What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-11-05 compared with 2025-05-07 · 571 added, 678 removed, 437 unchanged (74% of the section changed)

3 unchanged sentences

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

March 28, 2025

September 26, 2025

June 30, 2025

11 unchanged sentences

70,150 69,576

Right-of-use operating lease assets

Right-of-use assets operating lease assets

16,311 17,250

17 unchanged sentences

40,719 28,446

Right-of-use operating lease obligations

Right-of-use lease obligations

13,474 14,357

Accrued retirement benefits

11,685 11,832

Deferred income taxes

8 unchanged sentences

124,330 125,414

Accumulated other comprehensive loss

( 8,554 ) ( 6,905 )

Accumulated other comprehensive income (loss)

164,087 171,413

8 unchanged sentences

TWIN DISC, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

(IN THOUSANDS, EXCEPT PER SHARE DATA)

For the Quarter-Ended

For the Three Quarters Ended

March 28, 2025

March 29, 2024

March 28, 2025

March 29, 2024

September 26, 2025 September 27, 2024

$ 79,996 $ 72,897

1 unchanged sentence

57,062 53,575

Cost of goods sold - Other

22,934 19,322

21,706 20,940 62,708 58,233

Marketing, engineering and administrative expenses

20,699 19,487

Restructuring expenses

287 139 355 207

Income from operations

Income (loss) from operations

2,235 ( 165 )

Other (expense) income:

Other income (expense):

Interest expense

( 800 ) ( 636 )

Other (expense) income, net

( 1,567 ) 959 ( 2,525 ) 649

Other income (expense), net

( 864 ) ( 1,344 )

(Loss) income before income taxes and noncontrolling interest

( 1,664 ) ( 1,980 )

Income tax expense

Income (loss) before income taxes and noncontrolling interest

571 ( 2,145 )

Net (loss) income

Income tax benefit (expense)

( 983 ) ( 627 )

Net earnings attributable to noncontrolling interest, net of tax

Net income (loss)

( 412 ) ( 2,772 )

Net (loss) income attributable to Twin Disc, Incorporated

Net income (loss) attributable to noncontrolling interest, net of tax

Net income (loss) attributable to Twin Disc, Incorporated

$ ( 518 ) $ ( 2,765 )

1 unchanged sentence

$ 0.04 $ 0.04

(Loss) income per share data:

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

Earnings (loss) per share data:

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

$ ( 0.04 ) $ ( 0.20 )

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

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

$ ( 0.04 ) $ ( 0.20 )

5 unchanged sentences

Comprehensive income (loss)

Net (loss) income

Net income (loss)

$ ( 412 ) $ ( 2,772 )

Benefit plan adjustments, net of income taxes of $1 and $11, respectively

201 ( 191 ) ( 1,245 ) ( 470 )

Foreign currency translation adjustment

( 2,431 ) 7,164

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

( 653 ) 196 ( 360 ) ( 73 )

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

Comprehensive income (loss)

( 2,113 ) 3,760

Comprehensive income attributable to noncontrolling interest

( 82 ) ( 34 ) ( 340 ) ( 224 )

Comprehensive income (loss) attributable to noncontrolling interest

Comprehensive income (loss) attributable to Twin Disc, Incorporated

4 unchanged sentences

(IN THOUSANDS)

For the Three Quarters Ended

March 28, 2025

March 29, 2024

For the Quarter Ended

September 26, 2025 September 27, 2024

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income

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

Net income (loss)

$ ( 412 ) $ ( 2,772 )

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

Depreciation and amortization

Gain on sale of assets

Loss on write-down of industrial product inventory

Loss on sale of boat management product line and related inventory

Restructuring expenses

(Benefit) provision for deferred income taxes

Provision for deferred income taxes

( 403 ) ( 361 )

Stock compensation expense and other non-cash changes, net

Net change in operating assets and liabilities

Net cash provided by operating activities

( 11,035 ) ( 5,465 )

Net cash provided (used) by operating activities

( 7,524 ) ( 4,344 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of property, plant, and equipment

Acquisition of Kobelt, less cash acquired

( 3,430 ) ( 2,362 )

Proceeds from sale of property, plant, and equipment

Net cash used by investing activities

( 9 ) ( 369 )

Net cash provided (used) by investing activities

( 3,439 ) ( 2,722 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings under long-term debt agreement

Borrowings under revolving loan arrangements

40,375 30,090

Repayments of revolving loan arrangements

Repayments of other long-term debt

( 27,971 ) ( 26,791 )

Dividends paid to shareholders

Payments of right-of-use finance lease obligations

( 566 ) ( 570 )

Payments of finance lease obligations

( 284 ) ( 546 )

Cash used in net share settlement of restricted stock units

Payments of withholding taxes on stock compensation

( 1,675 ) ( 1,249 )

Net cash provided (used) by financing activities

Effect of exchange rate changes on cash

( 773 ) 2,773

Net change in cash

( 1,868 ) ( 3,359 )

Beginning of period

16,109 20,070

End of period

$ 14,241 $ 16,711

The notes to condensed consolidated financial statements are an integral part of these statements.

2 unchanged sentences

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

Basis of Presentation

Basis of Presentation and Other Information

The unaudited condensed consolidated financial statements have been prepared by Twin Disc, Incorporated (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of the Company, include adjustments, consisting primarily of normal recurring items, necessary for a fair statement of results for each period.

3 unchanged sentences

The prior year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States.

The condensed consolidated financial statements and information presented herein include the financial results of Kobelt Manufacturing Co.

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.

The provisional fair value estimates of Kobelt's 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.

The condensed consolidated financial statements and information presented herein include the financial results of Katsa Oy (“Katsa”).

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.

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

Katsa is included in the Company's manufacturing segment.

The Company’s condensed consolidated financial statements include the accounts of Twin Disc, Incorporated and its wholly owned domestic and foreign subsidiaries, with the exception of our investment in Twin Disc Nico LTD., which is 66 % owned by the Company.

The Company’s condensed consolidated financial statements include the accounts of Twin Disc, Incorporated and its wholly-owned domestic and foreign subsidiaries.

The Company's reporting period ends on the last Friday of the quarterly calendar period.

The Company's fiscal year ends on June 30, regardless of the day of the week on which June 30 falls.

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.

Certain prior year immaterial amounts have been reclassified to conform with the current year's presentation.

The changes did not have a material impact on the Company's condensed consolidated financial position, results of operations, or cash flows in any of the periods presented.

The condensed consolidated financial statements and information presented herein include the financial results of Kobelt Manufacturing Co.

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

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.

Recently Issued Not Yet Adopted Accounting Standards

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

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

Recently 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.

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.

This change is effective for annual periods beginning after December 15, 2024.

The Company will adopt the guidance for its 2026 annual report filed on Form 10 -K, which will result in additional disclosures related to income tax but not impact the Company’s results of operations or financial position.

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

1 unchanged sentence

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 expects to adopt the new annual disclosures as required for fiscal 2025 and the interim disclosures as required beginning with the first quarter of fiscal 2026.

ASU 2023 - 09 is effective for annual periods beginning after December 15, 2024.

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

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

Special Note Regarding Smaller Reporting Company Status

2 unchanged sentences

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 Kobelt Manufacturing Co.

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, 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 as 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 $ 16,586 in cash at closing, which included a base payment plus adjustments for net cash, working capital, and earnout.

This amount was subject to a final determination of working capital adjustments and 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 BMO Harris Bank N.A.

(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 condensed consolidated statement of operations and comprehensive income (loss) net sales and earnings for Kobelt of $ 1,229 and ( $160 ), 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

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

Other current assets

Property, plant and equipment

Intangible assets

Accounts payable

Accrued liabilities

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.

(a) Accounts receivable represent contractual amounts receivable from customers.

The amounts approximate fair value.

(b) Inventory consists of:

Raw materials

Work in progress at fair value

Finished goods at fair value

Inventories at fair value

Inventories at book value

Dies, tools and fixtures

Machinery and equipment

Property, plant and equipment at fair value

Property, plant and equipment at book value

(d) Intangible assets consist of:

Estimated average

Customer relationship

Computer Software - External

Developed technology

(e) The amounts approximate fair value.

(f) The Company recorded goodwill of $ 2,131 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.

The weighted average remaining useful life of the intangible assets included in the table above is approximately 17.4 years.

The Company reported the following contract assets and liabilities, which are presented within trade accounts receivable, net and accrued liabilities on the condensed balance sheets.

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

Contract Assets Contract Liabilities

Cost in Excess Trade Accounts Total Contract Customer Deferred Total Contract

of Billings, Net Receivable, Net Assets Deposits Revenue Liabilities

June 30, 2024 $ 5,216 $ 52,207 $ 57,423 $ 26,540 $ 2,025 $ 28,565

June 30, 2025 6,988 58,941 65,929 13,538 29,664 43,302

September 26, 2025 $ 5,897 $ 63,950 $ 69,847 $ 11,836 $ 33,886 $ 45,722

The Company’s 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.

Inventories, Net

The major classes of inventories were as follows:

March 28, 2025

September 26, 2025

June 30, 2025

Finished parts

$ 67,473 $ 67,037

Work in process

28,988 27,229

Raw materials

In the second quarter of fiscal year 2025, the Company completed a product rationalization evaluation on its industrial product offerings.

As a result of the evaluation, an inventory write-down on certain industrial products, totaling $ 1.6 million, was recorded.

In the first quarter of fiscal year 2024, the Company entered into an agreement to sell most of its boat management system product line located at one of its subsidiaries in Italy.

The sale amount was below cost and resulted in the Company recognizing an inventory write-down of $ 2.1 million.

The Company also evaluated its other boat management system inventory, not associated with the sale.

This evaluation resulted in the Company recognizing an additional inventory write-down of $ 1.6 million for inventory located in the U.S.

These write-downs were partially offset by certain liabilities transferred to the buyer at the time of the sale.

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

61,811 57,685

$ 158,272 $ 151,951

The Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its suppliers.

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While we believe the warranty reserve is adequate and that the judgment applied is appropriate, such amounts estimated to be due and payable in the future could differ materially from what actually transpires.

The following is a listing of the activity in the warranty reserve for the quarters ended March 28, 2025 and March 29, 2024:

The following is a listing of the activity in the warranty reserve for the quarters ended September 26, 2025 and September 27, 2024:

For the Quarter Ended

For the Three Quarters Ended

March 28, 2025

March 29, 2024

March 28, 2025

March 29, 2024

September 26, 2025

September 27, 2024

Reserve balance, beginning of period

$ 5,257 $ 4,220

Current period expense and adjustments

Payments or credits to customers

( 1,389 ) ( 821 )

Reserve balance, end of period

The current portion of the warranty accrual ($ 3,641 and $ 4,052 as of March 28, 2025 and March 29, 2024, respectively) is reflected in accrued liabilities, while the long-term portion ($ 1,057 and $ 843 as of March 28, 2025 and March 29, 2024, respectively) is included in other long-term liabilities on the consolidated balance sheets.

$ 4,894 $ 4,450

The current portion of the warranty accrual ($ 3,930 and $ 3,452 as of September 26, 2025 and September 27, 2024, respectively) is reflected in accrued liabilities, while the long-term portion ($ 964 and $ 998 as of September 26, 2025 and September 27, 2024, respectively) is included in other long-term liabilities on the condensed consolidated balance sheets.

Contingencies

4 unchanged sentences

Principal products 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 to both domestic and foreign customers in a variety of market areas, principally pleasure craft, commercial and military marine markets, as well as in the energy and natural resources, government, 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.

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.

The Company has two reportable segments:

manufacturing and distribution.

These segment structures reflect 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 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 is summarized as follows:

For the Quarter Ended

For the Three Quarters Ended

March 28, 2025

March 29, 2024

March 28, 2025

March 29, 2024

Manufacturing segment sales

Distribution segment sales

Inter/Intra segment elimination – manufacturing

Inter/Intra segment elimination – distribution

Net (loss) income attributable to Twin Disc, Incorporated

Manufacturing segment net income

Distribution segment net income

Corporate and eliminations

March 28, 2025

June 30, 2024

Manufacturing segment assets

Distribution segment assets

Corporate assets and elimination of

intercompany assets

Disaggregated revenue:

The following table presents details deemed most relevant to the users of the financial statements for the quarters ended March 28, 2025 and March 29, 2024.

Net sales by product group for the quarter ended March 28, 2025 is summarized as follows:

Elimination of

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

The following table presents the selected financial information with respect to the Company’s reportable segments as of September 26, 2025:

Manufacturing

Intercompany Sales

Land-based transmissions

Marine and propulsion systems

Net sales by product group for the quarter ended March 29, 2024 is summarized as follows:

Elimination of

Elimination and adjustments

$ 74,054 $ 21,778 $ - $ ( 15,836 ) $ 79,996

Intra-segment sales

( 2,047 ) ( 3,162 ) - 5,209 -

Inter-segment sales

( 9,874 ) ( 753 ) - 10,627 -

Total consolidated net sales

62,133 17,863 - - 79,996

Cost of goods sold:

Cost of goods sold

55,770 17,338 - 15,626 57,062

Intra-segment cost of goods sold

( 2,047 ) ( 3,162 ) - ( 5,209 ) -

Inter-segment cost of goods sold

( 9,874 ) ( 753 ) - ( 10,627 ) -

Total consoldiated cost of goods sold

43,849 13,423 - ( 210 ) 57,062

18,284 4,440 - 210 22,934

Marketing, engineering and administrative expenses

10,495 3,736 6,468 - 20,699

Operating income (loss)

7,789 704 ( 6,468 ) 210 2,235

Other income (expense):

Interest income

398 129 482 ( 990 ) 19

Interest expense

( 1,756 ) ( 2 ) ( 32 ) 990 ( 800 )

Other income (expense)

( 3,320 ) ( 1,528 ) 3,991 ( 26 ) ( 883 )

Total consolidated other income (expense)

( 4,678 ) ( 1,401 ) 4,441 ( 26 ) ( 1,664 )

Pretax earnings (loss)

3,111 ( 697 ) ( 2,027 ) 184 571

Income tax benefit (expense)

( 761 ) ( 225 ) 17 ( 14 ) ( 983 )

Net income (loss)

2,350 ( 922 ) ( 2,010 ) 170 ( 412 )

Minority interest

- 106 - - 106

Net income (loss) attributable to Twin Disc, Incorporated

$ 2,350 $ ( 1,028 ) $ ( 2,010 ) $ 170 $ ( 518 )

Total consolidated assets

$ 533,508 $ 66,003 $ ( 225,825 ) $ ( 10,150 ) $ 363,536

Depreciation and amortization

$ 3,066 $ 95 $ 303 $ - $ 3,464

Expenditures for segment assets

2,288 370 772 - 3,430

The following table presents the selected financial information with respect to the Company’s reportable segments as of September 27, 2024:

Manufacturing

Intercompany Sales

Land-based transmissions

Marine and propulsion systems

Net Sales by product group for the three quarters ended March 28, 2025 is summarized as follows:

Elimination and

$ 63,318 $ 29,583 $ - $ ( 20,004 ) $ 72,897

Intra-segment sales

( 858 ) ( 5,117 ) - 5,975 -

Inter-segment sales

( 12,695 ) ( 1,334 ) - 14,029 -

Total consolidated net sales

49,765 23,132 - - 72,897

Cost of goods sold:

Cost of goods sold

50,038 22,902 - $ 19,365 53,575

Intra-segment cost of goods sold

( 858 ) ( 5,117 ) - ( 5,975 ) -

Inter-segment cost of goods sold

( 12,695 ) ( 1,334 ) - ( 14,029 ) -

Total consoldiated cost of goods sold

36,485 16,451 - ( 639 ) 53,575

13,280 6,681 - 639 19,322

Marketing, engineering and administrative expenses

9,424 3,828 6,235 - 19,487

Operating income (loss)

3,856 2,853 ( 6,235 ) 639 ( 165 )

Other income (expense):

Interest income

205 133 - ( 299 ) 39

Interest expense

( 899 ) ( 2 ) ( 34 ) 299 ( 636 )

Other income (expense)

( 889 ) ( 1,372 ) 902 ( 24 ) ( 1,383 )

Total consolidated other income (expense)

( 1,583 ) ( 1,241 ) 868 ( 24 ) ( 1,980 )

Pretax earnings (loss)

2,273 1,612 ( 5,367 ) 615 ( 2,145 )

Income tax benefit (expense)

( 404 ) ( 668 ) 227 218 ( 627 )

Net income (loss)

1,869 944 ( 5,140 ) 833 ( 2,772 )

Minority interest

- ( 7 ) - - ( 7 )

Net income (loss) attributable to Twin Disc, Incorporated

$ 1,869 $ 951 $ ( 5,140 ) $ 833 $ ( 2,765 )

Total consolidated assets

$ 474,502 $ 63,108 $ ( 203,841 ) $ ( 10,222 ) $ 323,547

Depreciation and amortization

$ 2,872 $ 92 $ 274 $ - $ 3,238

Expenditures for segment assets

1,713 357 292 - 2,362

Disaggregated revenue:

The following table presents details deemed most relevant to the users of the financial statements for the quarters ended September 26, 2025 and September 27, 2024.

Net sales by product group for the quarter ended September 26, 2025 is summarized as follows:

Elimination of

1 unchanged sentence

Intercompany Sales

$ 10,304 $ 997 $ ( 923 ) $ 10,378

Land-based transmissions

17,880 2,951 ( 3,273 ) 17,558

Marine and propulsion systems

Net Sales by product group for the three quarters ended March 29, 2024 is summarized as follows:

45,870 13,483 ( 11,127 ) 48,226

- 4,347 ( 513 ) 3,834

$ 74,054 $ 21,778 $ ( 15,836 ) $ 79,996

Net sales by product group for the quarter ended September 27, 2024 is summarized as follows:

Elimination of

1 unchanged sentence

Intercompany Sales

$ 8,797 $ 1,053 $ ( 681 ) $ 9,169

Land-based transmissions

18,153 3,563 ( 4,432 ) 17,284

Marine and propulsion systems

36,347 20,331 ( 14,578 ) 42,100

21 4,636 ( 313 ) 4,344

$ 63,318 $ 29,583 $ ( 20,004 ) $ 72,897

Industrial products include clutches, power take-offs and pump drives sold to the agriculture, recycling, construction and oil and gas markets.

The land-based transmission products include applications for oil field and natural gas, military and airport rescue and firefighting.

The marine and propulsion systems include marine transmission, azimuth drives, controls, surface drives, and propellers for the global commercial marine, pleasure craft and patrol boat markets.

Other include non-Twin Disc manufactured product sold through Company-owned distribution entities.

Stock-Based Compensation

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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.

The Omnibus Plan is designed to benefit key employees (including officers) 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.

2 unchanged sentences

Performance Stock Awards ( “ PSA ” )

During the first three quarters of fiscal 2025 and 2024, the Company granted a target number of 116.1 and 119.3 PSAs, respectively, to various employees of the Company, including executive officers.

During the first quarter of fiscal 2026 and 2025, the Company granted a target number of 166.5 and 116.1 PSAs, respectively, to various employees of the Company, including executive officers.

The fiscal 2026 PSAs 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, 2028.

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 333.1 .

Based upon actual results to date, the Company is currently not accruing compensation expense for these PSAs.

The fiscal 2025 PSAs 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, 2027.

There were 350.0 and 329.9 unvested PSAs outstanding at March 28, 2025 and March 29, 2024, respectively.

There were 396.4 and 350.0 unvested PSAs outstanding at September 26, 2025 and September 27, 2024, respectively.

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.

Compensation expense of $ 376 and $ 326 was recognized for the quarters ended March 28, 2025 and March 29, 2024, respectively, related to PSAs.

Compensation expense of $ 1,296 and $ 704 was recognized for the three quarters ended March 28, 2025 and March 29, 2024, respectively, related to PSAs.

The weighted average grant date fair value of the unvested awards at March 28, 2025 was $ 10.85 .

At March 28, 2025, the Company had $ 1,919 of unrecognized compensation expense related to the unvested shares that would vest if the specified target objective was achieved for the fiscal 2025, 2024 and 2023 awards.

The total fair value of PSAs vested as of March 28, 2025 and March 29, 2024 was $ 0 .

Compensation expense of $ 378 and $ 659 was recognized for the quarters ended September 26, 2025 and September 27, 2024, respectively, related to PSAs.

The weighted average grant date fair value of the unvested awards at September 26, 2025 was $ 11.12 .

At September 26, 2025, the Company had $ 2,736 of unrecognized compensation expense related to the unvested shares that would vest if the specified target objective was achieved for the fiscal 2026 and 2025 awards.

The total fair value of PSAs vested as of September 26, 2025 and September 27, 2024 was $ 0 .

Performance Stock Unit Awards ( “ PSUA ” )

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 the first three quarters of fiscal 2025 and 2024 , the Company granted a target number of 0 and 10.5 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 .

There were 10.5 and 10.5 unvested PSUAs outstanding at March 28, 2025 and March 29, 2024, respectively.

There were 8.0 and 10.5 unvested PSUAs outstanding at September 26, 2025 and September 27, 2024, respectively.

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

Compensation expense of $ 22 and $ 11 was recognized for the quarters ended March 28, 2025 and March 29, 2024, respectively, related to PSUAs.

Compensation expense of $ 33 and $ 29 was recognized for the three quarters ended March 28, 2025 and March 29, 2024, respectively, related to PSUAs.

The weighted average grant date fair value of the unvested awards at March 28, 2025 was $ 12.15 .

At March 28, 2025, the Company had $ 55 of unrecognized compensation expense related to the unvested shares that would vest if the specified target objective was achieved for the fiscal 2024 awards.

The total fair value of PSUAs vested as of March 28, 2025 and March 29, 2024 was $ 0 .

Compensation expense of $ 8 and $ 11 was recognized for the quarters ended September 26, 2025 and September 27, 2024, respectively, related to PSUAs.

The weighted average grant date fair value of the unvested awards at September 26, 2025 was $ 12.15 .

At September 26, 2025, the Company had $ 25 of unrecognized compensation expense related to the unvested shares that would vest if the specified target objective was achieved for the fiscal 2025 awards.

The total fair value of PSUAs vested as of September 26, 2025 and September 27, 2024 was $ 0 .

Restricted Stock Awards ( “ RS ” )

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The fair value of the RS grants is recorded as compensation expense over the vesting period, which is generally 1 to 3 years.

During the first three quarters of fiscal 2025 and 2024, the Company granted 45.8 and 117.2 service based restricted shares, respectively, to employees and non-employee directors.

There were 251.3 and 246.6 unvested shares outstanding at March 28, 2025 and March 29, 2024, respectively.

A total of 0 and 2.4 shares of restricted stock were forfeited during the three quarters ended March 28, 2025 and March 29, 2024, respectively.

Compensation expense of $ 321 and $ 330 was recognized for the quarters ended March 28, 2025 and March 29, 2024, respectively.

Compensation expense of $ 949 and $ 953 was recognized for the three quarters ended March 28, 2025 and March 29, 2024, respectively.

The total fair value of restricted stock grants vested as of March 28, 2025 and March 29, 2024 was $ 454 and $ 2,196 , respectively.

As of March 28, 2025, the Company had $ 877 of unrecognized compensation expense related to restricted stock which will be recognized over the next three years.

During the first quarter of fiscal 2026 and 2025, the Company granted 113.2 and 1.8 service based restricted shares, respectively.

There were 233.2 and 244.4 unvested shares outstanding at September 26, 2025 and September 27, 2024, respectively.

A total of 2.2 and 0 shares of restricted stock were forfeited during the quarters ended September 26, 2025 and September 27, 2024, respectively.

Compensation expense of $ 305 and $ 311 was recognized for the quarters ended September 26, 2025 and September 27, 2024, respectively.

The total fair value of restricted stock grants vested as of September 26, 2025 and September 27, 2024 was $ 1,156 and $ 27 , respectively.

As of September 26, 2025, the Company had $ 1,269 of unrecognized compensation expense related to restricted stock which will be recognized over the next three years.

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.

The RSUs entitles 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.

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

During the first three quarters of fiscal 2025 and 2024, the Company granted 77.4 and 7.1 of employment based RSUs, respectively.

There were 156.9 and 135.0 unvested RSUs outstanding at March 28, 2025 and March 29, 2024, respectively.

Compensation expense of $ 137 and $ 124 was recognized for the quarters ended March 28, 2025 and March 29, 2024, respectively.

Compensation expense of $ 327 and $ 372 was recognized for the three quarters ended March 28, 2025 and March 29, 2024, respectively.

The total fair value of restricted stock units vested as of March 28, 2025 and March 29, 2024 was $ 701 and $ 25 , respectively.

The weighted average grant date fair value of the unvested awards at March 28, 2025 was $ 10.66 .

As of March 28, 2025, the Company had $ 852 of unrecognized compensation expense related to restricted stock which will be recognized over the next three years.

During the first quarter of fiscal 2026 and 2025, the Company granted 0 and 77.4 of employment based RSUs, respectively.

There were 79.2 and 156.9 unvested RSUs outstanding at September 26, 2025 and September 27, 2024, respectively.

Compensation expense of $ 171 and $ 43 was recognized for the quarters ended September 26, 2025 and September 27, 2024, respectively.

The total fair value of restricted stock units vested as of September 26, 2025 and September 27, 2024 was $ 33 and $0, respectively.

The weighted average grant date fair value of the unvested awards at September 26, 2025 was $ 12.84 .

As of September 26, 2025, the Company had $ 605 of unrecognized compensation expense related to restricted stock which will be recognized over the next three years.

Pension and Other Postretirement Benefit Plans

2 unchanged sentences

The components of the net periodic benefit cost for the defined benefit pension plans and the other postretirement benefit plan are as follows:

The service cost component is included in cost of goods sold and marketing, engineering and administrative expenses.

All other components of net periodic benefit cost (gain) are included in other income (expense), net.

For the Quarter Ended

For the Three Quarters Ended

March 28, 2025

March 29, 2024

March 28, 2025

March 29, 2024

September 26, 2025

September 27, 2024

Pension Benefits:

2 unchanged sentences

Expected return on plan assets

( 751 ) ( 826 )

Amortization of transition obligation

Amortization of prior service cost

Amortization of actuarial net loss

Amortization of prior service cost (benefit)

Amortization of actuarial net loss (gain)

Net periodic benefit cost (gain)

1 unchanged sentence

Interest cost

Amortization of prior service benefit

Amortization of actuarial net gain

Net periodic benefit gain

The service cost component is included in cost of goods sold and marketing, engineering, and administrative expenses.

All other components of net periodic benefit cost are included in other (expense) income, net.

Amortization of prior service cost (benefit)

Amortization of actuarial net loss (gain)

( 13 ) ( 10 )

Net periodic benefit cost (gain)

$ 23 $ ( 23 )

The Company expects to contribute approximately $ 705 to its pension plans in fiscal 2026.

As of March 28, 2025, $ 592 in contributions to the pension plans have been made.

The Company has reclassified $ 201 (net of $ 5 in taxes) of benefit plan adjustments from accumulated other comprehensive loss during the quarter ended March 28, 2025, and ($ 191 ) (net of $ 10 in taxes) during the quarter ended March 29, 2024.

These reclassifications are included in the computation of net periodic benefit cost.

The Company has reclassified ($ 1,246 ) (net of $ 3 in taxes) of benefit plan adjustments from accumulated other comprehensive loss during the three quarters ended March 28, 2025, and ($ 470 ) (net of $ 2 in taxes) during the three quarters ended March 29, 2024.

These reclassifications are included in the computation of net periodic benefit cost.

As of September 26 2025, the amount of $ 181 in contributions to the pension plans have been made.

The Company has reclassified $ 632 (net of $ 1 in taxes) of benefit plan adjustments from accumulated other comprehensive income (loss) during the quarter ended September 26, 2025, and $ 221 (net of $ 11 in taxes) during the quarter ended September 27, 2024.

These reclassifications are included in the computation of net periodic benefit cost (gain).

Accounting policies for interim reporting require the Company to adjust its effective tax rate each quarter to be consistent with the estimated Annual Effective Tax Rate (AETR).

1 unchanged sentence

To calculate its AETR, an entity must estimate its ordinary income or loss and the related tax expense or benefit for its full fiscal year.

In situations in which an entity is in a loss position and recognizes a full valuation allowance, the guidance in ASC 740 - 270 - 25 - 9 applies.

Due to continued historical domestic losses and uncertain future domestic earnings, the Company continues to recognize a full domestic valuation allowance.

In situations in which an entity is in a loss position and recognizes a full valuation allowance, the guidance in ASC 740 - 270 - 30 - 36a applies.

Due to continued historical domestic and foreign immaterial jurisdiction losses and uncertain future earnings, the company continues to recognize a full valuation allowance for these entities.

Permanent differences continue to fluctuate and are significant compared to projected ordinary income.

Therefore, per ASC guidance, the fully valued domestic entity was removed from the annualized effective rate calculation.

Therefore, per ASC guidance, the fully valued domestic entity and the immaterial foreign jurisdiction was removed from the annualized effective rate calculation.

Because of the full U.S.

valuation allowance, the U.S.

entity may only recognize tax expense (benefit) recorded for ASC 740 - 10 adjustments.

and foreign immaterial jurisdiction valuation allowance, these entities may only recognize tax benefit (expense) recorded for ASC 740 - 10 adjustments.

For the Quarter-Ended

For the Three Quarters Ended

March 28, 2025

March 29, 2024

March 28, 2025

March 29, 2024

Foreign earnings, before income taxes of $ 1,140 , $ 400 , $ 3,546 , and $ 2,599 , respectively

September 26, 2025

September 27, 2024

Foreign earnings (loss) , before income taxes of $ 998 and $ 854 , respectively

$ 3,222 $ 3,443

Domestic losses, before income taxes of $ 0 , ($ 2 ), $( 227 ) and $ 7 , respetively

Domestic and immaterial foreign jurisdiction earnings (loss), before income taxes of ($ 15 ) and ($ 227 ), respectively

( 2,651 ) ( 5,588 )

(Loss) income before income taxes and noncontrolling interest

Income (loss) before income taxes and noncontrolling interest

$ 571 $ ( 2,145 )

Income tax expense

Income tax benefit (expense)

$ ( 983 ) $ ( 627 )

1 unchanged sentence

172.2 % - 29.2 %

Due to the full US valuation allowance currently in place, no tax benefit can be recognized on the domestic losses.

Goodwill and Intangible Assets

Due to the full U.S.

and immaterial foreign jurisdiction allowance currently in place, no tax benefit can be recognized on the losses within those jurisdictions.

A discrete benefit was recorded during the period of ($ 14 ) related to the release of an uncertain tax position.

During the quarter ended September 26, 2025, the Company recorded a discrete tax expense of $ 147 for U.S.

federal, state, and foreign withholding taxes associated with a planned repatriation from China for previously indefinitely reinvested earnings.

The change in assertion was due to cash flow optimization.

The impact of this discrete item increased the Company's foreign effective tax rate by 4.6 % for the period.

In prior periods, the Company had asserted indefinite reinvestment of these earnings and no deferred tax liability was recorded.

On July 4, 2025, the One Big Beautiful Bill Act (the "Act") was enacted and signed into law.

The Act restores and makes permanent a number of corporate tax provisions, such as full expensing for U.S.-based research and development expenditures and capital investments, as well as certain changes to the U.S.

taxation of foreign activity.

The Company has evaluated the impact of the provisions and determined that while the legislation impacts the timing of certain tax deductions, it does not result in a material impact to the Company's effective tax rate.

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.

The Company reviews goodwill for impairment on a reporting unit basis annually as of the end of the fiscal year, and whenever events or circumstances (“triggering events”) indicate that the carrying value of goodwill may not be recoverable.

The Company monitors for interim triggering events on an ongoing basis.

Such triggering events include unfavorable operating results and macroeconomic trends.

The fair value of reporting units is primarily driven by projected growth rates and operating results under the income approach using a discounted cash flow model, which applies an appropriate market-participant discount rate, and consideration of other market approach data from guideline public companies.

If declining actual operating results or future operating results become indicative that the fair value of the Company’s reporting units has declined below their carrying values, an interim goodwill impairment test may need to be performed and may result in a non-cash goodwill impairment charge.

On February 14, 2025, as discussed in Note B, the Company acquired goodwill in the estimated amount of $ 2,131 and intangible assets in the estimated amount of $ 2,847 as part of the acquisition of Kobelt.

These estimates are preliminary and are pending completion of several elements, including finalization of an independent valuation of fair value of the assets acquired and liabilities assumed and final review by the Company’s management.

The final determination of fair values and resulting goodwill may differ significantly from what is currently reflected.

As of March 28, 2025, changes in the carrying amount of goodwill is summarized as follows:

As of September 26, 2025, changes in the carrying amount of goodwill is summarized as follows:

Balance at June 30, 2025

Translation adjustment

Balance at March 28, 2025

For the quarter ended March 28.

2025, the Company performed a review of potential triggering events, and concluded there were no triggering events that indicated that the fair value of its reporting units had not more likely than not declined to below their carrying values at March 28, 2025.

The Company will perform an annual impairment test for its new and stand-alone reporting unit, Kobelt, as of June 30, 2025.

As of March 28, 2025, the following acquired intangible assets have definite useful lives and are subject to amortization:

Balance at September 26, 2025

As of September 26, 2025, the following acquired intangible assets have definite useful lives and are subject to amortization:

Net Book Value Rollforward

1 unchanged sentence

Gross Carrying

Amortization /

Relationships

Accumulated Amortization / Impairment

Customer Relationships

Balance at June 30, 2025

Other additions

$ 43,403 $ ( 30,042 ) $ 13,361 $ 7,195 $ 1,834 $ 2,036 $ 2,296 $ 13,361

8 - 8 - - - 8 8

- ( 667 ) ( 667 ) ( 326 ) ( 49 ) ( 76 ) ( 216 ) ( 667 )

Translation adjustment

Balance at March 28, 2025

( 332 ) 200 ( 132 ) ( 72 ) ( 29 ) ( 26 ) ( 5 ) ( 132 )

Balance at September 26, 2025

$ 43,079 $ ( 30,509 ) $ 12,570 $ 6,797 $ 1,756 $ 1,934 $ 2,083 $ 12,570

Other intangibles consist mainly of computer software.

1 unchanged sentence

The weighted average remaining useful life of the intangible assets included in the table above is approximately 7 years.

Intangible amortization expense was $ 915 and $ 822 for the quarters ended March 28, 2025, and March 29, 2024, respectively.

Intangible amortization expense was $ 2,721 and $ 2,458 for the three quarters ended March 28, 2025, and March 29, 2024, respectively.

Estimated intangible amortization expense for the remainder of fiscal 2025 and each of the next five fiscal years and thereafter is as follows:

Intangible amortization expense was $ 667 and $ 926 for the quarters ended September 26, 2025, and September 27, 2024, respectively.

Estimated intangible amortization expense for the remainder of fiscal 2026 and each of the next five fiscal years is as follows:

Long-term Debt

Long-term debt at March 28, 2025 and June 30, 2024 consisted of the following:

March 28, 2025

Long-term debt at September 26, 2025 and June 30, 2025 consisted of the following:

September 26, 2025

June 30, 2025

1 unchanged sentence

Revolving loans (expire April 2027)

$ 30,194 $ 17,921

Term loan (due April 2027)

13,500 13,500

43,719 31,446

current maturities

( 3,000 ) ( 3,000 )

Total long-term debt

$ 40,719 $ 28,446

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.

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; 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.

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.

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, 2023.

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:

( 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 permitted the Company to use 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 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.

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;

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;

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.

On February 14, 2025, the Company entered into a Credit Agreement (the “New 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.

Pursuant to the New Agreement, the Bank made a Term Loan to the Company in the principal amount of $ 15 million, consisting of as assignment of a term loan under the Credit Agreement from BMO to the Bank with a remaining principal of $ 8.5 million and an additional advance of $ 6.5 million.

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 new agreement, the Company is restricted in making dividend payments beyond $ 5 million in any fiscal year.

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 New 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 New 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 New Agreement runs through April 1, 2027.

The Company used the increased borrowing capacity under the New Agreement to help finance its acquisition of Kobelt Manufacturing Co.

(“Kobelt”), as described elsewhere in this current report.

Kobelt is included as a Borrower under the New Agreement, and may borrow directly under the New Agreement up to the lesser of the Revolving Credit Commitment or $ 25 million.

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

Under the Credit Agreement, the Company may not pay cash dividends on its common stock in excess of $ 5.0 million in any fiscal year.

The term of the Revolving Loans under the Credit Agreement runs through April 1, 2027.

The Company used the increased borrowing capacity under the Credit Agreement to help finance its acquisition of Kobelt.

Kobelt is included as a Borrower under the Credit Agreement, and may borrow directly under the Credit Agreement up to the lesser of the Revolving Credit Commitment or $ 25.0 million.

For purposes of determining the Borrowing Base under the Credit Agreement, Eligible Receivables and Eligible Inventory of Kobelt are included.

In addition, 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 Oy acquisition, as well as pro-forma EBITDA of Katsa Oy and Kobelt as permitted by the Bank.

Interest rates under the New Agreement are based on the secured overnight financing rate (“SOFR”), the euro interbank offered rate (the “EURIBO Rate”), or the Canadian Overnight Repo Rate Average (the “CORRA”).

Loans under the New Agreement are designated as either as “SOFR Loans,” which accrue interest at an Adjusted Term SOFR plus an Applicable Margin;

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;

4 unchanged sentences

2.125 % and 3.625 % for Term Loans;

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

Borrowings under the New Agreement are secured by substantially all of the Company’s, including Kobelt’s, personal property, including accounts receivable, inventory, machinery and equipment, and intellectual property.

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 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 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 New 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 New Agreement and the Negative Pledge Agreement.

The Company also entered into a Collateral Assignment of Rights under Purchase Agreement for its acquisition of Kobelt, described in Item 8.01 below.

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 New Agreement;

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

( 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 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 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;

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 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).

The Company remains in compliance with its liquidity and other covenants.

As of March 28, 2025, current maturities include $ 3,000 of term loan payments due within the coming year.

During the quarter ended March 28, 2025, the average interest rate was 6.95 % on the Term Loan, and 5.74 % on the Revolving Loans.

As of March 28, 2025, the Company’s borrowing capacity on the Revolving Loans under the terms of the Credit Agreement was $ 47,322 , and the Company had approximately $ 21,571 of available borrowings.

As of September 26, 2025, current maturities include $ 3,000 of term loan payments due within the coming year.

During the quarter ended September 26, 2025, the average interest rate was 6.73 % on the Term Loan, and 5.26 % on the Revolving Loans.

As of September 26, 2025, the Company’s borrowing capacity on the Revolving Loans under the terms of the Credit Agreement was $ 46,337 , and the Company had approximately $ 16,143 available borrowings.

In addition to the Credit Agreement, the Company has established unsecured lines of credit that are used from time to time to secure certain performance obligations by the Company.

The Company’s borrowings described above approximate fair value at March 28, 2025 and June 30, 2024.

The Company’s borrowings described above approximate fair value at September 26, 2025 and June 30, 2025.

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

The Company is party to an interest rate swap arrangement with Bank of Montreal, with an initial notional amount of $ 20,000 and a maturity date of March 4, 2026 to hedge the Term Loan.

As of March 28, 2025, the notional amount was $ 8,500 .

As of September 26, 2025, the notional amount was $ 7,500 .

This swap has been designated as a cash flow hedge under ASC 815, Derivatives and Hedging.

This swap is included in the disclosures in Note P, Derivative Financial Instruments.

This swap is included in the disclosures in Note O, Derivative Financial Instruments.

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 the fair value of the euro revolver are reported in accumulated other comprehensive loss along with the foreign currency translation adjustments on those foreign investments.

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

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

Shareholders ’ Equity

The Company, from time to time, makes open market purchases of its common stock under authorizations given to it by the Board of Directors, of which 315.0 shares as of March 28, 2025 remain authorized for purchase.

The Company did not make any open market purchases of its shares during the quarters ended March 28, 2025 and March 29, 2024.

The following is a reconciliation of the Company’s equity balances for the quarters ended March 28, 2025 and March 29, 2024:

The Company, from time to time, makes open market purchases of its common stock under authorizations given to it by the Board of Directors, of which 315.0 shares as of September 26, 2025 remain authorized for purchase.

The Company did not make any open market purchases of its shares during the quarters ended September 26, 2025 and September 27, 2024.

The following is a reconciliation of the Company’s equity balances for the first fiscal quarters of 2026 and 2025:

Twin Disc, Inc.

Shareholders’ Equity

Accumulated Other

Comprehensive

Income (Loss)

Treasury Stock

Balance, June 30, 2025

$ 42,269 $ 125,414 $ 3,730 $ ( 7,402 ) $ 380 $ 164,391

Net income (loss)

( 518 ) 106 ( 412 )

Dividends paid to shareholders

( 566 ) ( 566 )

Translation adjustments

( 2,516 ) 85 ( 2,431 )

Benefit plan adjustments, net of tax

Unrealized loss on hedges, net of tax

Unrealized gain (loss) on hedges, net of tax

Compensation expense

Stock awards, net

( 5,318 ) 3,632 ( 1,686 )

Balance, September 26, 2025

Dividends paid to shareholders

Translation adjustments

Benefit plan adjustments, net of tax

Unrealized gain on hedges, net of tax

Compensation expense

Stock awards, net

Balance, December 27, 2024

Net (loss) income

Dividends paid to shareholders

Translation adjustments

Benefit plan adjustments, net of tax

Unrealized loss on hedges, net of tax

Compensation expense

Stock awards, net

Balance, March 28, 2025

$ 37,813 $ 124,330 $ 1,944 $ ( 3,770 ) $ 571 $ 160,888

Twin Disc, Inc.

Shareholders’ Equity

Accumulated Other

Comprehensive

Income (Loss)

Treasury Stock

Balance, June 30, 2024

Net (loss) income

Translation adjustments

Benefit plan adjustments, net of tax

Unrealized gain on hedges, net of tax

Compensation expense

Stock awards, net

Balance, September 29, 2023

Dividends paid to shareholders

Translation adjustments

Benefit plan adjustments, net of tax

Unrealized loss on hedges, net of tax

Compensation expense

Stock awards, net

Balance, December 27, 2024

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

Net income (loss)

( 2,765 ) ( 7 ) ( 2,772 )

Dividends paid to shareholders

( 570 ) ( 570 )

Translation adjustments

7,021 143 7,164

Benefit plan adjustments, net of tax

Unrealized gain on cash flow hedge, net of tax

Unrealized gain (loss) on hedges, net of tax

( 853 ) ( 853 )

Compensation expense

Stock awards, net

Balance, March 29, 2024

Reconciliations for the changes in accumulated other comprehensive loss, net of tax, by component for the quarters ended March 28, 2025 and March 29, 2024 are as follows:

Net Investment

( 2,920 ) 1,671 ( 1,249 )

Balance, September 27, 2024

$ 39,902 $ 126,257 $ ( 516 ) $ ( 8,112 ) $ 488 $ 158,019

Reconciliations for the changes in accumulated other comprehensive income (loss), net of tax, by component for the quarters ended September 26, 2025 and September 27, 2024 are as follows:

Benefit Plan Adjustment

Balance, June 30, 2025

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

Translation adjustment during the quarter

Amounts reclassified from accumulated other comprehensive loss

( 2,516 ) - - -

Amounts reclassified from accumulated other comprehensive income (loss)

- 632 ( 31 ) 129

Net current period other comprehensive income (loss)

( 2,516 ) 632 ( 31 ) 129

Balance, September 26, 2025

Translation adjustment during the quarter

Return on plan assets

Amounts reclassified from accumulated other comprehensive loss

Net current period other comprehensive (loss) income

Balance, December 27, 2024

Translation adjustment during the quarter

Amounts reclassified from accumulated other comprehensive loss

Net current period other comprehensive income (loss)

Balance, March 28, 2025

Net Investment

$ 12,520 $ ( 10,829 ) $ 253 $ -

Benefit Plan Adjustment

Balance, June 30, 2024

Translation adjustment during the quarter

Amounts reclassified from accumulated other comprehensive loss

Net current period other comprehensive (loss) income

Balance, September 29, 2023

$ ( 849 ) $ ( 8,062 ) $ 504 $ 1,502

Translation adjustment during the quarter

Amounts reclassified from accumulated other comprehensive loss

Amounts reclassified from accumulated other comprehensive income (loss)

- 221 ( 169 ) ( 684 )

Net current period other comprehensive income (loss)

Balance, December 27, 2024

Translation adjustment during the quarter

Amounts reclassified from accumulated other comprehensive loss

Net current period other comprehensive (loss) income

Balance, March 29, 2024

Reconciliation for the changes in benefit plan adjustments, net of tax for the quarter ended March 28, 2025 are as follows:

Quarter Ended

Three Quarters

March 28, 2025

7,021 221 ( 169 ) ( 684 )

Balance, September 27, 2024

$ 6,172 $ ( 7,841 ) $ 335 $ 818

Reconciliation for the changes in benefit plan adjustments, net of tax for the quarter ended September 26, 2025 are as follows:

Amount Reclassified

Changes in benefit plan items

Actuarial losses

Transition asset and prior service benefit

Return on plan assets

Actuarial loss (gain)

Transition asset and prior service cost (benefit)

Total amortization

Total reclassification, net of tax

Reconciliation for the changes in benefit plan adjustments, net of tax for the quarter ended March 29, 2024 is as follows:

Quarter Ended

Three Quarters

March 29, 2024

Total changes, net of tax

Reconciliation for the changes in benefit plan adjustments, net of tax for the quarter ended September 27, 2024 is as follows:

Amount Reclassified

Changes in benefit plan items

Actuarial losses

Transition asset and prior service benefit

Actuarial loss (gain)

(a)Transition asset and prior service cost (benefit)

Total amortization

Total reclassification, net of tax

These accumulated other comprehensive loss components are included in the computation of net periodic pension cost (see Note H, "Pension and Other Postretirement Benefit Plans" for further details).

Restructuring of Operations

Restructuring expenses

The Company has implemented various restructuring programs in response to unfavorable macroeconomic trends in certain of the Company’s markets since the fourth quarter of fiscal 2015.

These programs primarily involved the reduction of workforce in several of the Company’s manufacturing locations, under a combination of voluntary and involuntary programs.

During the fourth quarter of fiscal 2021, the Company undertook a series of steps to accelerate its focus on its core competencies, improve its fixed cost structure, and monetize some of its under-utilized assets.

The Company continued its restructuring plans with regard to its Belgian operations during fiscal year 2025 and 2024.

A voluntary program was implemented to reduce the workforce.

The action was taken to allow the Belgian operation to focus resources on core manufacturing processes, while allowing for savings on the outsourcing of non-core processes.

Total restructuring charges relating to streamlining operations totaled $ 287 and $ 139 in the quarters ending March 28, 2025 and March 29, 2024, respectively.

Total restructuring charges relating to streamlining operations totaled to $ 355 and $ 207 in the three quarters ending March 28, 2025 and March 29, 2024, respectively.

The following is a roll-forward of restructuring activity:

Accrued restructuring liability, June 30, 2024

Payments, adjustments and write-offs during the year

Accrued restructuring liability, March 28, 2025

Total changes, net of tax

These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension benefit cost (gain) (see Note H, "Pension and Other Postretirement Benefit Plans" for further details).

Earnings Per Share

The Company calculates basic earnings per share based upon the weighted average number of common shares outstanding during the period, while the calculation of diluted earnings per share includes the dilutive effect of potential common shares outstanding during the period.

The calculation of diluted earnings per share excludes all potential common shares if their inclusion would have an anti-dilutive effect.

Certain restricted stock award recipients have a non-forfeitable right to receive dividends declared by the Company and are therefore included in computing earnings per share pursuant to the two -class method.

The components of basic and diluted earnings per share were as follows:

For the Quarter Ended

For the Three Quarters Ended

March 28, 2025

March 29, 2024

March 28, 2025

March 29, 2024

Net (loss) income

Net earnings attributable to noncontrolling interest, net of tax

Net (loss) income attributable to Twin Disc, Incorporated

The Company calculates basic earnings per share (“EPS”) based upon the weighted average number of common shares outstanding during the period, while the calculation of diluted EPS includes the dilutive effect of potential common shares outstanding during the period.

The calculation of diluted EPS excludes all potential common shares if their inclusion would have an anti-dilutive effect.

Certain restricted stock award recipients have a non-forfeitable right to receive dividends declared by the Company and are therefore included in computing EPS pursuant to the two -class method.

The components of basic and diluted EPS were as follows:

September 26, 2025 September 27, 2024

Net income (loss)

$ ( 412 ) $ ( 2,772 )

Net income (loss) attributable to noncontrolling interest, net of tax

Net income (loss) attributable to Twin Disc, Incorporated

( 518 ) ( 2,765 )

Weighted average shares outstanding - basic

Basic (Loss) Income Per Share:

Net (loss) earnings per share - basic

Net (loss) income

Net earnings attributable to noncontrolling interest, net of tax

Net (loss) income attributable to Twin Disc, Incorporated

13,961 13,778

Basic earnings (loss) per share:

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

$ ( 0.04 ) $ ( 0.20 )

Net income (loss)

$ ( 412 ) $ ( 2,772 )

Net income (loss) attributable to noncontrolling interest, net of tax

Net income (loss) attributable to Twin Disc, Incorporated

( 518 ) ( 2,765 )

Weighted average shares outstanding - basic

13,961 13,778

Effect of dilutive stock awards

Weighted average shares outstanding - diluted

Diluted (Loss) Income Per Share:

Net (loss) earnings per share - diluted

The following potential common shares were excluded from diluted EPS for the three quarters ended March 28, 2025 as the Company reported a net loss:

404.3 related to the Company’s unvested PSAs, 10.5 related to the Company’s unvested PSAUs, 103.2 related to the Company’s unvested RS awards, and 38.2 related to the Company’s unvested RSUs.

13,961 13,778

Diluted earnings (loss) per share:

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

$ ( 0.04 ) $ ( 0.20 )

The following potential common shares were excluded from diluted EPS for the quarter ended September 26, 2025 as the Company reported a net loss:

229.9 related to the Company’s unvested PSAs, 8.0 related to the Company’s unvested PSUA awards, 233.2 related to the Company’s unvested RS awards, and 79.2 related to the Company’s unvested RSUs.

The following potential common shares were excluded from diluted EPS for the quarter ended September 27, 2024 as the Company reported a net loss:

84.5 related to the Company’s unvested PSAs, 0.0 related to the Company’s unvested PSUA awards, 157.2 related to the Company’s unvested RS awards, and 103.2 related to the Company’s unvested RSUs.

Lease Liabilities

6 unchanged sentences

Non-lease components and the lease components to which they relate are accounted for as a single lease component.

The following table provides a summary of leases recorded on the condensed consolidated balance sheet.

Condensed Consolidated Balance Sheet

March 28, 2025

The following table provides a summary of leases recorded on the condensed consolidated balance sheets.

Condensed Consolidated

Balance Sheets Location

September 26, 2025

June 30, 2025

1 unchanged sentence

Right-of-use operating lease assets

$ 16,311 $ 17,250

Right-of-use finance lease assets

3 unchanged sentences

Current maturities of right-of-use operating lease obligations

$ 3,336 $ 3,393

Right-of-use operating lease liabilities, non-current

Right-of use operating lease obligations

Right-of-use lease obiligations

13,474 14,357

Right-of-use finance lease liabilities, current

2 unchanged sentences

Other long-term liabilities

$ 4,975 $ 5,212

The components of lease expense were as follows:

For the Quarter Ended

For the Three Quarters Ended

March 28, 2025

March 29, 2024

March 28, 2025

March 29, 2024

September 26, 2025

September 27, 2024

Finance lease cost:

6 unchanged sentences

Sublease income

( 26 ) ( 21 )

Net lease cost

$ 1,650 $ 1,355

Other information related to leases was as follows:

For the Quarter Ended

For the Three Quarters Ended

March 28, 2025

March 29, 2024

March 28, 2025

March 29, 2024

September 26, 2025

September 27, 2024

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

$ 1,240 $ 1,013

Operating cash flows from finance leases

9 unchanged sentences

Finance leases

Approximate future minimum rental commitments under non-cancellable leases as of March 28, 2025 were as follows:

Approximate future minimum rental commitments under non-cancellable leases as of September 26, 2025 were as follows:

Operating Leases

Finance Leases

$ 3,336 $ 1,063

Total future lease payments

Amount representing interest

( 5,999 ) ( 1,344 )

Present value of future payments

$ 16,810 $ 6,038

Derivative Financial Instruments

4 unchanged sentences

Interest Rate Swap Contracts

The Company has one outstanding interest rate swap contract as of March 28, 2025, with a notional amount of $ 8,500 .

The Company has one outstanding interest rate swap contract as of September 26, 2025, with a notional amount of $ 7,500 .

It has been designated as a cash flow hedge in accordance with ASC 815, Derivatives and Hedging.

1 unchanged sentence

The Company records gains and losses on interest rate swap contracts qualifying as cash flow hedges in accumulated other comprehensive loss to the extent that these hedges are effective and until the Company recognizes the underlying transactions in net earnings, at which time these gains and losses are recognized in interest expense on its condensed consolidated statements of operations and comprehensive income (loss).

Cash flows from derivative financial instruments are classified as cash flows from financing activities on the consolidated statements of cash flows.

Cash flows from derivative financial instruments are classified as cash flows from financing activities on the condensed consolidated statements of cash flows.

These contracts generally have original maturities of greater than twelve months.

Net unrealized after-tax gains related to cash flow hedging activities that were included in accumulated other comprehensive loss were $ 314 and $504 as of March 28, 2025, and June 30, 2024, respectively.

The unrealized amounts in accumulated other comprehensive loss will fluctuate based on changes in the fair value of open contracts during each reporting period.

The Company estimates that $ 104 of net unrealized losses related to cash flow hedging activities included in accumulated other comprehensive loss will be reclassified into earnings within the next twelve months.

Net unrealized after-tax gains (loss) related to cash flow hedging activities that were included in accumulated other comprehensive income (loss) were $ 253 and $ 284 as of September 26, 2025, and June 30, 2025, respectively.

The unrealized amounts in accumulated other comprehensive income (loss) will fluctuate based on changes in the fair value of open contracts during each reporting period.

The Company estimates that $ 43 of net unrealized gain (loss) related to cash flow hedging activities included in accumulated other comprehensive income (loss) will be reclassified into earnings within the next twelve months.

Derivatives Designated as Net Investment Hedges

The Company is exposed to foreign currency exchange rate risk related to its investment in net assets in foreign countries.

During the fourth quarter of fiscal 2021, the Company designated its euro denominated Revolving Loan, with a notional amount of €13,000, as a net investment hedge to mitigate the risk of variability in its euro denominated net investments in wholly-owned foreign subsidiaries.

All changes in the fair value of the euro revolver were then recorded in accumulated other comprehensive loss along with the foreign currency translation adjustments on those foreign investments.

Net unrealized after-tax income related to net investment hedging activities that were included in accumulated other comprehensive loss were $ 1,332 and $ 1,502 as of March 28, 2025 and June 30, 2024, respectively.

The Company is exposed to foreign currency exchange risk related to its investment in net assets in foreign countries.

As discussed in Note K, Long-term Debt, during the fourth quarter of fiscal 2021, the Company designated its euro denominated Revolving Loan, with a notional amount of €13,000, as a net investment hedge to mitigate the risk of variability in its euro denominated net investments in wholly-owned foreign subsidiaries.

All changes in the fair value of the euro revolver were then recorded in accumulated other comprehensive income (loss) along with the foreign currency translation adjustments on those foreign investments.

Net unrealized after-tax gains (loss) related to net investment hedging activities that were included in accumulated other comprehensive income (loss) were $ 0 and ($ 129 ) as of September 26, 2025 and June 30, 2025, respectively.

Fair Value of Derivative Instruments

The fair value of derivative instruments included in the condensed consolidated balance sheets were as follows:

Condensed Consolidated Balance

Sheet Location

March 28, 2025

Condensed Consolidated

Balance Sheets Location

September 26, 2025

June 30, 2025

2 unchanged sentences

Other current assets

Interest rate swap

Other noncurrent assets

The impact of the Company’s derivative instruments on the condensed consolidated statements of operations and comprehensive income (loss) for the quarters ended March 28, 2025 and March 29, 2024, respectively, was as follows:

The impact of the Company’s derivative instruments on the condensed consolidated statements of operations and comprehensive income (loss) for the quarters ended September 26, 2025 and September 27, 2024, respectively, was as follows:

Condensed Consolidated Statements

1 unchanged sentence

For the Quarter Ended

For the Three Quarters Ended

Income (Loss) Location

March 28, 2025

March 29, 2024

March 28, 2025

March 29, 2024

September 26, 2025

September 27, 2024

Derivative designated as hedge:

1 unchanged sentence

Interest expense

$ 70 $ 62 $ 181 $ 200

Interest rate swap

Unrealized (loss) gain on hedges

Unrealized gain (loss) on hedges

( 31 ) ( 169 )

Net investment hedge

Unrealized (loss) gain on hedges

( 608 ) 156 ( 170 ) 75

Unrealized gain (loss) on hedges

Management Discussion and Analysis

In the financial review that follows, we discuss our results of operations, financial condition and certain other information.

This discussion should be read in conjunction with our consolidated financial statements as of March 28, 2025, and related notes, as reported in Item 1 of this Quarterly Report.

This discussion should be read in conjunction with our condensed consolidated financial statements as of September 26, 2025, and related notes, as reported in Item 1 of this Quarterly Report.

Some of the statements in this Quarterly Report on Form 10-Q are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995.

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Results of Operations

(In thousands)

Quarter Ended

Three Quarters Ended

March 28, 2025

March 29, 2024

March 28, 2025

March 29, 2024

September 26, 2025

% of Net Sales

September 27, 2024

% of Net Sales

Cost of goods sold

Cost of goods sold - other

Marketing, engineering and administrative expenses

Restructuring expense

Income from operations

Comparison of the Third Quarter of Fiscal 2025 with the Third Quarter of Fiscal 2024

Net sales for the third quarter increased 9.5%, or $7.1 million, to $81.2 million from $74.2 million in the same quarter a year ago.

The acquisition of Katsa Oy, completed in the fourth quarter of fiscal 2024, contributed $7.1 million of additional revenue in the quarter.

In addition, the acquisition of Kobelt, completed in the current quarter, contributed $1.2 million of additional revenue.

The remaining decrease of $1.2 million primarily reflects weaker demand for oil and gas transmissions in China, along with some softening in North American commercial marine activity, partially offset by continued growth in demand for the company’s Veth propulsion systems.

Global sales of marine and propulsion products improved 9.0% from the prior year, while shipments of industrial products improved by 56.2%.

Shipments of off-highway transmission products declined by 6.9%, with reduced Chinese demand for oil and gas transmissions.

The European region saw a significant increase in revenue ($9.1 million or 35.8%) thanks primarily to the acquisition of Katsa and continued growth of the Veth product line.

Sales into North America and Asia were essentially flat with the prior period quarter.

Currency translation had an unfavorable impact on third quarter fiscal 2025 sales compared to the third quarter of the prior year totaling $2.5 million primarily due to the strengthening of the US dollar against the euro, Singapore dollar and Australian dollar.

Income (loss) from operations

Comparison of the First Quarter of Fiscal 2026 with the First Quarter of Fiscal 2025

Net sales for the first quarter increased 9.7%, or $7.1 million, to $80.0 million from $72.9 million in the same quarter a year ago.

The acquisition of Kobelt, completed in the third quarter of fiscal 2025, contributed $3.1 million of additional revenue in the quarter.

The remaining increase primarily reflects continued growth in demand for the company’s Veth propulsion systems.

Global sales of marine and propulsion products improved 14.6% from the prior year, largely on the strength of the Veth product demand.

Sales of industrial products improved 13.2% from the prior year first quarter, with a significant contribution from the Kobelt acquisition.

Shipments of off-highway transmission products improved slightly (1.5%), with generally stable demand across end markets.

The North American region saw a significant increase in revenue ($8.7 million or 48.9%) thanks to the acquisition of Kobelt and expansion of Veth product sales into the region.

Sales into Europe increased 6.8%, or $2.0 million, on growing demand for the Veth product.

The Asia Pacific region declined 14.5%, or $2.4 million, on weaker commercial marine demand and reduced shipments of oilfield transmissions into China.

Currency translation had a favorable impact on first quarter fiscal 2026 sales compared to the first quarter of the prior year totaling $3.2 million primarily due to the strengthening of the euro against the U.S.

Sales at our manufacturing segment increased 17.0%, or $10.7 million, versus the same quarter last year.

The Company’s recent acquisition, Katsa Oy, in Finland contributed $7.1 million of incremental revenue.

The acquisition of Kobelt within the quarter contributed $1.2 million of incremental revenue.

manufacturing operations were essentially flat, showing a 1.2% decline from the prior third quarter, with consistent demand for airport rescue and firefighting (“ARFF”), marine and industrial products.

The Company’s operation in the Netherlands saw increased revenue of $3.4 million (17.4%) compared to the third fiscal quarter of 2024, as this operation continues to experience record demand for its propulsion systems.

The Company’s Belgian operation saw a decrease compared to the prior year third quarter (27.9% or $2.2 million), with weaker demand for its marine transmission products.

The Company’s Italian manufacturing operations were down $0.8 million (14.4%) compared to the third quarter of fiscal 2024, due to weaker demand for industrial and commercial marine products in the region.

The Company’s Swiss manufacturing operation, which supplies customized propellers for the global mega yacht and patrol boat markets, was down $0.1 million (9.7%) compared to the prior year third quarter.

Our distribution segment experienced a decrease in sales of $5.3 million (14.9%) in the third quarter of fiscal 2025 compared to the third quarter of fiscal 2024.

The Company’s Asian distribution operations in Singapore, China and Japan were down 8.9% or $1.2 million from the prior year on reduced Chinese demand for oil and gas transmissions.

The Company’s North America distribution operation also saw a decrease ($3.9 million or 43.4%) on some softening in North American demand for commercial marine products.

The Company’s European distribution operation saw a decline ($0.6 million or 8.2%) on a weaker shipments of commercial marine projects.

The Company’s distribution operation in Australia and New Zealand, which provides boat accessories, propulsion and marine transmission systems for the pleasure craft market, saw an increase in revenue of 5.9% from the prior year third fiscal quarter), primarily due to improved pleasure craft demand.

Gross profit as a percentage of sales for the third quarter of fiscal 2025 declined to 26.7%, compared to 28.2% for the same period last year.

The shortfall to the prior year gross profit percentage is attributed primarily to a less favorable product mix, along with purchase accounting amortization related to Katsa and Kobelt.

For the fiscal 2025 third quarter, marketing, engineering and administrative (“ME&A”) expenses, as a percentage of sales, were 24.0%, compared to 23.2% for the fiscal 2024 third quarter.

ME&A expenses increased $2.3 million (13.2%) over the same period last fiscal year.

The increase in ME&A spending for the quarter was comprised of the addition of Katsa and Kobelt ($1.7 million), an inflationary increase to wages ($0.6 million) and an increase in professional fees ($0.5 million).

These increases were offset by a decrease in global bonus expense ($0.1 million), telephone expense ($0.1 million) and the impact of currency translation ($0.4 million).

Interest expense was up $0.4 million to $0.7 million in the third quarter of fiscal 2025, with a higher average outstanding revolver balance following the Katsa and Kobelt acquisitions.

Other expense (benefit) of $1.6 million for the third fiscal quarter was primarily attributable to a currency loss ($1.3 million) resulting from the weakening of the US dollar against the euro, along with pension amortization expense ($0.2 million).

The fiscal 2025 third quarter effective tax rate was (407.9%) compared to 9.3% in the prior fiscal year third quarter.

The full domestic valuation allowance, along with the mix of foreign earnings by jurisdiction, resulted in the change to the effective tax rate, which becomes very volatile when pre-tax results are very close to breakeven.

Comparison of the First Nine Months of Fiscal 2025 with the First Nine Months of Fiscal 2024

Net sales for the first nine months increased 15.8%, or $33.4 million, to $244.1 million from $210.7 million in the same period a year ago.

The acquisition of Katsa Oy, completed in the fourth quarter of fiscal 2024, contributed $26.3 million of additional revenue in the first nine months, while the recently announced acquisition of Kobelt contributed $1.2 million.

This was partially offset by the sale of the boat management system product line in the prior year, reducing revenue by $2.6 million in the period.

The remaining increase of $8.5 million primarily reflects continued growth in demand for the company’s Veth propulsion systems, along with improved shipments of the Company’s products for the ARFF market.

Global sales of marine and propulsion products improved 16.1% from the prior year, driven by strong demand for the Veth product.

Shipments of industrial products improved by 53.7%, driven by the addition of Katsa.

Shipments of off-highway transmission products improved by just 1.0%, with improving ARFF shipments being offset by weaker Chinese demand for oil and gas transmissions.

The European region saw a significant increase in revenue ($28.7 million or 39.6%) thanks primarily to the acquisition of Katsa and continued growth of the Veth product.

Sales into North America increased 2.4%, or $1.5 million, on improved industrial and commercial marine shipments in the first half of the fiscal year.

The Asia Pacific region decreased 4.7%, or $2.7 million, on weaker demand for oilfield transmissions into China in the first fiscal quarter.

Currency translation had an unfavorable impact on the first nine months of fiscal 2025 sales compared to the comparable period of the prior year totaling $1.5 million primarily due to the weakening of the euro, Singapore dollar and Australian dollar against the U.S.

Sales at our manufacturing segment increased 18.4%, or $33.1 million, versus the same period last year.

The Company’s new acquisition, Katsa Oy, in Finland contributed $26.3 million of incremental revenue, while the recently announced acquisition of Kobelt contributed $1.2 million.

manufacturing operations experienced a 3.5%, or $3.0 million, increase in sales versus the first nine months of fiscal 2024, with improvement in demand for ARFF and industrial products.

The Company’s operation in the Netherlands saw increased revenue of $12.4 million (23.9%) compared to the first nine months of fiscal 2024, as this operation continues to experience record demand for its propulsion systems and has begun to increase capacity to satisfy the growing demand.

The Company’s Belgian operation saw a decrease compared to the prior year first half (19.9% or $4.0 million), with weaker demand for its marine transmission products.

The Company’s Italian manufacturing operations were down $3.3 million (22.3%) compared to the first nine months of fiscal 2024, due primarily to the sale of the boat management product line in the prior year, along with weaker European demand for industrial and commercial marine products.

The Company’s Swiss manufacturing operation, which supplies customized propellers for the global mega yacht and patrol boat markets, was up $0.1 million (2.5%) compared to the prior year comparable period.

Our distribution segment experienced a decrease in sales of $8.0 million (7.7%) in the first nine months of fiscal 2025 compared to the first nine months of fiscal 2024.

The Company’s Asian distribution operations in Singapore, China and Japan were down 6.7% or $2.9 million from the prior year on weaker demand for oilfield transmissions into China.

The Company’s North America distribution operation saw a decrease ($5.8 million or 26.4%) on some softening in North American demand for commercial marine products.

The Company’s European distribution operation saw an increase ($0.6 million or 3.7%) on stronger shipments of commercial marine projects.

The Company’s distribution operation in Australia and New Zealand, which provides boat accessories, propulsion and marine transmission systems for the pleasure craft market, saw a decrease in revenue of 0.1% from the prior year comparable period, on stable demand.

Gross profit as a percentage of sales for the first nine months of fiscal 2025 declined to 25.7%, compared to 27.6% for the same period last year.

The current year includes the impact of a non-cash inventory write-down of $1.6 million.

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

Excluding this adjustment, the first nine months gross profit percent was 26.3%.

The remaining shortfall to the prior year gross profit percentage is attributed to a less favorable product mix, along with purchase accounting amortization related to Katsa.

For the fiscal 2025 first nine months, marketing, engineering and administrative (“ME&A”) expenses, as a percentage of sales, were 23.7%, compared to 24.3% for the first nine months of fiscal 2024.

The Company’s new Canadian acquisition, Kobelt, contributed $3.1 million of incremental revenue.

manufacturing operations experienced a 1.4%, or $0.4 million, decrease in sales versus the first fiscal quarter of 2025, driven by a reduction in aftermarket demand.

The Company’s operation in the Netherlands saw increased revenue of $6.8 million (43.6%) compared to the first fiscal quarter of 2025, as this operation continues to ramp up production to meet record demand for its propulsion systems.

The Company’s Finnish operation saw an increase in revenue ($0.7 million or 7.7%) as demand for European defense applications continues to improve.

The Company’s Belgian operation saw a decrease compared to the prior year first quarter (16.2% or $0.8 million), with weaker demand for its marine transmission products.

The Company’s Italian manufacturing operation was up $0.6 million (16.7%) compared to the first quarter of fiscal 2025, due primarily to some strengthening demand for marine products in the region.

The Company’s Swiss manufacturing operation, which supplies customized propellers for the global mega yacht and patrol boat markets, was up $0.7 million (44.4%) compared to the prior year first quarter.

Our distribution segment experienced a decrease in sales of $7.8 million (26.4%) in the first quarter of fiscal 2026 compared to the first quarter of fiscal 2025.

The Company’s Asian distribution operations in Singapore, China and Japan were down 24.7% or $2.9 million from the prior year on reduced demand for commercial marine products.

The Company’s North America distribution operation saw a $2.1 million decrease (41.6%) on reduced demand for European produced goods, somewhat impacted by the changing tariff structure.

Similarly, the Company’s European distribution operation saw a significant decrease ($2.5 million or 45.5%) on reduced activity in commercial marine projects.

The Company’s distribution operation in Australia and New Zealand, which provides boat accessories, propulsion and marine transmission systems for the pleasure craft market, saw a slight decrease in revenue (3.0% from the prior year first fiscal quarter), on relatively stable demand.

Gross profit as a percentage of sales for the first quarter of fiscal 2026 improved to 28.7%, compared to 26.5% for the same period last year.

The improvement in the current year first quarter compared to the prior year result reflects the impact of additional volume and the success of margin improvement initiatives across the manufacturing operations.

For the fiscal 2026 first quarter, marketing, engineering and administrative (“ME&A”) expenses, as a percentage of sales, were 25.9%, compared to 26.7% for the fiscal 2025 first quarter.

ME&A expenses increased $1.2 million (6.2%) over the same period last fiscal year.

The increase in ME&A spending for the first nine months was comprised of the addition of Katsa and Kobelt ($4.7 million), a catch-up adjustment to non-cash stock compensation ($0.6 million), a legal settlement ($0.4 million), an increase in professional fees ($0.9 million) and other inflation related increases ($0.6 million).

These increases were offset by a decrease in global bonus expense ($0.7 million).

Interest expense was up $0.7 million to $1.8 million in the first nine months of fiscal 2025, with a higher average outstanding revolver balance following the Katsa and Kobelt acquisitions.

Other expense of $2.5 million for the first nine months was primarily attributable to a currency loss ($1.9 million), along with pension amortization expense ($0.7 million).

The fiscal 2025 first nine month effective tax rate was 1,469.0% compared to 41.0% in the prior fiscal year comparable period.

The full domestic valuation allowance, along with the mix of foreign earnings by jurisdiction, resulted in the change to the effective tax rate.

This rate becomes very volatile when pre-tax results are very close to breakeven.

The increase in ME&A spending for the quarter was comprised of the addition of Kobelt ($0.6 million) and a currency translation impact ($0.5 million).

Interest expense was up $0.2 million to $0.8 million in the first quarter of fiscal 2026, with a higher average outstanding revolver balance following the Katsa and Kobelt acquisitions.

Other expense of $0.9 million for the first fiscal quarter was primarily attributable to a currency loss ($0.2 million) and pension amortization expense ($0.7 million).

The fiscal 2026 first quarter effective tax rate was 172.2% compared to (29.2%) in the prior fiscal year first quarter.

The full domestic valuation allowance provides for a very volatile effective tax rate.

This, along with the mix of foreign earnings by jurisdiction, resulted in the change to the effective tax rate.

Financial Condition, Liquidity and Capital Resources

Comparison between March 28, 2025 and June 30, 2024

As of March 28, 2024, the Company had net working capital of $123.1 million, which represents an increase of $3.0 million, or 2.5%, from the net working capital of $120.1 million as of June 30, 2024.

Cash decreased by $3.8 million to $16.2 million as of March 28, 2025, versus $20.1 million as of June 30, 2024.

As of March 28, 2025, the majority of the cash is at the Company’s overseas operations in Europe ($4.8 million) and Asia-Pacific ($11.2 million).

Comparison between September 26, 2025 and June 30, 2025

As of September 26, 2025, the Company had net working capital of $132.3 million, which represents an increase of $11.2 million, or 9.3%, from the net working capital of $121.1 million as of June 30, 2025.

Cash decreased by $1.9 million to $14.2 million as of September 26, 2025, versus $16.1 million as of June 30, 2025.

As of September 26, 2025, the majority of the cash is at the Company’s overseas operations in Europe ($4.4 million) and Asia-Pacific ($9.1 million).

Trade receivables of $63.9 million were up $5.0 million, or 8.5%, when compared to last fiscal year-end.

The impact of foreign currency translation was to decrease accounts receivable by $0.4 million versus June 30, 2025.

As a percent of sales, trade receivables finished at 70.5% in the third quarter of fiscal 2025 compared to 55.2% for the comparable period in fiscal 2024 and 61.8% for the fourth quarter of fiscal 2024.

The current quarter was unfavorably impacted by timing of sales within the quarter, heavily weighted toward the end of the quarter.

As a percent of sales, trade receivables finished at 79.9% in the first quarter of fiscal 2026 compared to 70.7% for the comparable period in fiscal 2025 and 61.0% for the fourth quarter of fiscal 2025.

Inventories increased by $6.3 million, or 4.2%, versus June 30, 2025 to $158.3 million.

The impact of foreign currency translation was to decrease inventories by $1.1 million versus June 30, 2025.

The largest increase is the result of the Kobelt acquisition during the quarter ($6.0 million).

The Singapore distribution entity experienced a $2.4 million increase primarily related to customer delays of deliveries on oilfield transmissions into China.

Additional increases were seen at our US distribution operation ($1.6 million) and Australia ($0.6 million).

Offsetting decreases came at our operations in the United States ($1.9 million), favorably impacted by the non-cash write down of industrial inventory in the second fiscal quarter ($1.6 million).

Our operation in Finland saw a decrease ($1.7 million) on a softening in demand during the quarter.

The global operations team is focused on driving inventory improvements in the second half and beyond.

On a consolidated basis, as of March 28, 2025, the Company’s backlog of orders to be shipped over the next six months approximates $133.7 million, compared to $133.7 million at June 30, 2024 and $130.5 million at March 29, 2024.

As a percentage of six-month backlog, inventory has increased from 98% at June 30, 2024 to 103% at March 28, 2025.

The largest increase came at our domestic operation ($3.9 million) due to delayed shipments.

Our operation in the Netherlands increased $1.3 million in support of growing backlog for the Veth product, also impacted by delayed shipment of a large project.

The Singapore distribution entity experienced a $2.0 million increase related to customer delays of deliveries on oilfield transmissions into China.

Our operation in Finland saw a $1.3 million increase driven by growing demand for product in the defense market.

Our Australian distribution operation saw a $1.0 million decrease in inventory.

On a consolidated basis, as of September 26, 2025, the Company’s backlog of orders to be shipped over the next six months approximates $163.3 million, compared to $150.5 million at June 30, 2025 and $144.3 million at September 27, 2024.

As a percentage of six-month backlog, inventory has decreased from 101% at June 30, 2025 to 97% at September 26, 2025.

Net property, plant and equipment increased $0.6 million (0.8%) to $70.2 million versus $69.6 million at June 30, 2025.

The Company had capital spending of $7.5 million in the first three quarters, along with the impact of the Kobelt acquisition ($5.0 million).

This increase was offset by depreciation of $6.2 million and an unfavorable exchange impact ($0.9 million).

Capital spending occurring in the first nine months was primarily related to replacement capital, along with capital to drive growth and operating efficiencies.

The Company had capital spending of $3.4 million in the quarter.

This increase was offset by depreciation of $2.3 million and an unfavorable exchange impact of $0.3 million.

Capital spending occurring in the first quarter was primarily related to replacement capital, along with capital to drive growth and operating efficiencies.

In total, the Company expects to invest between $15 and $17 million in capital assets in fiscal 2026.

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The Company’s capital program is focused on modernizing key core manufacturing, assembly and testing processes and improving efficiencies at its facilities around the world.

Accounts payable as of March 28, 2025 of $31.6 million was down $1.0 million, or 3.1%, from June 30, 2024.

The impact of foreign currency translation was essentially neutral to accounts payable.

The decrease is primarily related to reduced purchasing activity toward the end of the quarter.

Total borrowings and long-term debt as of March 28, 2025 increased $15.0 million to $40.8 million versus $25.8 million at June 30, 2024.

The increase is primarily related to the acquisition of Kobelt in the quarter ($16.7 million).

During the first nine months, the Company reported positive free cash flow of $0.5 million (defined as operating cash flow less acquisitions of fixed assets), driven by improved earnings.

The Company ended the quarter with total debt, net of cash, of $24.5 million, compared to $5.7 million at June 30, 2024, for a net increase of $18.8 million.

Total equity decreased $4.9 million, or 3.1%, to $150.2 million as of March 28, 2025.

The net loss during the first nine months decreased equity by $3.1 million, while other decreases related to dividends paid to shareholders of $1.7 million.

Accounts payable as of September 26, 2025 of $37.1 million was down $1.7 million, or 4.3%, from June 30, 2025.

The impact of foreign currency translation was to decrease accounts payable by $0.3 million versus June 30, 2025.

The remaining decrease is primarily related to the normal timing of inventory receipts and payments within the quarter.

Total borrowings and long-term debt as of September 26, 2025 increased $12.3 million to $43.7 million versus $31.4 million at June 30, 2025.

During the first quarter, the Company reported negative free cash flow of $11.0 million (defined as operating cash flow less acquisitions of fixed assets), driven by unfavorable working capital movement related primarily to inventory, the payment of the annual bonus for fiscal 2025, timing of trade receivable receipts and capital spending.

The Company ended the quarter with total debt, net of cash, of $29.5 million, compared to $15.3 million at June 30, 2025, for a net degradation of $14.2 million.

Total equity decreased $3.5 million, or 2.1%, to $160.9 million as of September 26, 2025.

The net loss during the first quarter decreased equity by $0.4 million, along with an unfavorable foreign currency translation of $2.4 million.

The net change in common stock and treasury stock resulting from the accounting for stock-based compensation decreased equity by $0.8 million.

The net remaining decrease in equity of $1.0 million primarily represents the amortization of net actuarial loss and prior service cost on the Company’s defined benefit pension plans, along with the unrealized loss on cash flow hedges.

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

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.

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”).

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;

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.

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.

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, 2023.

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.

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.

Upon the occurrence of an Event of Default, BMO 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 permitted the Company to use 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 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.

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.

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

Pursuant to the New Agreement, the Bank made a Term Loan to the Company in the principal amount of $15 million, consisting of as assignment of a term loan under the Credit Agreement from BMO to the Bank with a remaining principal of $8.5 million and an additional advance of $6.5 million.

The quarterly dividend decreased equity by $0.6 million.

The net remaining increase in equity of $0.7 million primarily represents the amortization of net actuarial loss and prior service cost on the Company’s defined benefit pension plans, along with the unrealized gain on cash flow hedges.

(the “Prior 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 new agreement, the Company is restricted in making dividend payments beyond $5 million in any fiscal year.

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 New 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 New 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 New Agreement runs through April 1, 2027.

The Company used the increased borrowing capacity under the New Agreement to help finance its acquisition of Kobelt Manufacturing Co.

(“Kobelt”), as described elsewhere in this current report.

Kobelt is included as a Borrower under the New Agreement, and may borrow directly under the New Agreement up to the lesser of the Revolving Credit Commitment or $25 million.

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

Under the Credit Agreement, the Company may not pay cash dividends on its common stock in excess of $5.0 million in any fiscal year.

The term of the Revolving Loans under the Credit Agreement runs through April 1, 2027.

The Company used the increased borrowing capacity under the Credit Agreement to help finance its acquisition of Kobelt.

Kobelt is included as a Borrower under the Credit Agreement, and may borrow directly under the Credit Agreement up to the lesser of the Revolving Credit Commitment or $25.0 million.

For purposes of determining the Borrowing Base under the Credit Agreement, Eligible Receivables and Eligible Inventory of Kobelt are included.

In addition, 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 Oy acquisition, as well as pro-forma EBITDA of Katsa Oy and Kobelt as permitted by the Bank.

Loans under the New Agreement are designated as either as “SOFR Loans,” which accrue interest at an Adjusted Term SOFR plus an Applicable Margin;

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;

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

Borrowings under the New Agreement are secured by substantially all of the Company’s and Kobelt’s personal property, including accounts receivable, inventory, machinery and equipment, and intellectual property.

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

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

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

The Company’s Tangible Net Worth may not be less than $100.0 million plus 50% of positive Net Income for each fiscal year ending on or after June 30, 2024.

The Company has also pledged 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 Kobelt, described in Item 8.01 below.

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 New Agreement;

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

(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 the Bank determines a greater amount is necessary.

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The Company remains in compliance with its liquidity and other covenants.

Other significant contractual obligations as of March 28, 2025 are disclosed in Note O "Lease Liabilities" in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Management believes that available cash, the Credit Agreement, the unsecured lines of credit, cash generated from future operations, and potential access to debt markets will be adequate to fund the Company's cash and capital requirements for the foreseeable future.

Other significant contractual obligations as of September 26, 2025 are disclosed in Note N "Lease Liabilities" in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

There are no material undisclosed guarantees.

As of March 28, 2025, the Company had no additional material purchase obligations other than those created in the ordinary course of business related to inventory and property, plant, and equipment, which generally have terms of less than 90 days.

As of September 26, 2025, the Company had no additional material purchase obligations other than those created in the ordinary course of business related to inventory and property, plant, and equipment, which generally have terms of less than 90 days.

The Company has long-term obligations related to its postretirement plans which are discussed in detail in Note H "Pension and Other Postretirement Benefit Plans” in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1of this Quarterly Report on Form 10-Q.

Postretirement medical claims are paid by the Company as they are submitted.

In fiscal 2025, the Company expects to contribute $0.5 million to postretirement benefits based on actuarial estimates; however, these amounts can vary significantly from year to year because the Company is self-insured.

In fiscal 2026, the Company expects to contribute $0.5 million to postretirement benefits based on actuarial estimates;

however, these amounts can vary significantly from year to year because the Company is self-insured.

In fiscal 2026, the Company expects to contribute $0.7 million to its defined benefit pension plans.

The Company does not have any material off-balance sheet arrangements.

Management believes that available cash, the New Agreement, the unsecured lines of credit, cash generated from future operations, and potential access to debt markets will be adequate to fund the Company's cash and capital requirements for the foreseeable future.

New Accounting Releases

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements