 through July 31, 2009, at which time the Company froze future accruals under domestic defined benefit pension plans.

To reduce administration costs, in December 2022, the Company merged its domestic hourly and salaried defined benefit pension plans into a single plan.

Due to the merger, an interim remeasurement was required which resulted in a net measurement loss (gain on liability offset by loss on assets) which increased the net liability from an expected amount of $ 1.5 million to a measured amount of $ 2.6 million.

Lower future administrative costs are expected to be favorable to the net liability in subsequent measurements.

The Company's funding policy for the plans covering domestic employees is to contribute an actuarially determined amount which falls between the minimum required contribution and maximum amount that can be deducted for federal income tax purposes.

In addition, the Company has unfunded, non-qualified retirement plans for certain management employees and Directors.

5 unchanged sentences

The measurement date for the Company’s pension and postretirement benefit plans in fiscal 2025 and 2024 was June 30.

As discussed in Note A, during the fourth quarter of fiscal year 2023, the Company changed its accounting method related to the recognition of actuarial gains and losses for its pension and postretirement benefit plans.

Under the new method, actuarial gains and losses are recognized in net periodic benefit costs upon annual remeasurement in the fourth quarter, or on an interim basis as triggering events warrant remeasurement.

These changes have been applied retrospectively to prior years presented below.

See Note A for further information regarding the impact of the change in accounting principle on the Company’s consolidated financial statements.

The income to the Company of its retirement benefit plans is shown in the following table:

Year Ended June 30

Pension Benefits

What changed 10-K

Item 9A. Controls and Procedures