What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2026-09-04 compared with 2025-09-05 · 846 added, 514 removed, 1276 unchanged (52% of the section changed)

9 unchanged sentences

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company, and

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of the effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures included in such controls may deteriorate.

The Company conducted an evaluation of the effectiveness of its internal control over financial reporting based upon the framework (2013 edition) in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

The Company conducted an evaluation of the effectiveness of its internal control over financial reporting based upon the Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in 2013.

Based upon such evaluation, the Company’s management concluded that its internal control over financial reporting was effective as of June 30, 2026.

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

RSM US LLP, an independent registered public accounting firm, has audited the Company’s internal control over financial reporting as of June 30, 2026, as stated in their report which appears herein.

7 unchanged sentences

For information with respect to the executive officers of the Registrant, see "Information About Our Executive Officers" at the end of Part I of this report.

For information with respect to the Directors of the Registrant, see "Election of Directors" in the Proxy Statement for the Annual Meeting of Shareholders to be held October 30, 2025, which is incorporated into this report by reference.

For information with respect to the Company’s Code of Ethics, see "Guidelines for Business Conduct and Ethics” in the Proxy Statement for the Annual Meeting of Shareholders to be held October 30, 2025, which is incorporated into this report by reference.

For information with respect to the Directors of the Registrant, see "Election of Directors" in the Proxy Statement for the Annual Meeting of Shareholders to be held on October 29, 2026, which is incorporated into this report by reference.

For information with respect to the Company’s Code of Ethics, see "Guidelines for Business Conduct and Ethics” in the Proxy Statement for the Annual Meeting of Shareholders to be held on October 29, 2026, which is incorporated into this report by reference.

The Company’s Code of Ethics is included on the Company’s website, www.twindisc.com.

1 unchanged sentence

For information with respect to procedures by which shareholders may recommend nominees to the Company’s Board of Directors, see “Director Committee Functions:

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

Nominating and Governance Committee” in the Proxy Statement for the Annual Meeting of Shareholders to be held on October 29, 2026, which is incorporated into this report by reference.

There were no changes to these procedures since the Company’s last disclosure relating to these procedures.

For information with respect to the Audit Committee Financial Expert, see “Director Committee Functions:

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

Audit Committee” in the Proxy Statement for the Annual Meeting of Shareholders to be held on October 29, 2026, which is incorporated into this report by reference.

For information with respect to the Audit Committee Disclosure, see “Director Committee Functions:

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

Audit Committee” in the Proxy Statement for the Annual Meeting of Shareholders to be held on October 29, 2026, which is incorporated into this report by reference.

For information with respect to the Audit Committee Membership, see “Director Committee Functions:

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

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

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

Committee Membership” in the Proxy Statement for the Annual Meeting of Shareholders to be held on October 29, 2026, which is incorporated into this report by reference.

For information with respect to the Company’s Insider Trading Policy, see “Insider Trading Policy” in the Proxy Statement for the Annual Meeting of Shareholders to be held on October 29, 2026, which is incorporated into this report by reference.

For information regarding compliance with Section 16 (a) of the Securities Exchange Act of 1934, see “Delinquent Section 16 (a) Reports” in the Proxy Statement for the Annual Meeting of Shareholders to be held on October 29, 2026, which is incorporated into this report by reference.

Executive Compensation

5 unchanged sentences

Certain Relationships and Related Transactions, Director Independence

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

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

For information with respect to transactions with related persons, see “Corporate Governance – Transactions with Related Persons” in the Proxy Statement for the Annual Meeting of Shareholders to be held on October 29, 2026, which is incorporated into this report by reference.

For information with respect to director independence, see “Corporate Governance – Board Independence” in the Proxy Statement for the Annual Meeting of Shareholders to be held on October 29, 2026, which is incorporated into this report by reference.

Principal Accounting Fees and Services

The Company incorporates by reference the information contained in the Proxy Statement for the Annual Meeting of Shareholders to be held October 30, 2025, under the headings “Fees to Independent Registered Public Accounting Firm” and “Pre-approval Policies and Procedures.”

The Company incorporates by reference the information contained in the Proxy Statement for the Annual Meeting of Shareholders to be held on October 29, 2026, under the headings “Fees to Independent Registered Public Accounting Firm” and “Pre-approval Policies and Procedures.”

Exhibits, Financial Statement Schedules

8 unchanged sentences

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm, RSM US LLP , Milwaukee, Wisconsin , PCAOB ID # 49

Report of Independent Registered Public Accounting Firm, RSM US LLP, Milwaukee, Wisconsin, PCAOB ID No.

Consolidated Balance Sheets as of June 30, 2026 and 2025

Consolidated Statements of Operations and Comprehensive Income for the years ended June 30, 2025 and 2024

Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended June 30, 2026 and 2025

Consolidated Statements of Cash Flows for the years ended June 30, 2026 and 2025

10 unchanged sentences

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements of the Company and our report dated September 4, 2026 expressed an unqualified opinion.

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

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

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

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

Basis for Opinion

21 unchanged sentences

Opinion on the Financial Statements

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

We have audited the accompanying consolidated balance sheets of Twin Disc, Incorporated and its subsidiaries (the Company) as of June 30, 2026 and 2025, the related consolidated statements of operations and comprehensive income (loss), changes in equity and cash flows for each of the two years in the period ended June 30, 2026, and the related notes to the consolidated financial statements and schedule (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2026 and 2025, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2026, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of June 30, 2026, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated September 4, 2026 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Notes A, B and S to the consolidated financial statements, at June 30, 2026 the Company elected to change its method of accounting for certain inventories in the United States from the last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method for all years presented.

Basis for Opinion

13 unchanged sentences

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Deferred Tax Asset Valuation Allowance

As described in Note O to the consolidated financial statements the Company’s gross deferred tax asset and valuation allowance was approximately $31,582,000 and $23,964,000, respectively, as of June 30, 2025.

Deferred Tax Asset Realizability and Release of the Valuation Allowance

As described in Note N to the consolidated financial statements, the Company concluded that it was more likely than not that substantially all of its domestic deferred tax assets would be realized and, accordingly, released the full domestic valuation allowance of approximately $16,400,000 (as adjusted) during the quarter ended December 26, 2025.

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

Valuation allowances are provided for deferred tax assets where it is considered more likely than not that the Company will not realize the benefit of such assets.

In evaluating the realizability of deferred tax assets in future periods, the available positive and negative evidence, including projected future taxable income exclusive of reversing temporary differences, history of book losses, tax planning strategies and results of recent operations, are considered.

We identified management’s determination of the value of deferred tax assets as a critical audit matter as there is significant judgment required by management to conclude that it is more likely than not that these deferred tax assets will be realized in future periods.

In evaluating the realizability of deferred tax assets in future periods, the available positive and negative evidence, including historical book income or losses, projected future taxable income exclusive of reversing temporary differences, tax planning strategies and results of recent operations, are allowable sources of income that can be considered.

In making the determination to release the full valuation allowance, management specifically considered recent financial history, including the three-year cumulative taxable income, and income tax planning strategies approved by management intended to facilitate the utilization of deferred tax assets and expiring tax attributes.

Income tax planning strategies included contemplated tax accounting method changes and other actions designed to accelerate future taxable income and increase the utilization of the Company’s deferred tax assets and carryforwards, including its net operating losses and tax credits.

We identified management’s determination of the realizability of the Company’s deferred tax assets and the release of the full valuation allowance on domestic deferred tax assets as a critical audit matter as there is significant judgment required by management to conclude that it is more likely than not that the deferred tax assets will be realized in future periods.

In particular, management’s conclusion involved significant judgment in evaluating whether the identified income tax planning strategies were prudent, feasible, and expected to be implemented.

Three-year cumulative taxable income was considered as observable historical evidence, and management did not rely on forecasted future book income in reaching its conclusion.

In addition, the auditing of these elements involved complex and subjective auditor judgment, including the need to involve personnel with specialized skill and knowledge.

Our audit procedures to evaluate management’s determination that sufficient taxable income will not be generated to realize all of the deferred tax assets included the following, among others:

Our audit procedures to evaluate management’s determination that it is more likely than not that the deferred tax assets will be realized and that the release of the valuation allowance was appropriate included the following, among others:

We evaluated the design and operating effectiveness of internal controls over income taxes, specifically, those controls over the evaluation of the realizability of deferred tax assets.

We evaluated the reasonableness of management’s estimates in regard to the ability to generate future taxable income and utilize the deferred tax assets by evaluating:

(i) the forecast of future taxable income, including testing of management’s forecasts against the Company’s historical performance, and (ii) testing management’s assessment of the timing of future reversals of temporary differences.

We utilized personnel with specialized knowledge and skill in income taxes and accounting for income taxes under Accounting Standards Codification (ASC) 740 to assist in the evaluation of management’s assessment of positive and negative evidence and their conclusion that it is more likely than not that the Company will not realize the benefit of its deferred tax assets.

We evaluated management’s assessment of positive and negative evidence supporting realization of deferred tax assets, including consideration of the Company’s three-year cumulative taxable income position, which represented historical information.

We evaluated the reasonableness of management’s tax-planning strategies, including assessing whether the strategies were prudent and feasible, whether management had the intent and ability to implement the strategies, and whether the anticipated tax consequences were consistent with applicable tax rules and regulations.

/s/ RSM US LLP

22 unchanged sentences

14,121 13,361

Deferred income taxes

Deferred income tax assets

Other noncurrent assets

16 unchanged sentences

Accrued retirement benefits

Deferred income taxes

10,429 11,832

Deferred income tax liabilities

Other long-term liabilities

9 unchanged sentences

222,880 203,547

171,413 164,485

Less treasury stock, at cost ( 209,263 and 482,181 shares, respectively)

7 unchanged sentences

TWIN DISC, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the years ended June 30, 2026 and 2025

8 unchanged sentences

Restructuring expenses

Income from operations

Other operating income

Income (loss) from operations

17,960 11,084

Other income (expense):

1 unchanged sentence

( 3,078 ) ( 2,646 )

Bargain purchase gain

Other (expense) income, net

Other income (expense), net

( 1,286 ) ( 5,472 )

( 4,364 ) ( 8,118 )

Income before income taxes and noncontrolling interest

Income tax expense

Net (loss) income

Income (loss) before income taxes and noncontrolling interest

Income tax benefit (expense)

13,974 ( 3,368 )

Net earnings attributable to noncontrolling interest, net of tax

Net income (loss)

27,570 ( 402 )

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

$ 27,077 $ ( 697 )

1 unchanged sentence

$ 0.16 $ 0.16

(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

$ 1.92 $ ( 0.05 )

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

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

$ 1.86 $ ( 0.05 )

4 unchanged sentences

14,586 13,856

Comprehensive income

Net (loss) income

Comprehensive income (loss)

Net income (loss)

$ 27,570 $ ( 402 )

2 unchanged sentences

Foreign currency translation adjustment

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

Comprehensive income

Comprehensive income attributable to noncontrolling interest

Comprehensive income attributable to Twin Disc, Incorporated

( 6,129 ) 15,924

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

( 155 ) ( 1,851 )

Comprehensive income (loss)

23,994 10,272

Comprehensive income (loss) attributable to noncontrolling interest

Comprehensive income (loss) attributable to Twin Disc, Incorporated

$ 23,635 $ 9,938

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

4 unchanged sentences

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income

Net income (loss)

$ 27,570 $ ( 402 )

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

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

Depreciation and amortization

13,746 14,899

Gain on sale of assets

1 unchanged sentence

Loss on write-down of industrial product inventory

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

Gain on Katsa acquisition

Restructuring charges

2 unchanged sentences

Stock compensation expense

( 523 ) 1,226

Changes in operating assets and liabilities, net of acquired business

3 unchanged sentences

3,291 ( 10,927 )

Other current assets

Accounts payable

1 unchanged sentence

Accrued liabilities

12,463 ( 755 )

Accrued retirement benefits

2,428 ( 456 )

Net cash provided by operating activities

Net cash provided (used) by operating activities

22,899 23,979

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of property, plant, and equipment

Acquisition of capital expenditures

( 13,713 ) ( 15,157 )

Acquisition of Kobelt, less cash acquired

Acquisition of Katsa, less cash acquired

Proceeds from sale of property, plant, and equipment

( 671 ) ( 653 )

Net cash used by investing activities

Net cash provided (used) by investing activities

( 14,149 ) ( 32,899 )

13 unchanged sentences

( 457 ) ( 306 )

Cash used in net share settlement of restricted stock units

Payments of withholding taxes on stock compensation

( 1,675 ) ( 1,256 )

Net cash (used) provided by financing activities

Net cash provided (used) by financing activities

( 6,589 ) ( 965 )

Effect of exchange rate changes on cash

( 2,241 ) 5,924

Net change in cash

14 unchanged sentences

Comprehensive

(Loss) Income

Balance at June 30, 2023

Income (Loss)

Balance at June 30, 2024 (As Adjusted)

$ 41,798 $ 160,529 $ ( 6,905 ) $ ( 9,783 ) $ 352 $ 185,991

Net income (loss)

( 697 ) 295 ( 402 )

Dividends paid to shareholders

Dividends paid to shareholders and non-controlling interest

( 2,284 ) ( 306 ) ( 2,590 )

3 unchanged sentences

( 3,399 ) ( 3,399 )

Unrealized gain on hedges, net of tax

Unrealized loss on hedges, net of tax

( 1,851 ) ( 1,851 )

Compensation expense

1 unchanged sentence

( 3,636 ) 2,381 ( 1,255 )

Balance at June 30, 2024

Balance at June 30, 2025 (As Adjusted)

42,269 157,548 3,730 ( 7,402 ) 380 196,525

Net (loss) income

Net income (loss)

27,077 493 27,570

Dividends paid to shareholders

Dividends paid to shareholders and non-controlling interest

( 2,285 ) ( 457 ) ( 2,742 )

2 unchanged sentences

Benefit plan adjustments, net of tax

( 3,399 ) ( 3,399 )

Unrealized loss on hedges, net of tax

Unrealized gain (loss) on hedges, net of tax

( 155 ) ( 155 )

12 unchanged sentences

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

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

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

Products offered include:

4 unchanged sentences

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

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

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

Based in Finland, Katsa is an 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.

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

6 unchanged sentences

Translation of Foreign Currencies ‑‑The financial statements of the Company’s non-U.S.

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

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

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

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

Included in other (expense) income are foreign currency transaction gain (losses) of ($ 4,825 ) and $ 377 in fiscal 2025 and 2024, respectively.

Included in other income (expense) are foreign currency transaction gain (losses) of $ 1,699 and ($ 4,825 ) in fiscal 2026 and 2025, respectively.

Business Combinations ‑‑ In accordance with ASC 805 - 10, “Business Combinations”, the Company accounts for all business combinations using the acquisition method of accounting.

11 unchanged sentences

Accounts Receivable, net --These represent trade accounts receivable and are stated net of an allowance for credit losses of $ 1,647 and $ 1,548 at June 30, 2026 and 2025, respectively.

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

The assessment of likelihood of customer default is based on a variety of factors, including the length of time the receivables are past due, the historical collection experience, as well as the consideration of customer concentrations, customer creditworthiness, negotiated changes to the payment terms of customers, recent economic trends, and expectations regarding economic conditions over a reasonable and supportable future period.

Various factors may adversely impact its customer’s ability to access sufficient liquidity and capital to fund their operations and render the Company’s estimation of customer defaults inherently uncertain.

While the Company believes current allowance for credit losses are adequate, it is possible that these factors may cause higher levels of customer defaults and bad debt expense in future periods.

The Company records an allowance for credit losses based on expected credit losses over the contractual life of its receivables.

Certain customers are evaluated individually when unique credit risk characteristics indicate heightened expected credit losses, while the remaining portfolio is evaluated collectively based on shared risk characteristics.

The estimate incorporates historical collection experience, current conditions, and reasonable and supportable forecasts, including consideration of the aging of receivables, customer concentrations, customer creditworthiness, negotiated changes in payment terms, recent economic trends, and expected future economic conditions.

Various factors may adversely impact a customer’s ability to access sufficient liquidity and capital to fund their operations, making the estimation of expected credit losses inherently uncertain.

While the Company believes its allowance for credit losses is adequate, actual credit losses may differ from estimated amounts due to changes in customer-specific factors, economic conditions, or other circumstances.

Fair Value of Financial Instruments --The carrying amount reported in the consolidated balance sheets for cash, trade accounts receivable and accounts payable approximate fair value because of the immediate short-term maturity of these financial instruments .

If measured at fair value, cash would be classified as Level 1 and all other items listed above would be classified as Level 2 in the fair value hierarchy, as defined in Note N, Pension and Other Postretirement Benefit Plans.

If measured at fair value, cash would be classified as Level 1 and all other items listed above would be classified as Level 2 in the fair value hierarchy, as defined in Note M, Pension and Other Postretirement Benefit Plans.

The Company’s borrowings under the revolving loan agreement, which is classified as long-term debt and consists of loans that are routinely borrowed and repaid throughout the year, approximate fair value at June 30, 2026.

1 unchanged sentence

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

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

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

Inventories, net ‑‑Inventories are valued at the lower of cost or net realizable value, which includes an estimate for excess and obsolete inventory.

Cost has been determined by the first‑in, first‑out (“FIFO”) basis or average cost methods.

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

Inventories include raw materials, work-in-process and finished goods.

Certain completed sub-assemblies are classified as finished goods because they are separately marketable products that may be sold directly to customers as replacement parts or service components, although such items may also be incorporated into the Company’s finished products.

Change in Accounting Method

During the fourth quarter of fiscal 2026, the Company changed its method of accounting for inventories located in the United States from the last-in, first -out (“LIFO”) cost method to the FIFO cost method.

The Company believes the FIFO method is preferable because it better reflects the current cost of inventory on the consolidated balance sheets, more closely aligns with the physical flow of inventory and the manner in which the Company manages its inventory, improves comparability with industry peers that generally use FIFO or average cost methods, and provides a more consistent basis for evaluating operating results across the Company’s global operations.

The change in accounting method was applied retrospectively to all periods presented.

Accordingly, prior-period consolidated financial statements have been adjusted as if the FIFO method had been used for the Company’s U.S.

inventories in all periods presented.

The retrospective application of the change increased the July 1, 2024 inventory balance and retained earnings by $ 30,937 , net of tax.

The change also affected previously reported inventory, noncurrent deferred income taxes, retained earnings, cost of goods sold, gross profit, income tax expense, net income, and earnings per share for the periods presented.

The Consolidated Balance Sheets as of June 30, 2025, the Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended June 30, 2025, and the Consolidated Statements of Cash Flows for the year ended June 30, 2025 have been retrospectively adjusted to reflect the change in accounting principle.

The primary impact of the change was to eliminate the Company’s LIFO reserve and increase reported inventory and retained earnings, net of the related income tax effects.

Because LIFO previously reflected the most recent inventory costs in cost of goods sold, the change to FIFO also affected comparative cost of goods sold, gross profit, income before income taxes, income tax expense, and net income for prior periods.

The change did not affect cash flows from operations, investing activities, or financing activities, except for the related reclassification of noncash reconciling items within the Consolidated Statements of Cash Flows.

See Note B, Inventories, net and Note S, 2025 Impact of Accounting Method Change, for additional information regarding the effect of the change on the Company’s consolidated financial statements.

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

48 unchanged sentences

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

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

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

Pension and Other Postretirement Benefits Plans -- The Company provides a wide range of benefits to employees and retired employees, including pensions and postretirement health care coverage.

7 unchanged sentences

As of June 30, 2026, the Company identified two operating segments.

Refer to "Note K.

Business Segments and Foreign Operations" for further information.

Refer to Note J, Business Segments and Foreign Operations, of the notes to the consolidated financial statements for further information.

Revenue Recognition --Revenue from contracts with customers is recognized using a five -step model consisting of the following:

20 unchanged sentences

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

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

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

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

While significant customer deposits are collected at certain locations, the Company’s payment terms are generally short-term in nature;

therefore, do not include a significant financing component.

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

Deferred revenue represents billings in excess of cost based on milestone billings in the contract and customer deposits represent cash received from customers before performance obligations are fulfilled.

Contract Assets

9 unchanged sentences

$ 4,617 $ 66,761 $ 71,378 $ 14,538 $ 36,211 $ 50,749

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

The Company’s contracts are generally short-term in nature;

therefore, the amount included in contract liabilities at the beginning of the year was recognized as revenue in the reporting period.

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

4 unchanged sentences

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

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

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

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

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

Recently Adopted Accounting Standards -- 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 adopted the new annual disclosures as required for fiscal 2025 and will adopt the interim disclosures as required beginning with the first quarter of fiscal 2026.

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.

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

The Company has adopted ASU 2023 - 09 on a prospective basis 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.

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

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.

Kobelt Manufacturing Co., Ltd., Inc.

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

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

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

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

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

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

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

The transaction is considered a taxable stock acquisition.

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

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

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

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

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

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

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

Purchase Price Allocation

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

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

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

Cash purchase price

Total consideration

Assets acquired:

Trade accounts receivable

Other current assets

Property, plant and equipment

Intangible assets

Total assets acquired

Liabilities assumed :

Accounts payable

Accrued liabilities

Deferred tax liability

Total liabilities assumed

Total identified net assets acquired:

Purchase price consideration

Fair Value Estimate of Assets Acquired and Liabilities Assumed

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

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

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

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

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

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

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

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

Assets acquired and liabilities assumed:

Trade accounts receivable

INVENTORIES, NET

Other current assets

Property, plant and equipment

Intangible assets, net

Accounts payable

Accrued liabilities

Deferred tax liability

Total identified net assets acquired:

Purchase price consideration

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

Accounts receivable represent contractual amounts receivable from customers.

The amounts approximate fair value.

Inventory consists of:

Raw materials

Work in progress at fair value

Finished goods at fair value

Inventories at fair value

Inventories at book value

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

Dies, tools and fixtures

Machinery and equipment

Property, plant and equipment at fair value

Property, plant and equipment at book value

Intangible assets consist of :

Estimated average

Customer relationship

Computer Software - External

Developed technology

The amounts approximate fair value.

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

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

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

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

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

As a well-established business with a solid reputation for quality in addition to its strong in-house manufacturing and engineering capabilities, this acquisition is an excellent opportunity to expand Twin Disc’s global presence, leveraging Kata’s longstanding relationships with leading European OEMs to introduce the Company’s portfolio into new, growing markets.

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

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

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

The Company, in part, financed the payment of the cash consideration through borrowings of $ 16.9 million under a new credit agreement entered into on April 1, 2024 with BMO Harris Bank N.A.

(the “Credit Agreement”).

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

Purchase Price Allocation

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

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

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

Cash purchase price

Final working capital adjustment

Total consideration

Assets acquired (in millions):

Trade accounts receivable, net

Inventories, net

Prepaid expenses

Property, plant and equipment, net

Right-of-use operating lease assets

Intangible assets, net

Total assets acquired

Liabilities assumed (in millions):

Accounts payable

Accrued liabilities

Lease obligations

Deferred income taxes

Total liabilities assumed

Total identified net assets acquired (in millions):

Gain on bargain purchase

Purchase price consideration

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

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

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

associated with the acquisition.

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

Pro forma results of operation for this acquisition have not been presented because the effects of the acquisition were not material to the Company’s consolidated financial results.

Fair Value Estimate of Assets Acquired and Liabilities Assumed

The Company is continuing its review of the fair value estimate of certain 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 provisional fair value estimates of the property, plant and equipment, net, the intangible assets, net, and deferred income taxes are pending final review by the Company.

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 or the excess of such fair values over the purchase price is allocated to bargain purchase gain.

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

The following summarizes the fair value of the assets acquired and liabilities assumed at the acquisition date, including the preliminary estimates of the property, plant and equipment, net, the intangible assets, net, and deferred income taxes:

Assets acquired (in millions):

Trade accounts receivable, net

Inventories, net

Prepaid expenses

Property, plant and equipment, net

Right-of-use operating lease assets

Intangible assets, net

Accounts payable

Accrued liabilities

Lease obligations

Deferred income taxes

Total identified net assets acquired (in millions):

Gain on bargain purchase

Purchase price consideration

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

Accounts receivable represent contractual amounts receivable from customers.

The amounts approximate fair value.

Inventory consists of (in millions):

Raw materials

Work in progress at fair value

Finished goods at fair value

Inventories at fair value

Inventories at book value

The value of property, plant and equipment is estimated at (in millions):

Property, plant and equipment at fair value

Property, plant and equipment at book value

Intangible assets consist of (in millions):

Estimated fair

Customer relationships

Technology know-how

The amounts approximate fair value.

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

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

The fair values of property, plant and equipment, net, intangible assets, net, and deferred taxes presented above are preliminary until the final purchase price consideration is determined and the Company completes its work with the use of a third -party valuation firm.

These values are subject to change.

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

INVENTORIES, NET

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

6 unchanged sentences

$ 178,028 $ 184,085

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.

The 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.

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

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

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

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

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

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

For the years ended June 30, 2025 and 2024, the effects of LIFO decrements decreased cost of goods sold by $ 2,112 and $ 1,553 , respectively.

The Company had reserves for inventory obsolescence of $ 16,190 and $ 16,016 at June 30, 2026 and 2025, respectively.

Inventories are valued at the lower of cost or net realizable value, which includes an estimate for excess and obsolete inventory.

Cost is determined by the first‑in, first‑out (FIFO) basis or average cost methods.

During the fourth quarter of 2026, the Company changed its methodology for valuing the majority of inventories located in the United States to the FIFO cost method from the last-in, first -out (“LIFO”) cost method.

The Company concluded that the FIFO basis of accounting is preferable as it provides a better matching of costs and revenues, more closely resembles the physical flow of inventory, better reflects the acquisition cost of inventory on the balance sheet, and results in improved comparability with industry peers.

The effects of this change in accounting method have been retrospectively applied to all periods presented and a cumulative effect adjustment was recorded to increase the July 1, 2024 inventory and retained earnings by $ 30,937 , net of tax.

The Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended June 30, 2025, Consolidated Statements of Cash Flows for the years ended June 30, 2025, and the Consolidated Balance Sheets as of June 30, 2025, have been retrospectively adjusted to reflect the change in accounting principle.

See Note S, 2025 Impact of Accounting Method Change, of the notes to the consolidated financial statements for additional information.

The following tables reflect the effect of the change in accounting method on the consolidated financial statements as of and for the year ended June 30, 2026:

Consolidated Statements of Operations and Comprehensive Income (Loss)

Under Previous

Cost of goods sold

$ 279,197 $ ( 487 ) $ 278,710

102,073 487 102,560

Income (loss) from operations

17,473 487 17,960

Income (loss) before income taxes and noncontrolling interest

13,109 487 13,596

Income tax benefit (expense)

21,322 ( 7,348 ) 13,974

Net income (loss)

34,659 ( 7,089 ) 27,570

Net income (loss) attributable to Twin Disc, Incorporated

34,166 ( 7,089 ) 27,077

Comprehensive income (loss)

Net income (loss)

$ 34,659 $ ( 7,089 ) $ 27,570

Comprehensive income (loss)

31,083 ( 7,089 ) 23,994

Comprehensive income (loss) attributable to Twin Disc, Incorporated

30,724 ( 7,089 ) 23,635

Earnings (loss) per share data:

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

$ 2.42 $ ( 0.50 ) $ 1.92

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

$ 2.34 $ ( 0.49 ) $ 1.86

Weighted average shares outstanding data:

Basic shares outstanding

14,119 - 14,119

Diluted shares outstanding

14,586 - 14,586

Consolidated Balance Sheets

Under Previous

Inventories, net

$ 145,407 $ 32,621 $ 178,028

Deferred income tax assets

28,669 ( 7,576 ) 21,093

Retained earnings

157,295 25,045 182,340

Consolidated Statements of Cash Flows

Under Previous

Cash flows from operating activities:

Net income (loss)

$ 34,659 $ ( 7,089 ) $ 27,570

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

Changes in operating assets and liabilities, net of acquired business

Inventories, net

3,778 ( 487 ) 3,291

Provision for deferred income taxes

( 25,622 ) 7,576 ( 18,046 )

Net cash provided (used) by operating activities

22,899 - 22,899

Consolidated Statements of Changes in Equity

Under Previous

Retained earnings

Balance at June 30, 2025

$ 125,414 $ 32,134 $ 157,548

Net income (loss) attributable to Twin Disc, Incorporated

34,166 ( 7,089 ) 27,077

Dividends paid to shareholders and non-controlling interest

( 2,285 ) ( 2,285 )

Balance at June 30, 2026

$ 157,295 $ 25,045 $ 182,340

PROPERTY, PLANT, AND EQUIPMENT, NET

15 unchanged sentences

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

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

As of June 30, 2026, changes in the carrying amount of goodwill is summarized as follows:

5 unchanged sentences

Net Book Value By Asset Type

Gross Carrying Amount

Accumulated Amortization / Impairment

Gross Carrying

Amortization /

Net Book Value

Customer Relationships

Technology Know-how

Balance at June 30, 2024

2 unchanged sentences

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

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

Translation adjustment

24 unchanged sentences

$ 82,739 $ 80,655

$ 80,655 $ 62,409

The Company warrants all assembled products, parts (except component products or parts on which written warranties are issued by the respective manufacturers thereof and are furnished to the original customer, as to which the Company makes no warranty and assumes no liability) and service against defective materials or workmanship.

17 unchanged sentences

Credit Agreement Debt

Revolving loans (expire April 2027)

Revolving loans (expire June 2031)

Term loan (due June 2031)

29,786 13,500

Term loan (due April 2027)

29,810 31,446

3 unchanged sentences

$ 28,310 $ 28,446

Net carrying value of term loan at June 30:

30,000 13,500

unamortized debt discount

unamortized debt issuance costs

Net carrying value of term loan

29,786 13,500

Credit Agreement Debt :

Current Credit Agreement

On February 14, 2025, the Company entered into an amended and restated Credit Agreement (the “Credit Agreement”) with Bank of Montreal (the “Bank”) that refinances and replaces the credit agreement dated as of June 29, 2018, as amended, between the Company and BMO Harris Bank, N.A.

(the “Prior Credit Agreement”).

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

Pursuant to the Credit Agreement, the Bank made a Term Loan to the Company in the principal amount of $ 15.0 million, consisting of an assignment of a term loan under the Prior Credit Agreement from BMO to the Bank with a remaining principal of $ 8.5 million and an additional advance of $ 6.5 million.

The maturity date of the Term Loan is April 1, 2027, and the Company is required to make principal installments on the Term Loan of at least $ 0.75 million per quarter.

Under the Credit Agreement, the Company is restricted in making dividend payments beyond $ 5 million in any fiscal year.

In addition, the Company may, from time to time prior to the maturity date, enter into Revolving Loans in amounts not to exceed, in the aggregate and subject to a Borrowing Base, $ 50.0 million (the “Revolving Credit Commitment”).

The Borrowing Base is the sum of (a) 85 % of outstanding unpaid Eligible Receivables and (b) the lesser of $ 40.0 million for each fiscal month ending on or prior to August 31, 2025 ( reduced to $ 35.0 million for each fiscal month ending on or prior to August 31, 2026, and further reduced to $ 32.5 million for each fiscal month ending thereafter) and 60 % of Eligible Inventory for each fiscal month ending on or prior to August 31, 2025 ( reduced to 55 % of Eligible Inventory for each fiscal month ending on or prior to February 28, 2026, and 50 % of Eligible Inventory for each fiscal month ending thereafter).

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

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

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

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

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

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

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

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

On June 30, 2026, Twin Disc, Incorporated (the “Company”) entered into a Credit Agreement (the “Credit Agreement”) among the Company, as Borrower;

Kobelt Manufacturing Co.

("Kobelt"), as Guarantor;

Bank of Montreal, as a Lender, Administrative Agent, Swing Line Lender, and L/C Issuer;

and JPMorgan Chase Bank, N.A.

("Chase"), as a Lender.

The Credit Agreement refinanced and replaced the credit agreement dated February 14, 2025 among the Company, Kobelt, and Bank of Montreal.

Capitalized terms in this Annual Report that are not otherwise defined herein are defined in the Credit Agreement.

Pursuant to the Credit Agreement, Bank of Montreal and Chase (the “Lenders”) made Term Loans to the Company in an aggregate principal amount of $ 30,000,000 .

The maturity date of the Term Loans is June 30, 2031, and the Company is required to make principal installments on the Term Loans of at least $ 375,000 per quarter, increasing to $ 562,500 per quarter for the quarter ending on or about September 30, 2028, and $ 750,000 per quarter for the quarter ending on or about September 30, 2030.

The Credit Agreement also allows the Company to enter into Revolving Loans with the Lenders from time to time prior to June 30, 2031 ( the “Revolving Credit Termination Date”) in amounts not to exceed $ 60,000,000 (the “Revolving Credit Commitment”).

The Revolving Credit Commitment includes a $ 5,000,000 sublimit for Swing Loans and a $ 4,000,000 sublimit for Letters of Credit that may be requested by the Company from time to time until the Revolving Credit Termination Date.

Each Swing Loan or Letter of Credit provided pursuant to the terms of the Credit Agreement shall be a Revolving Loan provided under the Revolving Credit Commitment.

Interest rates under the Credit Agreement are based on the secured overnight financing rate (“SOFR”), the euro interbank offered rate (the “EURIBO Rate”), the Canadian Overnight Repo Rate Average (the “CORRA”), or a Base Rate based on the highest of the prime rate, federal funds rate, or Term SOFR.

Loans under the Credit Agreement are designated as either as SOFR Loans, which accrue interest at a Term SOFR plus an Applicable Margin;

Base Rate Loans, which accrue interest at the Base Rate plus an Applicable Margin;

Eurodollar Loans, which accrue interest at the EURIBO Rate plus an Applicable Margin;

2 unchanged sentences

or Canadian Prime Rate Loans, which accrue interest at the Canadian Prime Rate plus an Applicable Margin.

The Applicable Margins are between 2 % and 3.5 % for Revolving Loans and Letters of Credit;

The Applicable Margin for Loans is between 1.50 % and 3.00 %, and the Applicable Margin for the Unused Revolving Credit Commitment is between 0.15 % and 0.30 % (each depending on the Company’s Total Funded Debt to EBITDA ratio).

The Term Loan has been designated as a SOFR Loan.

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

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

To effect these security interests, the Company entered into an Amended and Restated Security Agreement, Amended and Restated IP Security Agreement, Amended and Restated Pledge Agreement, and Amended and Restated Perfection Certificate with the Administrative Agent, and the Company entered into an Amended and Restated Agreement as to Liens and Encumbrances and an Amended and Restated Negative Pledge Agreement with the Administrative Agent with regard to the Company’s real property.

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

( 1 ) terminate the remaining Commitments and all obligations of the Lenders under the Credit Agreement;

( 2 ) declare the principal and accrued interest of all Loans outstanding under the Credit Agreement to be immediately due and payable;

and ( 3 ) demand the Company to immediately Cash Collateralize the outstanding L/C Obligations in an amount equal to 105 % of the aggregate L/C Obligations.

If such Event of Default is due to the Company’s bankruptcy, the actions and obligations listed above shall occur without notice to the Company.

Prior Credit Agreement

On February 14, 2025, the Company entered into an amended and restated Credit Agreement (the “2025 Credit Agreement”) with Bank of Montreal (the “Bank”) that refinanced and replaced the credit agreement dated as of June 29, 2018, as amended, between the Company and BMO Harris Bank, N.A.

(the “2018 Credit Agreement”).

Pursuant to the 2025 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 2018 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 was April 1, 2027, and the Company was required to make principal installments on the Term Loan of at least $ 0.75 million per quarter.

Under the 2025 Credit Agreement, the Company was able to 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 2025 Credit Agreement allowed the Company to obtain Letters of Credit from the Bank, which if drawn upon by the beneficiary thereof and paid by the Bank, became Revolving Loans.

Under the 2025 Credit Agreement, the Company could 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 2025 Credit Agreement ran through April 1, 2027.

The Company used the increased borrowing capacity under the 2025 Credit Agreement to help finance its acquisition of Kobelt.

Kobelt was included as a Borrower under the 2025 Credit Agreement, and was permitted to borrow directly under the 2025 Credit Agreement up to the lesser of the Revolving Credit Commitment or $ 25.0 million.

For purposes of determining the Borrowing Base under the 2025 Credit Agreement, Eligible Receivables and Eligible Inventory of Kobelt were included.

Interest rates under the 2025 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 2025 Credit Agreement were designated as either as “SOFR Loans,” which accrued interest at an Adjusted Term SOFR plus an Applicable Margin;

“Eurodollar Loans,” which accrued interest at the EURIBO Rate plus an Applicable Margin;

“Term CORRA Loans,” which accrued interest at an Adjusted Term CORRA plus an Applicable Margin;

“Daily Compounded CORRA Loans,” which accrued interest at a Daily Compounded CORRA plus an Applicable Margin;

or Canadian Prime Rate Loans,” which accrued interest at the Canadian Prime Rate plus an Applicable Margin.

The Applicable Margins were 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 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 Credit Agreement.

The 2025 Credit Agreement 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 is in compliance with its Total Funded Debt/EBITDA Ratio, the Company’s EBITDA will included 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 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 2025 Credit Agreement were 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 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 consented 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 2025 Credit Agreement.

Specifically, the Company amended and agreed to the assignment to the Bank of a Security Agreement, IP Security Agreement, Pledge Agreement, Perfection Certificate, and Assignment as to Liens and Encumbrances.

1 unchanged sentence

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.

Borrowings under the 2025 Credit Agreement were 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:

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

( 1 ) terminate its remaining obligations under the 2025 Credit Agreement;

( 2 ) declare all amounts outstanding under the 2025 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.

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 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).

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

As of June 30, 2025, the Company’s borrowing capacity under the terms of the Credit Agreement was approximately $ 50,597 and the Company had approximately $ 32,079 of available borrowings.

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 determined a greater amount was necessary.

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

During fiscal year 2026, the average interest rate was 6.46 % on the Term Loan, and 5.21 % on the Revolving Loans under the 2025 Credit Agreement.

The Company’s borrowings described above approximates fair value at June 30, 2026 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 amount of $ 20,000 and a maturity date of March 4, 2026 to hedge the Term Loan.

As of June 30, 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 S, 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 fair value of the euro Revolving Loan are reported in accumulated other comprehensive income (loss) along with the foreign currency translation adjustments on those foreign investments.

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

The Company’s interest rate swap matured on March 4, 2026, and was not renewed.

The Company had no interest rate swaps designated as cash flow hedges outstanding at June 30, 2026.

The maturity did not have a material impact on our consolidated financial statements.

On June 30, 2026, the Company refinanced and replaced its Credit Agreement.

As part of the refinance of the credit agreement the Revolving Loan designated in euro was paid in full.

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

4 unchanged sentences

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

Condensed Consolidated Balance Sheet Location

Consolidated Balance Sheet Location

Right-of-use operating lease assets

17 unchanged sentences

Amortization of right-of-use assets

$ 1,213 $ 980

Interest on lease liabilities

48 unchanged sentences

( 8,753 ) ( 11,461 )

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

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

( 129 ) 1,502

Net gain (loss) on cash flow hedge derivatives, net of income taxes of $ 0 and $ 210 , respectively

Net gain (loss) on net investment hedge derivatives, net of income taxes of $ 0 and ($ 103 ), respectively

Accumulated other comprehensive income (loss)

4 unchanged sentences

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

Other comprehensive loss before reclassifications

Other comprehensive income (loss) before reclassifications

Return on plan assets

- ( 1,808 ) - -

Amounts reclassified from accumulated other comprehensive income (loss)

7 unchanged sentences

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

Other comprehensive loss before reclassifications

Return on plan assets

Other comprehensive income (loss) before reclassifications

( 5,995 ) - - -

Amounts reclassified from accumulated other comprehensive income (loss)

6 unchanged sentences

Changes in benefit plan items

Actuarial loss

Actuarial income (loss)

Transition asset and prior service benefit

Return on plan assets

Total amortization

2 unchanged sentences

Changes in benefit plan items

Actuarial loss

Actuarial income (loss)

Transition asset and prior service benefit

Return on plan assets

Total amortization

5 unchanged sentences

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

June 30, 2026

June 30, 2025

$ 46,067 $ 41,502

8 unchanged sentences

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

Other includes non-Twin Disc manufactured products sold through Company-owned distribution entities.

The Company has two reportable segments:

manufacturing and distribution.

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

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 Company’s CODM is the Chief Executive Officer, who reviews financial information for the two reportable segments.

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.

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

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

The following table presents the selected financial information with respect to the Company’s reportable segments for the year ended June 30, 2026:

20 unchanged sentences

43,729 15,373 25,353 - 84,455

Restructuring expenses

Restructuring expense 366 - - - 366

Other operating income

152 - ( 373 ) - ( 221 )

12 unchanged sentences

15,306 2,431 ( 4,456 ) ( 521 ) 13,596

Income tax expense (benefit)

Income tax benefit (expense)

( 14,085 ) ( 2,132 ) 30,229 ( 38 ) 13,974

Net earnings (loss)

Net income (loss)

1,221 299 25,773 ( 559 ) 27,570

1 unchanged sentence

- 493 - - 493

Net earnings (loss) attributable to Twin Disc, Incorporated

Net income (loss) attributable to Twin Disc, Incorporated

$ 1,221 $ ( 194 ) $ 25,773 $ ( 559 ) $ 27,077

42 unchanged sentences

5,720 5,908 ( 8,759 ) ( 287 ) 2,966

Income tax expense

Income tax benefit (expense)

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

Net earnings (loss)

Net income (loss)

4,244 3,757 ( 8,531 ) ( 256 ) ( 402 )

1 unchanged sentence

- ( 295 ) - - ( 295 )

Net earnings (loss) attributable to Twin Disc, Incorporated

Net income (loss) attributable to Twin Disc, Incorporated

$ 4,244 $ 3,462 $ ( 8,531 ) $ ( 256 ) $ ( 697 )

13 unchanged sentences

20,356 22,358

13,111 10,420

Other countries

45 unchanged sentences

Shares available for future awards as of June 30 were as follows (assuming that outstanding performance awards are issued at the target level of performance):

2020 Directors' Plan

2021 LTI Plan

186,786 566,168

Performance Stock Awards ( “ PSA ” )

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

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

In fiscal 2026 and 2025, the Company granted a target number of 166,537 and 116,091 PSAs, respectively, to various employees and consultants of the Company, including executive officers.

The PSAs granted in fiscal 2026 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 333,074 .

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

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

The PSAs granted in fiscal 2025 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.

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

3 unchanged sentences

A total of 2,810 and 2,286 shares of performance stock awards were forfeited during fiscal 2026 and 2025, respectively.

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

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

The compensation expense for the year ended June 30, 2026 and 2025, related PSAs, was $ 2,018 and $ 1,951 , respectively.

The tax expense from compensation expense for the year ended June 30, 2026 and 2025, related PSAs, was $ 473 and $ 417 , respectively.

The weighted average grant date fair value of the unvested awards at June 30, 2026 was $ 10.69 .

4 unchanged sentences

The fiscal 2025 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 PSUAs that can vest if the target objective is exceeded totals 16,006 .

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

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

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 16,006 .

There were 0 and 8,003 unvested PSUAs outstanding at June 30, 2026 and 2025, respectively.

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

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

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

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

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

A total of 0 and 2,470 shares of PSUAs were forfeited during fiscal 2026 and 2025, respectively.

The compensation expense for the year ended June 30, 2026 and 2025, related to PSUAs was $ 202 and $ 24 .

respectively.

The tax expense from compensation expense for the year ended June 30, 2026 and 2025, related PSUAs, was $ 47 and $ 6 , respectively.

The weighted average grant date fair value of the unvested awards at June 30, 2026 was $ 12.15 .

At June 30, 2026, the Company had $ 0 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 performance stock awards vested in fiscal 2026 and fiscal 2025 was $ 190 and $ 0 .

Restricted Stock Awards ( “ RS ” )

40 unchanged sentences

3,132 3,404 139 165

Prior service cost

Prior service cost (benefit)

Actuarial loss (gain)

43 unchanged sentences

Net transition obligation

Prior service benefit

Prior service cost (benefit)

Actuarial net loss (gain)

21 unchanged sentences

Amortization of prior service cost

Amortization of actuarial net gain

Amortization of actuarial net loss (gain)

( 53 ) ( 262 )

Net periodic benefit income

Net periodic benefit cost (income)

$ 91 $ ( 90 )

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income for Fiscal 2025 (Pre-tax):

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (Loss) for Fiscal 2026 (Pre-tax):

Postretirement

Net loss (gain)

$ ( 624 ) $ ( 10 )

Amortization of transition asset

Amortization of prior service benefit

Amortization of net (income) loss

Total recognized in other comprehensive income

Amortization of prior service cost (benefit)

Amortization of net loss (gain)

Total recognized in other comprehensive income (loss)

Net periodic benefit cost (income)

Total recognized in net periodic benefit cost (income) and other comprehensive income

Total recognized in net periodic benefit cost (income) and other comprehensive income (loss)

$ ( 266 ) $ 134

2 unchanged sentences

Net loss (income)

$ 1,656 $ ( 165 )

Amortization of transition asset

Amortization of prior service (income) cost

Amortization of net (income) loss

Total recognized in other comprehensive loss

Net periodic benefit income

Amortization of prior service cost (benefit)

Amortization of net loss (gain)

Total recognized in other comprehensive income (loss)

Net periodic benefit cost (income)

Total recognized in net periodic benefit cost (income) and other comprehensive income (loss)

$ 2,687 $ 206

Total recognized in net periodic benefit cost (income) and other comprehensive loss

Additional Information

13 unchanged sentences

5.56 % 5.55 %

The assumed weighted-average healthcare cost trend rate was 7.7 % in fiscal 2025, grading down from 8.3 % in fiscal 2024.

The assumed weighted-average healthcare cost trend rate was 6.2 % in fiscal 2026, grading down to 3.7 % in fiscal 2073.

The Company’s Benefits Committee (“Committee”), a non-board management committee, oversees investment matters related to the Company’s funded benefit plans.

11 unchanged sentences

100 % 100 % 100 %

Due to market conditions and other factors, actual asset allocation may vary from the target allocation outlined above.

27 unchanged sentences

Company common stock (a)

1,157 1,157 - -

Common stock (a)

20 unchanged sentences

Fixed income funds

International equity securities

Hedged equity mutual funds

$ 35,118 $ 37,687

$ 38,606 $ 41,018

The following tables present a reconciliation of the fair value measurements using significant unobservable inputs (Level III) as of June 30, 2026 and 2025:

20 unchanged sentences

These amounts are recorded in cost of goods sold and marketing, engineering and administration costs.

United States and foreign (loss) income before income taxes and minority interest as of June 30 were as follows:

United States and foreign income (loss) before income taxes and minority interest as of June 30 were as follows:

United States

8 unchanged sentences

534 ( 1,292 )

( 18,046 ) ( 1,581 )

$ ( 13,974 ) $ 3,368

The components of the net deferred tax asset as of June 30 are summarized in the table below.

5 unchanged sentences

State net operating loss and other state credit carryforwards, net of ASU 2013-11

Federal net operating loss

Research & experimental expenditure capitalization

Foreign net operating loss carryforwards

Accrued liabilities

Right of use assets - operating leases

7 unchanged sentences

Deferred tax liabilities:

$ 1,601 $ 7,521

Property, plant and equipment

1 unchanged sentence

Long term operating lease obligations

Step-up on fair value adjustment

Other liabilities

1 unchanged sentence

$ 16,613 $ ( 1,508 )

At June 30, 2025 the Company has net operating loss carryforwards (“NOLs”) of approximately $ 0 and $ 31,031 for federal and state income tax purposes which will expire at various dates from fiscal year 2026 – 2044.

During the year, the Company filed amended tax returns, which resulted in adjustments to certain tax attribute balances, including federal net operating loss and foreign tax credit carryforwards.

The Company has federal and state tax credit carryforwards of approximately $ 11,718 and $ 1,276 , respectively, which will expire at various dates from fiscal 2026 – 2044.

The majority of the Company’s foreign tax credit carryforwards, which make up $ 9,639 of the $ 11,718 , are scheduled to expire in fiscal year 2026.

At June 30, 2026 the Company has net operating loss carryforwards (“NOLs”) of approximately $ 0 and $ 11,685 for federal and state income tax purposes, respectively, which will expire at various dates from fiscal year 2027 – 2045.

During the year, the Company filed accounting method change applications with the Internal Revenue Service, which resulted in changes to certain tax attribute balances, including inventory, prepaids and deferred revenue.

The Company has federal and state tax Research & Development credit (“R&D credits”) carryforwards of approximately $ 1,345 and $ 1,190 , respectively.

Federal R&D credits will expire at various dates from fiscal years 2038 – 2046, while state R&D credits will expire at various dates from fiscal years 2063 – 2076.

The Company has foreign tax credit carryforwards of approximately $ 1,502 , which will expire at various dates from fiscal 2027 - 2034.

The Company maintains valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be realized.

Changes in valuation allowances from period to period are included in the tax provision in the period of change.

In determining whether a valuation allowance is required, the Company takes into account such factors as prior earnings history, expected future earnings, carry-back and carry-forward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset.

The Company has evaluated the likelihood of whether the net deferred tax assets would be realized and concluded that it is more likely than not that all of deferred tax assets would not be realized.

Management believes that it is more likely than not that the results of future operations will not generate sufficient taxable income and foreign source income to realize all the domestic deferred tax assets, therefore, a valuation allowance in the amount of $ 23,964 and $ 24,035 have been recorded for fiscal years 2025 and 2024, respectively.

During fiscal 2026, the Company reassessed the realizability of its deferred tax assets and concluded that its domestic valuation allowance was no longer required.

This conclusion was supported by improved operating results, including a three -year cumulative income position, as well as the implementation of tax planning strategies during the year.

As a result, the Company released $ 23,879 of valuation allowance and recognized a corresponding income tax benefit.

Of the total valuation allowance released, $ 7,462 was recorded directly to retained earnings in connection with the change in inventory valuation method from LIFO to FIFO, and $ 16,417 was recognized as an income tax benefit in the Consolidated Statement of Operations and Comprehensive Income (Loss).

The table below provides the updated requirements of ASU 2023 - 09, on a prospective basis.

See Note A – Description of Business and Summary of Significant Accounting Policies- Recently Adopted Accounting Standards section for additional details on the adoption of ASU- 2023 - 09.

Following is a reconciliation of the applicable U.S.

federal income taxes to the actual income taxes reflected in the statements of operations (in thousands):

federal income tax at 21 %

federal income taxes to the actual income taxes reflected in the statements of operations and other comprehensive income (loss) for the year-end June 30, 2026:

United States Statutory Tax Rate

State and Local Income Taxes, Net of Federal Income Tax Effect (1)

( 2,416 ) ( 17.8 %)

Foreign Tax Effects

Other 375 2.8 %

Return to Provision ( 654 ) ( 4.8 %)

Innovation box regime ( 583 ) ( 4.3 %)

Other 126 0.9 %

Withholding tax 427 3.1 %

Other ( 65 ) ( 0.5 %)

Other foreign jurisdictions

Effect of Changes in Tax Laws or Rates Enacted in the Current Period

Effect of Cross-Border Tax Laws

Global Intangible Low-Taxed Income

Foreign-derived Intangible Income

( 4,726 ) ( 34.8 %)

Foreign tax credit

( 3,888 ) ( 28.6 %)

( 129 ) ( 1.0 %)

Changes in Valuation Allowances

( 13,854 ) ( 101.9 %)

Nontaxable or Nondeductible items

Changes in Unrecognized Tax Benefits

Other Adjustments

Deferred True-ups

Effective Tax Rate

$ ( 13,974 ) ( 102.8 %)

State taxes in New Hampshire and Wisconsin make up the majority of the tax effect in this category as well as the release of the state valuation.

The Company’s effective tax rate of ( 102.8 %) was primarily driven by the release of the Federal and State valuation allowance, and foreign inclusion items:

GILTI, FDII and subpart F.

On July 4, 2025, the President signed H.R.

1, the “One Big Beautiful Bill Act,” into law.

The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in calendar year 2025, including the restoration of immediate expensing of domestic R&D expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense.

The Act also includes certain changes to the US taxation of foreign activity, including changes to foreign tax credits, GILTI, FDII, and BEAT.

These changes are generally effective for tax years beginning after December 31, 2025.

The change in tax law has had an immaterial net impact on the tax provision for the year ended June 30, 2026.

The advantageous provisions of the tax act were not beneficial to the Company in their efforts to utilize expiring tax attributes.

As previously disclosed and adjusted, the following is a reconciliation of the applicable U.S.

federal income taxes to the actual income taxes reflected in the statements of operations and other comprehensive income (loss) for the year-end June 30, 2025:

federal income tax at 21 %

Increases (reductions) in tax resulting from:

US Foreign inclusion items

Foreign inclusion items

Foreign rate differences

2 unchanged sentences

Foreign other

Foreign bargain purchase gain

Foreign tax ruling

Foreign uncollectible tax receivable

( 242 ) ( 144 )

Change in prior year estimate

Research & development tax credits

( 107 ) ( 47 )

Foreign tax credits

Unrecognized tax benefits

Stock compensation

1 unchanged sentence

Executive compensation

FDII Deduction

Valuation allowance

( 827 ) 1,110

$ 3,368 $ 4,121

The Company has not provided additional U.S.

2 unchanged sentences

for the foreseeable future.

These earnings relate to ongoing operations and were approximately $ 30,302 and $ 20,977 at June 30, 2025 and June 30, 2024, respectively.

Such earnings could become taxable upon the sale or liquidation of these foreign subsidiaries or upon dividend repatriation.

3 unchanged sentences

The tax years open to examination in the U.S.

are for years subsequent to fiscal 2020.

are for years subsequent to fiscal 2022, however some statutes remain open with respect to certain tax attribute carryforwards until those attributes are utilized.

The Company has approximately $ 757 and $ 644 of unrecognized tax benefits as of June 30, 2026 and June 30, 2025 respectively, which, if recognized would impact the effective tax rate.

No material changes are expected to the reserve during the next 12 months.

The Company’s policy is to accrue interest and penalties related to unrecognized tax benefits in income tax expense.

4 unchanged sentences

Reductions based on tax positions related to the prior year

( 28 ) ( 16 )

Subtractions due to statues closing

( 14 ) ( 227 )

Unrecognized tax benefits, end of year

1 unchanged sentence

As of June 30, 2026 and 2025, the amounts accrued for interest and penalties totaled $ 2 and $ 6 , respectively, and are not included in the reconciliation above.

On July 4, 2025, the President signed H.R.

1, the “One Big Beautiful Bill Act,” into law.

The Act also includes certain changes to the US taxation of foreign activity, including changes to foreign tax credits, GILTI, FDII, and BEAT.

These changes are generally effective for tax years beginning after December 31, 2025.

These changes were not reflected in the income tax provision for the period ended June 30, 2025, as enactment occurred after the balance sheet date.

The Company is currently evaluating the impact on future periods.

This tax act may have a material impact on the company’s ability to realize it’s deferred tax assets and the need to maintain the valuation allowance.

The impacts of this law change is expected to be reflected in the first quarter of fiscal year 2026, the period in which the tax act was enacted into law.

The Company made tax payments and received tax refunds during the year ended June 30, 2026 as follows:

State - Other

Total cash paid for income taxes (net of refunds)

Total cash paid for income taxes (prior to ASU 2023-09)

CONTINGENCIES

1 unchanged sentence

Management believes that final disposition of such litigation will not have a material impact on the Company’s results of operations, financial position or cash flows, either individually or in the aggregate.

On February 20, 2026, the U.S.

Supreme Court invalidated tariffs previously imposed under the International Emergency Economic Powers Act (“IEEPA”).

The ruling did not address the availability, timing or mechanics of any potential refunds related to tariffs previously collected, and the outcome of any related administrative or legal processes remains uncertain.

Following the ruling, the U.S.

administration implemented new tariffs under alternative statutory authority, including Section 122 of the Trade Act of 1974, which permits temporary import surcharges subject to statutory limits and duration requirements.

In April 2026, the U.S.

Court of International Trade (“CIT”) issued an order for the U.S.

Customs and Border Protection (“CBP”) to treat the IEEPA Tariffs as unlawful and administer affected import entries accordingly.

As a result of the order, the CBP must recalculate duties without the IEEPA tariffs and ensure that importers of record receive the benefit of the Supreme Court ruling in the form of refunds for such amounts paid and interest.

On June 2, 2026, the Department of Justice filed an appeal with the U.S.

Court of Appeals for the Federal Circuit challenging the CIT's order requiring CBP to provide refunds of IEEPA tariffs on a broad, nationwide basis.

Multiple legal challenges to the Section 122 tariffs have been filed as well, and on May 7, 2026, the U.S.

Court of International Trade ruled that the Section 122 tariffs are unlawful;

however, the court's injunction applies only to the named plaintiffs, and the tariffs remain in effect for all other importers pending appeal.

The Company is evaluating the impact of the Supreme Court ruling and the subsequent order issued by the CIT, and is monitoring related developments from the CBP regarding its plan to process refunds to importers of record, including the launch on April 20, 2026 of the CBP's Consolidated Administration and Processing of Entries (“CAPE”) system for submitting refund claims, as well as the administration’s decision on whether or not to appeal the CIT’s order.

As of June 30, 2026, the Company has not recorded a receivable related to potential refunds for IEEPA Tariffs paid by the Company.

The ultimate resolution of this matter, including the administration’s decision to appeal the CIT’s order, the extent and manner in which costs previously incurred and paid may be recoverable through the CBP, and the timing of any potential recovery remains uncertain.

RESTRUCTURING OF OPERATIONS

15 unchanged sentences

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

Net (loss) income

$ ( 1,599 ) $ 11,246

Net earnings attributable to noncontrolling interest

Net income (loss)

$ 27,570 $ ( 402 )

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

27,077 ( 697 )

1 unchanged sentence

14,119 13,856

Basic Income Per Share:

Net (loss) income per share - basic

$ ( 0.14 ) $ 0.80

Net (loss) income

Basic earnings (loss) per share:

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

$ 1.92 $ ( 0.05 )

Net earnings attributable to noncontrolling interest

Net income (loss)

$ 27,570 $ ( 402 )

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

27,077 ( 697 )

4 unchanged sentences

14,586 13,856

Diluted Income Per Share:

Net (loss) income per share - diluted

Diluted earnings (loss) per share:

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

$ 1.86 $ ( 0.05 )

11 unchanged sentences

Interest Rate Swaps Designated as Cash Flow Hedges

During the year the Company had one interest rate swap contract that matured as of March 4, 2026, with a notional amount of $ 6,500 .

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

The primary purpose of the Company’s cash flow hedging activities is to manage the potential changes in value associated with interest payments on the Company’s SOFR-based indebtedness.

The Company records gains and losses on interest rate swap contracts qualifying as cash flow hedges in accumulated other comprehensive income (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 consolidated statements of operations and comprehensive income.

Cash flows from derivative financial instruments are classified as cash flows from financing activities on the 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 income (loss) were ($ 284 ) and ($ 504 ) for the years ended June 30, 2025 and 2024, 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 ($ 75 ) of net unrealized loss related to cash flow hedging activities included in accumulated other comprehensive income (loss) will be reclassified into earnings within the next twelve months.

Net unrealized after-tax losses related to cash flow hedging activities that were included in accumulated other comprehensive income (loss) were $ 0 and ($ 285 ) for the years ended June 30, 2026 and 2025, 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.

Derivatives Designated as Net Investment Hedges

On June 30, 2026, the Company refinanced and replaced its Credit Agreement as discussed in Note G, Debt, of the notes to the consolidated financial statements.

As part of the refinance of the credit agreement the Revolving Loan designated in euro was paid in full.

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

As discussed in Note H, Debt, during the fourth quarter of fiscal 2021, the Company designated its euro denominated Revolving Loan, with a notional amount of €13,500, 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 fair value of the euro revolver were then reported in accumulated other comprehensive income (loss) along with the foreign currency translation adjustments on those foreign investments.

Net unrealized after-tax gains related to net investment hedging activities that were included in accumulated other comprehensive income (loss) were $ 129 and ($ 1,502 ) for the years ended June 30, 2025 and 2024, respectively.

As discussed in Note G, Debt, of the notes to the consolidated financial statements, during the fourth quarter of fiscal 2021, the Company designated its euro denominated Revolving Loan, with a notional amount of €13,500, 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 fair value of the euro revolver were then reported in accumulated other comprehensive loss along with the foreign currency translation adjustments on those foreign investments.

Net unrealized after-tax income (loss) related to net investment hedging activities that were included in accumulated other comprehensive income (loss) were $ 0 and $ 129 for the years ended June 30, 2026 and 2025, respectively.

Foreign Currency Forward Contracts Not Designated as Hedges

3 unchanged sentences

The maturities of the forward exchange contracts generally coincide with the settlement dates of the related transactions.

Gains and losses on these contracts are recorded in other expense, net in the consolidated statement of operations and comprehensive income as the changes in the fair value of the contracts are recognized and generally offset the gains and losses on the hedged items in the same period.

Gains and losses on these contracts are recorded in other expense, net in the consolidated statement of operations and comprehensive income (loss) as the changes in the fair value of the contracts are recognized and generally offset the gains and losses on the hedged items in the same period.

The primary currency to which the Company was exposed in fiscal 2026 and 2025 was the euro.

10 unchanged sentences

The fair value generally reflects the estimated amounts that the Company would receive or pay to terminate the contracts at the reporting date.

As discussed in Note H, Debt, the Company's euro denominated Revolving Loan approximates fair value at June 30, 2025 and June 30, 2024.

If measured at fair value in the financial statements, it would be classified as Level 2 in the fair value hierarchy.

The fair value of derivative instruments included in the consolidated balance sheets at June 30 were as follows:

Balance Sheet Location

Derivatives designated as hedges:

Interest rate swaps

Derivative designated as hedge:

Interest rate swap

Other current assets

Interest rate swaps

Other noncurrent assets

The impact of the Company’s derivative instruments on the consolidated statement of operations and comprehensive income for the years ended June 30 was as follows:

The impact of the Company’s derivative instruments on the consolidated statement of operations and comprehensive income (loss) for the years ended June 30 was as follows:

Statement of Operations and

Comprehensive Income Location

Comprehensive Income (Loss) Location

Derivatives designated as hedges:

2 unchanged sentences

Interest rate swap

Unrealized loss on hedges

Unrealized gain (loss) on hedges

( 285 ) ( 220 )

Net investment hedge

Unrealized (loss) gain on hedges

Unrealized gain (loss) on hedges

130 ( 1,631 )

2025 IMPACT OF ACCOUNTING METHOD CHANGE

The following tables summarize the effects of the accounting change described in Note B, Inventories, net, of the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss), Statements of Cash Flows and Statements of Changes in Equity for the year ended June 30, 2025 and Consolidated Balance Sheets as of June 30, 2025.

See next page.

Consolidated Statement of Operations and Comprehensive Income (Loss)

June 30, 2025

Under Previous

$ 340,738 $ - $ 340,738

Cost of goods sold

246,433 ( 1,197 ) 245,236

Cost of goods sold - other

1,579 - 1,579

92,726 1,197 93,923

Marketing, engineering and administrative expenses

82,431 - 82,431

Restructuring expenses

Other operating income

Income (loss) from operations

9,887 1,197 11,084

Other Income (expense):

Interest expense

( 2,646 ) - ( 2,646 )

Other income, net

( 5,472 ) - ( 5,472 )

( 8,118 ) - ( 8,118 )

Income (loss) before income taxes and noncontrolling interest

1,769 1,197 2,966

Income tax benefit (expense)

3,368 - 3,368

Net income (loss)

( 1,599 ) 1,197 ( 402 )

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

Net income (loss) attributable to Twin Disc, Incorporated

$ ( 1,894 ) $ 1,197 $ ( 697 )

Dividends per share

$ 0.16 $ - $ 0.16

Earnings (loss) per share data:

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

$ ( 0.14 ) $ 0.09 $ ( 0.05 )

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

$ ( 0.14 ) $ 0.09 $ ( 0.05 )

Weighted average shares outstanding data:

Basic shares outstanding

13,856 - 13,856

Diluted shares outstanding

13,856 - 13,856

Comprehensive income (loss)

Net income (loss)

$ ( 1,599 ) $ 1,197 $ ( 402 )

Benefit plan adjustments, net of income taxes of $13 and $8, respectively

( 3,399 ) - ( 3,399 )

Foreign currency translation adjustment

15,924 - 15,924

Unrealized gain (loss) on hedges, net of income taxes of $0 and 235, respectively

( 1,851 ) - ( 1,851 )

Comprehensive income (loss)

9,075 1,197 10,272

Comprehensive income (loss) attributable to noncontrolling interest

Comprehensive income (loss) attributable to Twin Disc, Incorporated

$ 8,741 $ 1,197 $ 9,938

Consolidated Balance Sheet

June 30, 2025

Under Previous

Current assets:

$ 16,109 $ - $ 16,109

Trade accounts receivable, net

58,941 - 58,941

Inventories, net

151,951 32,134 184,085

Other current assets

19,914 19,914

Total current assets

246,915 32,134 279,049

Property, plant and equipment, net

69,576 - 69,576

Right-of-use assets operating lease assets

17,250 - 17,250

2,892 - 2,892

Intangible assets, net

13,361 - 13,361

Deferred income tax assets

2,812 - 2,812

Other noncurrent assets

2,756 - 2,756

$ 355,562 $ 32,134 $ 387,696

LIABILITIES AND EQUITY

Current liabilities:

Current maturities of long-term debt

$ 3,000 $ - $ 3,000

Current maturities of right-of-use operating lease obligations

3,393 - 3,393

Accounts payable

38,745 - 38,745

Accrued liabilities

80,655 - 80,655

Total current liabilities

125,793 - 125,793

Long-term debt

28,446 - 28,446

Right-of-use lease obligations

14,357 - 14,357

Accrued retirement benefits

11,832 - 11,832

Deferred income tax liabilities

4,320 - 4,320

Other long-term liabilities

6,423 - 6,423

Total liabilities

191,171 - 191,171

Twin Disc, Incorporated shareholders' equity:

Preferred shares authorized:

Common shares authorized:

42,269 - 42,269

Retained earnings

125,414 32,134 157,548

Accumulated other comprehensive income (loss)

3,730 - 3,730

171,413 32,134 203,547

Less treasury stock, at cost (482,181 and 637,778 shares, respectively)

7,402 - 7,402

Total Twin Disc, Incorporated shareholders' equity

164,011 32,134 196,145

Noncontrolling interest

164,391 32,134 196,525

Total liabilities and equity

$ 355,562 $ 32,134 $ 387,696

Consolidated Statement of Cash Flows

June 30, 2025

Under Previous

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$ ( 1,599 ) $ 1,197 $ ( 402 )

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

Depreciation and amortization

14,899 - 14,899

Gain on sale of assets

( 98 ) - ( 98 )

Loss on write-down of industrial product inventory

1,579 - 1,579

Restructuring charges

Provision for deferred income taxes

( 1,581 ) - ( 1,581 )

Stock compensation expense

4,107 - 4,107

1,226 - 1,226

Changes in operating assets and liabilities

Trade accounts receivable, net

( 2,032 ) - ( 2,032 )

Inventories, net

( 9,730 ) ( 1,197 ) ( 10,927 )

2,748 - 2,748

Accounts payable

2,414 - 2,414

Accrued liabilities

12,463 - 12,463

Accrued retirement benefits

( 456 ) - ( 456 )

Net cash provided (used) by operating activities

23,979 - 23,979

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of property, plant, and equipment

( 15,157 ) - ( 15,157 )

Acquisition of Kobelt, less cash acquired

( 17,236 ) - ( 17,236 )

Proceeds from sale of property, plant, and equipment

( 653 ) - ( 653 )

Net cash provided (used) by investing activities

( 32,899 ) - ( 32,899 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings under long-term debt agreement

6,500 - 6,500

Borrowings under revolving loan arrangements

122,264 - 122,264

Repayments of revolving loan arrangements

( 122,264 ) - ( 122,264 )

Repayments of other long-term debt

( 2,500 ) - ( 2,500 )

Payments of right-of-use finance lease obligations

( 1,119 ) - ( 1,119 )

Dividends paid to shareholders

( 2,284 ) - ( 2,284 )

Dividends paid to noncontrolling interest

( 306 ) - ( 306 )

Payments of withholding taxes on stock compensation

( 1,256 ) - ( 1,256 )

Net cash provided (used) by financing activities

( 965 ) - ( 965 )

Effect of exchange rate changes on cash

5,924 - 5,924

Net change in cash

( 3,961 ) - ( 3,961 )

Beginning of period

20,070 - 20,070

End of period

$ 16,109 $ - $ 16,109

Consolidated Statements of Changes in Equity

June 30, 2025

Under Previous

Retained earnings

Balance at June 30, 2024

129,592 30,937 160,529

Net income (loss) attributable to Twin Disc

( 1,894 ) 1,197 ( 697 )

Dividends paid to shareholders

( 2,284 ) - ( 2,284 )

Balance at June 30, 2025

$ 125,414 $ 32,134 $ 157,548

As a result of the retrospective application of the change in accounting principle, the following financial statement line items within the unaudited interim 2026 and 2025 quarterly condensed consolidated financial statements were adjusted, as follows:

For the Quarter Ended

Consolidated Balance Sheets

September 26, 2025

December 26, 2025

March 27, 2026

June 30, 2026

Under Previous

Inventories, net

$ 158,272 $ 32,134 $ 190,406 $ 163,177 $ 32,134 $ 195,311 $ 160,331 $ 32,134 $ 192,465 $ 145,407 $ 32,621 $ 178,028

Deferred income tax assets

2,790 2,790 27,551 ( 7,462 ) 20,089 27,248 ( 7,462 ) 19,786 28,669 ( 7,576 ) 21,093

Retained earnings

124,330 32,134 156,464 146,130 24,672 170,802 148,875 24,672 173,547 157,295 25,045 182,340

For the Quarter Ended

Consolidated Balance Sheets

September 27, 2024

December 27, 2024

March 28, 2025

June 30, 2025

Under Previous

Inventories, net

$ 143,865 $ 30,937 $ 174,802 $ 128,278 $ 30,937 $ 159,215 $ 137,957 $ 30,937 $ 168,894 $ 151,951 $ 32,134 $ 184,085

Retained earnings

126,257 30,937 157,194 126,610 30,937 157,547 124,572 30,937 155,509 125,414 32,134 157,548

For the Quarter Ended

September 26, 2025

December 26, 2025

March 27, 2026

June 30, 2026

Consolidated Statement of Operations and

Comprehensive Income (Loss)

Under Previous

Cost of goods sold

$ 57,062 $ - $ 57,062 $ 67,813 $ - $ 67,813 $ 69,563 $ - $ 69,563 $ 84,760 $ ( 487 ) $ 84,273

22,934 - 22,934 22,367 - 22,367 27,131 - 27,131 29,640 487 30,127

Income (loss) from operations

2,235 - 2,235 2,087 - 2,087 5,822 - 5,822 7,328 487 7,815

Income (loss) before income taxes and noncontrolling interest

571 - 571 698 - 698 5,395 - 5,395 6,445 487 6,932

Income tax benefit (expense)

( 983 ) - ( 983 ) 21,780 ( 7,462 ) 14,318 ( 1,839 ) - ( 1,839 ) 2,363 114 2,477

Net income (loss)

( 412 ) - ( 412 ) 22,478 ( 7,462 ) 15,016 3,556 - 3,556 9,036 373 9,409

Net income (loss) attributable to Twin Disc, Incorporated

( 518 ) - ( 518 ) 22,371 ( 7,462 ) 14,909 3,325 - 3,325 8,987 373 9,360

Earnings (loss) per share data:

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

$ ( 0.04 ) $ - $ ( 0.04 ) $ 1.58 $ ( 0.53 ) $ 1.05 $ 0.23 $ - $ 0.23 $ 0.63 $ 0.03 $ 0.66

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

$ ( 0.04 ) $ - $ ( 0.04 ) $ 1.55 $ ( 0.51 ) $ 1.04 $ 0.23 $ - $ 0.23 $ 0.61 $ 0.03 $ 0.64

Weighted average shares outstanding data:

Basic shares outstanding

13,961 - 13,961 14,165 - 14,165 14,198 - 14,198 14,199 - 14,199

Diluted shares outstanding

13,961 - 13,961 14,389 - 14,389 14,416 - 14,416 14,666 - 14,666

Comprehensive income (loss)

Net income (loss)

$ ( 412 ) $ - $ ( 412 ) $ 22,478 $ ( 7,462 ) $ 15,016 $ 3,556 $ - $ 3,556 $ 9,036 $ 373 $ 9,409

Comprehensive income (loss)

( 2,113 ) - ( 2,113 ) 24,016 ( 7,462 ) 16,554 1,167 - 1,167 8,013 373 8,386

Comprehensive income (loss) attributable to Twin Disc, Incorporated

( 2,304 ) - ( 2,304 ) 23,936 ( 7,462 ) 16,474 956 - 956 8,136 373 8,509

For the Quarter Ended

September 27, 2024

December 27, 2024

March 28, 2025

June 30, 2025

Consolidated Statement of Operations and

Comprehensive Income (Loss)

Under Previous

Cost of goods sold

$ 53,575 $ - $ 53,575 $ 68,241 $ - $ 68,241 $ 59,536 $ - $ 59,536 $ 66,660 $ ( 1,197 ) $ 65,463

19,322 - 19,322 21,680 - 21,680 21,706 - 21,706 30,018 1,197 31,215

Income (loss) from operations

( 165 ) - ( 165 ) 2,760 - 2,760 1,947 - 1,947 5,345 1,197 6,542

Income (loss) before income taxes and noncontrolling interest

( 2,145 ) - ( 2,145 ) 2,651 - 2,651 ( 280 ) - ( 280 ) 1,543 1,197 2,740

Income tax benefit (expense)

$ 627 $ - $ 627 $ 1,552 $ - $ 1,552 $ 1,142 $ - $ 1,142 47 47

Net income (loss)

( 2,772 ) - ( 2,772 ) 1,099 - 1,099 ( 1,422 ) - ( 1,422 ) 1,496 1,197 2,693

Net income (loss) attributable to Twin Disc, Incorporated

( 2,765 ) - ( 2,765 ) 919 - 919 ( 1,472 ) - ( 1,472 ) 1,424 1,197 2,621

Earnings (loss) per share data:

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

$ ( 0.20 ) $ - $ ( 0.20 ) $ 0.07 $ - $ 0.07 $ ( 0.11 ) $ - $ ( 0.11 ) $ 0.10 $ 0.08 $ 0.19

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

$ ( 0.20 ) $ - $ ( 0.20 ) $ 0.07 $ - $ 0.07 $ ( 0.11 ) $ - $ ( 0.11 ) $ 0.10 $ 0.08 $ 0.19

Weighted average shares outstanding data:

Basic shares outstanding

13,778 - 13,778 13,868 - 13,868 13,895 - 13,895 13,897 - 13,897

Diluted shares outstanding

13,778 - 13,778 14,058 - 14,058 13,895 - 13,895 13,971 - 13,971

Comprehensive income (loss)

Net income (loss)

$ ( 2,772 ) $ - $ ( 2,772 ) $ 1,099 $ - $ 1,099 $ ( 1,422 ) $ - $ ( 1,422 ) $ 1,496 $ 1,197 2,693

Comprehensive income (loss)

3,760 - 3,760 ( 10,792 ) - ( 10,792 ) 2,278 - 2,278 13,829 1,197 15,026

Comprehensive income (loss) attributable to Twin Disc, Incorporated

3,624 - 3,624 ( 10,914 ) - ( 10,914 ) 2,196 - 2,196 13,835 1,197 15,032

Kobelt Manufacturing Co., Ltd., Inc.

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

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

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

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

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

The transaction is considered a taxable stock acquisition.

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

The Credit Agreement is further discussed in Note G, 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.

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.

For fiscal years ended 2026 and 2025, the Company included in its consolidated statement of operations and comprehensive income net sales and earnings (loss) for Kobelt of $ 13,414 and $ 232 , and $ 4,870 and ($ 164 ), respectively.

Purchase Price Allocation

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 final allocation of the purchase price of the assets acquired and liabilities assumed in connection with the acquisition of Kobelt.

Cash purchase price

Total consideration

Assets acquired:

Trade accounts receivable

Other current assets

Property, plant and equipment

Intangible assets

Total assets acquired

Liabilities assumed :

Accounts payable

Accrued liabilities

Deferred tax liability

Total liabilities assumed

Total identified net assets acquired:

Purchase price consideration

Final Fair Value of Assets Acquired and Liabilities Assumed

The Company has completed its review of the fair value of the assets acquired and liabilities assumed in connection with the acquisition of Kobelt.

The measurement period has ended, and the Company has made its final determination of the acquisition-date fair values of the assets acquired and liabilities assumed.

The amounts reflected in the purchase price allocation table represent the final allocation of the purchase price based on information obtained about facts and circumstances that existed as of the acquisition date.

The excess of the purchase price over the final fair values assigned to the identifiable assets acquired and liabilities assumed was recorded as goodwill.

Goodwill recognized in the acquisition is primarily attributable to the expected benefits from combining Kobelt’s operations with the Company’s existing business, including anticipated operating synergies, expanded product offerings and future growth opportunities.

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

Assets acquired and liabilities assumed:

Trade accounts receivable

Inventories, net

Other current assets

Property, plant and equipment

Intangible assets, net

Accounts payable

Accrued liabilities

Deferred tax liability

Total identified net assets acquired:

Purchase price consideration

The following information provides further details about the final fair values assigned to certain assets acquired and liabilities assumed at the acquisition date for key balance sheet items.

Accounts receivable represent contractual amounts receivable from customers.

The amounts approximate fair value.

Inventory consists of:

Raw materials

Work in progress at fair value

Finished goods at fair value

Inventories at fair value

Inventories at book value

The value of property, plant and equipment is as follows:

Dies, tools and fixtures

Machinery and equipment

Property, plant and equipment at fair value

Property, plant and equipment at book value

Intangible assets consist of:

Estimated average

Customer relationship

Computer Software - External

Developed technology

The amounts approximate fair value.

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

The goodwill represents the excess of the purchase price consideration over the final fair value assigned to the identifiable assets acquired and liabilities assumed.

TWIN DISC, INCORPORATED AND SUBSIDIARIES

7 unchanged sentences

$ 16,016 $ 956 $ ( 782 ) $ 16,190

Deferred tax valuation allowance

Deferred tax valuation allowance (As Adjusted)

$ 16,502 $ - $ ( 16,444 ) $ 58

3 unchanged sentences

$ 12,693 $ 3,773 $ ( 450 ) $ 16,016

Deferred tax valuation allowance

Deferred tax valuation allowance (As Adjusted)

$ 24,035 $ ( 7,462 ) $ ( 71 ) $ 16,502

9 unchanged sentences

Twin Disc, Incorporated Amended and Restated 2021 Omnibus Incentive Plan (Incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K dated August 11, 2026).

Twin Disc, Incorporated Amended and Restated 2021 Omnibus Incentive Plan (Incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K dated August 6, 2024).

The Twin Disc, Incorporated 2021 Long-Term Incentive Compensation Plan (Incorporated by reference to Appendix A of the Proxy Statement for the Annual Meeting of Shareholders held on October 28, 2021).

The 2020 Stock Incentive Plan for Non-Employee Directors (Incorporated by reference to Appendix A of the Proxy Statement for the Annual Meeting of Shareholders held on October 29, 2020).

Form of Restricted Stock Grant Agreement for restricted stock grants on August 3, 2023 (Incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K dated August 9, 2023).

Form of Restricted Stock Unit Grant Agreement for restricted stock units granted on August 3, 2022 (Incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K dated August 8,2022).

Form of Performance Stock Award Grant Agreement for award of performance shares on August 4, 2023 (Incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K dated August 9, 2023).

Form of Restricted Stock Grant Agreement for restricted stock grants on August 3, 2023 (Incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K dated August 9, 2023).

Form of Performance Stock Award Grant Agreement for award of performance shares on August 4, 2023 (Incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K dated August 9, 2023).

Amendment to Restricted Stock Unit Grant Agreement for restricted stock units granted on August 3, 2023 (Incorporated by reference to Exhibit 10.3 of the Company’s Form 8-K dated August 9, 2023).

Form of Restricted Stock Unit Grant Agreement for restricted stock unit grants on August 1, 2024 (Incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K dated August 6, 2024).

2 unchanged sentences

Form of Performance Stock Award Grant Agreement for award of performance shares on August 6, 2025 (Incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K dated August 12, 2025).

Form of Restricted Stock Grant Agreement for restricted stock grants on August 5, 2026 (Incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K dated August 11, 2026).

Form of Performance Stock Award Grant Agreement for award of performance shares on August 5, 2026 (Incorporated by reference to Exhibit 10.3 of the Company’s Form 8-K dated August 11, 2026).

Twin Disc, Incorporated Supplemental Executive Retirement Plan, amended and restated as of July 29, 2010 (Incorporated by reference to Exhibit 10.4 of the Company’ s Form 8-K dated August 4, 2010).

1 unchanged sentence

Form of Indemnity Agreement (Incorporated by reference to Exhibit 10.5 of the Company’ s Form 8-K dated August 2, 2005).

Credit Agreement By and Among Twin Disc, Incorporated, Twin Disc Canada Holdings Ltd., Kobelt Manufacturing Co.

Ltd., and Bank of Montreal, dated February 14, 2025 (Incorporated by reference to Exhibit 1.1 of the Company’s Form 8-K dated February 18, 2025).

Fifth Amended and Restated Revolving Note By and Among Twin Disc, Incorporated, Kobelt Manufacturing Co., Ltd.

and Bank of Montreal (Incorporated by reference to Exhibit 1.2 of the Company’s Form 8-K dated February 18, 2025).

Assignment and Assumption of Revolving Loan Note Between BMO Bank, N.A.

and Bank of Montreal (Incorporated by reference to Exhibit 1.3 of the Company’s Form 8-K dated February 18, 2025).

Second Amended and Restated Term Note By and Among Twin Disc, Incorporated, Kobelt Manufacturing Co., Ltd.

and Bank of Montreal (Incorporated by reference to Exhibit 1.4 of the Company’s Form 8-K dated February 18, 2025).

Assignment and Assumption of Term Loan Note Between BMO Bank, N.A.

and Bank of Montreal (Incorporated by reference to Exhibit 1.5 of the Company’s Form 8-K dated February 18, 2025).

Assignment and Amendment to Security Agreement By and Among BMO Bank, N.A., Bank of Montreal, and Twin Disc, Incorporated (Incorporated by reference to Exhibit 1.6 of the Company’s Form 8-K dated February 18, 2025).

Assignment and Amendment to IP Security Agreement By and Among BMI Bank, N.A., Bank of Montreal, Twin Disc, Incorporated, and Kobelt Manufacturing Co., Ltd.

(Incorporated by reference to Exhibit 1.7 of the Company’s Form 8-K dated February 18, 2025).

Assignment of and Amendment to Pledge Agreement By and Among BMO Bank, N.A., Bank of Montreal, and Twin Disc, Incorporated (Incorporated by reference to Exhibit 1.8 of the Company’s Form 8-K dated February 18, 2025).

Assignment of and Amendment to Perfection Certificate By and Among BMO Bank, N.A., Bank of Montreal, Twin Disc, Incorporated, and Kobelt Manufacturing Co.

(Incorporated by reference to Exhibit 1.9 of the Company’s Form 8-K dated February 18, 2025).

Assignment of and Amendment to Assignment as to Liens and Encumbrances By and Among BMO Bank, N.A., Bank of Montreal, and Twin Disc, Incorporated (Incorporated by reference to Exhibit 1.10 of the Company’s Form 8-K dated February 18, 2025).

Assignment of and Amendment to Negative Pledge Agreement By and Among BMO Bank, N.A., Bank of Montreal, and Twin Disc, Incorporated (Incorporated by reference to Exhibit 1.11 of the Company’s Form 8-K dated February 18, 2025).

Collateral Assignment of Rights Under Purchase Agreement By and Among Twin Disc, Incorporated, Twin Disc Canada Holdings Ltd., and Bank of Montreal (Incorporated by reference to Exhibit 1.12 of the Company’s Form 8-K dated February 18, 2025).

Share Purchase Agreement Among Kobelt Manufacturing Co.

Ltd., Twin Disc Canada Holdings Ltd., Twin Disc, Incorporated, the Shareholders of Kobelt Manufacturing Co.

Ltd., and Mark Chesley, dated February 14, 2025 (Incorporated by reference to Exhibit 99.2 of the Company’s Form 8-K dated February 18, 2025).

ISDA Master Agreement and Schedule, dated April 11, 2019, between Twin Disc, Incorporated and Bank of Montreal (Incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K dated April 26, 2019).

Confirmation of swap transaction, dated April 22, 2019, from Bank of Montreal to Twin Disc, Incorporated (Incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K dated April 26, 2019).

Insider Trading

Credit Agreement By and Among Twin Disc, Incorporated, Kobelt Manufacturing Co.

Ltd., Bank of Montreal, and JPMorgan Chase Bank, N.A., dated June 30, 2026 (Incorporated by reference to Exhibit 1.1 of the Company’s Form 8-K dated July 6, 2026).

Sixth Amended and Restated Revolving Note Between Twin Disc, Incorporated, Kobelt Manufacturing Co., Ltd.

and Bank of Montreal (Incorporated by reference to Exhibit 1.2 of the Company’s Form 8-K dated July 6, 2026).

Revolving Note Between Twin Disc, Incorporated and JPMorgan Chase Bank, N.A.

(Incorporated by reference to Exhibit 1.3 of the Company’s Form 8-K dated July 6, 2026).

Third Amended and Restated Term Note Between Twin Disc, Incorporated and Bank of Montreal (Incorporated by reference to Exhibit 1.4 of the Company’s Form 8-K dated July 6, 2026).

Term Note Between Twin Disc, Incorporated and JPMorgan Chase Bank, N.A.

(Incorporated by reference to Exhibit 1.5 of the Company’s Form 8-K dated July 6, 2026).

Swing Note Between Twin Disc, Incorporated and Bank of Montreal (Incorporated by reference to Exhibit 1.6 of the Company’s Form 8-K dated July 6, 2026).

Amended and Restated Security Agreement Between Twin Disc, Incorporated and Bank of Montreal (Incorporated by reference to Exhibit 1.7 of the Company’s Form 8-K dated July 6, 2026).

Amended and Restated IP Security Agreement Between Twin Disc, Incorporated and Bank of Montreal (Incorporated by reference to Exhibit 1.8 of the Company’s Form 8-K dated July 6, 2026).

Amended and Restated Pledge Agreement Between Twin Disc, Incorporated and Bank of Montreal (Incorporated by reference to Exhibit 1.9 of the Company’s Form 8-K dated July 6, 2026).

Amended and Restated Perfection Certificate Between Twin Disc, Incorporated and Bank of Montreal (Incorporated by reference to Exhibit 1.10 of the Company’s Form 8-K dated July 6, 2026).

Amended and Restated Agreement as to Liens and Encumbrances Between Twin Disc, Incorporated and Bank of Montreal (Incorporated by reference to Exhibit 1.11 of the Company’s Form 8-K dated July 6, 2026).

Amended and Restated Negative Pledge Agreement Between Twin Disc, Incorporated and Bank of Montreal (Incorporated by reference to Exhibit 1.12 of the Company’s Form 8-K dated July 6, 2026).

Preferability Letter from RSM U.S., LLP

Insider Trading Policy

Subsidiaries of the Registrant

37 unchanged sentences

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-K

Item 9A. Controls and Procedures