TWIN DISC INC 10-K

Item 9A. Controls and Procedures Conclusion Regarding Disclosure Controls and Procedures As required by Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of the end of the period covered by this report and under the supervision and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that such disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and to provide reasonable assurance that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding disclosure. Management ’ s Report on Internal Control Over Financial Reporting Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that: 1. pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company, 2. 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 3. 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 the 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. 19 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. 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. Changes in Internal Control Over Financial Reporting During the fourth quarter of fiscal 2026, there have not been any changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Item 9B. Other Information Not applicable. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. PART III Item 10. Directors, Executive Officers, and Corporate Governance 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 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. If the Company makes any substantive amendment to the Code of Ethics, or grants a waiver from a provision of the Code of Ethics for its Chief Executive Officer, Chief Financial Officer or Chief Accounting Officer (or any person performing similar functions), it intends to disclose the nature of such amendment on its website within four business days of the amendment or waiver in lieu of filing a Form 8 -K with the SEC. 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 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 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 on October 29, 2026, which is incorporated into this report by reference. 20 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 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. Item 11. Executive Compensation The information set forth under the captions "Executive Compensation" and "Director Compensation” in the Proxy Statement for the Annual Meeting of Shareholders to be held on October 29, 2026, is incorporated into this report by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters For information regarding security ownership of certain beneficial owners and management, see the Proxy Statement for the Annual Meeting of Shareholders to be held on October 29, 2026, under the captions "Principal Shareholders” and “Directors and Executive Officers" and incorporated into this report by reference. For information regarding securities authorized for issuance under equity compensation plans of the Company, see “Equity Compensation Plan Information” 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 are no arrangements known to the Registrant, the operation of which may at a subsequent date result in a change in control of the Registrant. Item 13. 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 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. Item 14. 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 on October 29, 2026, under the headings “Fees to Independent Registered Public Accounting Firm” and “Pre-approval Policies and Procedures.” PART IV Item 15. Exhibits, Financial Statement Schedules (a)(1) Consolidated Financial Statements See Index to Consolidated Financial Statements and Financial Statement Schedule, the Report of Independent Registered Public Accounting Firm and the Consolidated Financial Statements, all of which are incorporated by reference. (a)(2) Consolidated Financial Statement Schedule See Index to Consolidated Financial Statements and Financial Statement Schedule, and the Consolidated Financial Statement Schedule, all of which are incorporated by reference. (a)(3) Exhibits. See Exhibit Index included as the last page of this form, which is incorporated by reference. 21 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm, RSM US LLP, Milwaukee, Wisconsin, PCAOB ID No. 49 23-25 Consolidated Balance Sheets as of June 30, 2026 and 2025 26 Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended June 30, 2026 and 2025 27 Consolidated Statements of Cash Flows for the years ended June 30, 2026 and 2025 28 Consolidated Statements of Changes in Equity for the years ended June 30, 2026 and 2025 29 Notes to Consolidated Financial Statements 30-73 INDEX TO FINANCIAL STATEMENT SCHEDULE Schedule II - Valuation and Qualifying Accounts 74 Schedules, other than those listed, are omitted for the reason that they are inapplicable, are not required, or the information required is shown in the financial statements or the related notes. 22 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Twin Disc, Incorporated Opinion on the Internal Control Over Financial Reporting We have audited Twin Disc Incorporated’s (the Company) 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. In our opinion, the Company maintained, in all material respects, effective 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. 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. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management ’ s Report on Internal Control over Financial Reporting in Item 9A . Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) 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 (3) 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 the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of 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 or procedures may deteriorate. /s/ RSM US LLP Milwaukee, Wisconsin September 4, 2026 23 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Twin Disc, Incorporated Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Twin Disc, Incorporated 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 These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. 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 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. 24 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 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 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 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. ● 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 realize the benefit of its deferred tax assets. /s/ RSM US LLP We have served as the Company’s auditor since 2017. Milwaukee, Wisconsin September 4, 2026 25 TWIN DISC, INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, 2026 and 2025 (In thousands except share amounts) As Adjusted 2026 2025 ASSETS Current assets: Cash $ 16,029 $ 16,109 Trade accounts receivable, net 66,761 58,941 Inventories, net 178,028 184,085 Other current assets 17,397 19,914 Total current assets 278,215 279,049 Property, plant, and equipment, net 68,094 69,576 Right-of-use operating lease assets 14,730 17,250 Goodwill 2,772 2,892 Intangible assets, net 14,121 13,361 Deferred income tax assets 21,093 2,812 Other noncurrent assets 2,220 2,756 Total assets $ 401,245 $ 387,696 LIABILITIES AND EQUITY Current liabilities: Current maturities of long-term debt $ 1,500 $ 3,000 Current maturities of right-of use operating lease obligations 3,527 3,393 Accounts payable 30,809 38,745 Accrued liabilities 82,739 80,655 Total current liabilities 118,575 125,793 Long-term debt 28,310 28,446 Right-of-use operating lease obligations 11,691 14,357 Accrued retirement benefits 10,429 11,832 Deferred income tax liabilities 4,480 4,320 Other long-term liabilities 7,824 6,423 Total liabilities 181,309 191,171 Twin Disc shareholders' equity: Preferred shares authorized: 200,000 ; issued: none ; no par value - - Common shares authorized: 30,000,000 ; issued: 14,632,802 ; no par value 40,252 42,269 Retained earnings 182,340 157,548 Accumulated other comprehensive income (loss) 288 3,730 222,880 203,547 Less treasury stock, at cost ( 209,263 and 482,181 shares, respectively) 3,226 7,402 Total Twin Disc, Incorporated shareholders' equity 219,654 196,145 Noncontrolling interest 282 380 Total equity 219,936 196,525 Total liabilities and equity $ 401,245 $ 387,696 The notes to consolidated financial statements are an integral part of these statements. 26 TWIN DISC, INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) For the years ended June 30, 2026 and 2025 (In thousands, except per share amounts) As Adjusted 2026 2025 Net sales $ 381,270 $ 340,738 Cost of goods sold 278,710 245,236 Cost of goods sold - other - 1,579 Gross profit 102,560 93,923 Marketing, engineering and administrative expenses 84,455 82,431 Restructuring expenses 366 408 Other operating income ( 221 ) - Income (loss) from operations 17,960 11,084 Other income (expense): Interest expense ( 3,078 ) ( 2,646 ) Other income (expense), net ( 1,286 ) ( 5,472 ) ( 4,364 ) ( 8,118 ) Income (loss) before income taxes and noncontrolling interest 13,596 2,966 Income tax benefit (expense) 13,974 ( 3,368 ) Net income (loss) 27,570 ( 402 ) Less: Net income (loss) attributable to noncontrolling interest, net of tax 493 295 Net income (loss) attributable to Twin Disc, Incorporated $ 27,077 $ ( 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 $ 1.92 $ ( 0.05 ) Diluted earnings (loss) per share attributable to Twin Disc, Incorporated common shareholders $ 1.86 $ ( 0.05 ) Weighted average shares outstanding data: Basic shares outstanding 14,119 13,856 Diluted shares outstanding 14,586 13,856 Comprehensive income (loss) Net income (loss) $ 27,570 $ ( 402 ) Benefit plan adjustments, net of income taxes of $ 452 and $ 13 , respectively 2,708 ( 3,399 ) Foreign currency translation adjustment ( 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 Less: Comprehensive income (loss) attributable to noncontrolling interest 359 334 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. 27 TWIN DISC, INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended June 30, 2026 and 2025 (In thousands) As Adjusted 2026 2025 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 27,570 $ ( 402 ) 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 ( 200 ) ( 98 ) Loss on write-down of industrial product inventory - 1,579 Restructuring charges 139 39 Provision for deferred income taxes ( 18,046 ) ( 1,581 ) Stock compensation expense 3,845 4,107 Other, net ( 523 ) 1,226 Changes in operating assets and liabilities, net of acquired business Trade accounts receivable, net ( 9,001 ) ( 2,032 ) Inventories, net 3,291 ( 10,927 ) Other current assets 1,166 2,748 Accounts payable ( 6,907 ) 2,414 Accrued liabilities 5,391 12,463 Accrued retirement benefits 2,428 ( 456 ) Net cash provided (used) by operating activities 22,899 23,979 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of capital expenditures ( 13,713 ) ( 15,157 ) Acquisition of Kobelt, less cash acquired - ( 17,236 ) Proceeds from sale of property, plant, and equipment 235 147 Other, net ( 671 ) ( 653 ) Net cash provided (used) by investing activities ( 14,149 ) ( 32,899 ) CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under long-term debt agreement 30,000 6,500 Borrowings under revolving loan arrangements 114,526 122,264 Repayments of revolving loan arrangements ( 131,941 ) ( 122,264 ) Repayments of other long-term debt ( 13,500 ) ( 2,500 ) Payments of right-of-use finance lease obligations ( 1,246 ) ( 1,119 ) Dividends paid to shareholders ( 2,285 ) ( 2,284 ) Dividends paid to noncontrolling interest ( 457 ) ( 306 ) Cash used in net share settlement of restricted stock units ( 11 ) - Payments of withholding taxes on stock compensation ( 1,675 ) ( 1,256 ) 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 ( 80 ) ( 3,961 ) Cash: Beginning of period 16,109 20,070 End of period $ 16,029 $ 16,109 Supplemental cash flow information Cash paid during the year for: Interest 3,272 2,221 Income tax 5,836 3,844 The notes to consolidated financial statements are an integral part of these statements. 28 TWIN DISC, INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY For the years ended June 30, 2026 and 2025 (In thousands) Twin Disc, Inc. Shareholders’ Equity Accumulated Other Non- Common Retained Comprehensive Treasury Controlling Total Stock Earnings Income (Loss) Stock Interest Equity 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 and non-controlling interest ( 2,284 ) ( 306 ) ( 2,590 ) Translation adjustments 15,885 39 15,924 Benefit plan adjustments, net of tax ( 3,399 ) ( 3,399 ) Unrealized loss on hedges, net of tax ( 1,851 ) ( 1,851 ) Compensation expense 4,107 4,107 Stock awards, net of tax ( 3,636 ) 2,381 ( 1,255 ) Balance at June 30, 2025 (As Adjusted) 42,269 157,548 3,730 ( 7,402 ) 380 196,525 Net income (loss) 27,077 493 27,570 Dividends paid to shareholders and non-controlling interest ( 2,285 ) ( 457 ) ( 2,742 ) Translation adjustments ( 5,995 ) ( 134 ) ( 6,129 ) Benefit plan adjustments, net of tax 2,708 2,708 Unrealized gain (loss) on hedges, net of tax ( 155 ) ( 155 ) Compensation expense 3,845 3,845 Stock awards, net of tax ( 5,862 ) 4,176 ( 1,686 ) Balance at June 30, 2026 $ 40,252 $ 182,340 $ 288 $ ( 3,226 ) $ 282 $ 219,936 The notes to consolidated financial statements are an integral part of these statements. 29 TWIN DISC, INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS AND PER SHARE DATA) A. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations ‑‑Twin Disc, Incorporated (“Twin Disc”, or the “Company”) was incorporated under the laws of the state of Wisconsin in 1918. Twin Disc designs, manufactures and sells marine and heavy duty off‑highway power transmission equipment. The Company has manufacturing locations in the United States, Belgium, Canada, Finland, Italy, the Netherlands, and Switzerland. In addition to these countries, it has distribution locations in Singapore, China, Australia, New Zealand and Japan. Products offered include: marine transmissions, azimuth drives, surface drives, propellers and boat management systems as well as power-shift transmissions, hydraulic torque converters, power take-offs, industrial clutches, controls systems, and braking systems. The Company sells its products to customers primarily in the pleasure craft, commercial, and military marine markets, as well as in the energy and natural resources, government, military, and industrial markets. The Company's worldwide sales to both domestic and foreign customers are transacted through a direct sales force and a distributor network. On February 14, 2025, the Company completed the acquisition of 100 % of the outstanding common stock of Kobelt Manufacturing Co. Ltd. (“Kobelt”). Based in Surrey, British Columbia, Canada, Kobelt is a manufacturer of controls, propulsion, steering, and braking systems to the marine, oil and gas, and industrial markets. Basis of Presentations ‑‑The consolidated financial statements and information included in this Annual Report on Form 10 -K (“Form 10 -K”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. The financial statements have been prepared in accordance with Generally Accepted Accounting Principles of the United States of America. The Company’s fiscal year end is June 30. Consolidation Principles ‑‑The consolidated financial statements include the accounts of Twin Disc, Incorporated and its wholly-owned domestic and foreign subsidiaries. All significant intercompany transactions have been eliminated. Management Estimates-- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual amounts could differ from those estimates. 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 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 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. Under this method, the Company allocates the fair value of consideration transferred in a business combination to the estimated fair value at the acquisition date of the tangible and intangible assets acquired as well as the liabilities assumed. Acquisition costs are expensed as incurred. Any excess consideration transferred is recorded as goodwill and in instances where the fair value of consideration transferred is less than the estimated fair value of tangible and intangible assets acquired less liabilities assumed, such amounts are recorded as a gain on the bargain purchase. Certain adjustments to the assessed fair values of the assets, liabilities, or non-controlling interests made subsequent to the acquisition date, but within the measurement period, which is up to one year, are recorded as adjustments to goodwill or the gain on the bargain purchase. Any adjustments subsequent to the measurement period are recorded in income. Any cost or equity method interest that the Company holds in the acquired company prior to the acquisition is re-measured to fair value at acquisition with a resulting gain or loss recognized in income for the difference between fair value and the existing book value. 30 Cash --The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalent. Under the Company’s cash management system, cash balances at certain banks are funded when checks are presented for payment. To the extent that checks issued, but not yet presented for payment, exceed the balance on hand at the specific bank against which they were written, the amount of those un-presented checks is included in accounts payable. The Company maintains cash in bank accounts in excess of insured limits. The Company has not experienced any losses and does not believe that significant credit risk exists as a result of this practice. 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 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 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. The Company’s term loan borrowing, which is SOFR-based, approximates fair value at June 30, 2026. 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, 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. 31 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. Expenditures for maintenance, repairs and minor renewals are charged against earnings as incurred. Expenditures for major renewals and betterments are capitalized and depreciated. Capital project costs are accumulated in construction-in-progress until completed, at which time the costs are transferred to the relevant asset and commence depreciation. Depreciation is provided on the straight‑line method over the estimated useful lives of the assets. The lives assigned to buildings and related improvements range from 10 to 40 years, and the lives assigned to machinery and equipment range from 5 to 15 years. Upon disposal of property, plant, and equipment, the cost of the asset and the related accumulated depreciation are removed from the accounts and the resulting gain or loss is reflected in earnings. Fully depreciated assets are not removed from the accounts until physically disposed. At June 30, 2026 and 2025, the Company owned one permanently idled facility with a book value of $ 3.0 million. This facility is assessed for impairment quarterly and depreciation has ceased. This facility is accounted for within property, plant, and equipment. Right of Use Lease Assets ‑‑In accordance with ASC 842, the Company’s leases, with lease periods longer than twelve months, are recorded on the consolidated balance sheets. These leases primarily consist of office and warehouse facilities, as well as production and office equipment. The Company determines if an arrangement is a lease at contract inception. The lease term begins upon lease commencement, which is when the Company takes possession of the asset, and may include options to extend or terminate the lease when it is reasonably certain that such options will be exercised. As its lease agreements typically do not provide an implicit rate, the Company primarily uses an incremental borrowing rate based upon the information available at lease commencement. In determining the incremental borrowing rate, the Company considers its current borrowing rate, the lease period, and the economic environments where the lease activity is concentrated. Impairment of Long-lived Assets --The Company reviews long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. When triggering events are identified, the Company performs undiscounted operating cash flow analyses to determine if an impairment exists for property, plant, and equipment and other long-lived assets, including intangible assets. If an impairment is determined to exist, any related impairment loss is calculated based on fair value. Fair value is primarily determined using discounted cash flow analyses; however, other methods may be used to determine the fair value, including third party valuations when necessary. Intangible Assets, net -- Intangible assets primarily consist of customer relationships, technology know-how, and tradenames, all of which are definite-lived. They were initially valued at fair value at acquisition, and are amortized over their respective useful lives on the basis of straight line or accelerated, as appropriate. Goodwill -- The Company reviews goodwill for impairment on a reporting unit basis annually as of the first day of the Company’s fourth fiscal quarter, and whenever events or changes in circumstances (“triggering events”) indicate that the carrying value of goodwill may not be recoverable. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in expected future cash flows; a sustained, significant decline in the Company’s stock price and market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; the testing for recoverability of a significant asset group within a reporting unit; and slower growth rates. Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on the Company’s consolidated financial statements. Goodwill impairment charges are recorded using a simplified one -step approach. The fair value of a reporting unit, as defined, is compared to the carrying value of the reporting unit, including goodwill. The fair value is primarily determined using discounted cash flow analyses which is driven by projected growth rates, and which applies an appropriate market-participant discount rate; the fair value determined is also compared to the value obtained using a market approach from guideline public company multiples. If the carrying amount exceeds the fair value, that difference is recognized as an impairment loss. 32 The Company conducted its annual assessment for goodwill impairment as of June 30, 2026 using updated inputs, including appropriate risk-based, country and company specific weighted average discount rates for the Company’s reporting unit with goodwill. The Company completed its impairment testing as of June 30, 2026 and concluded there were no impairments. Changes in circumstances, existing at the measurement date or at other times in the future, or in the numerous estimates associated with management’s judgments, assumptions and estimates made in assessing the fair value of goodwill, could result in an impairment charge in the future. The Company will continue to monitor all significant estimates and impairment indicators, and will perform interim impairment reviews, as necessary. Derivative Financial Instruments - - The Company has written policies and procedures that place all financial instruments under the direction of the Company’s corporate treasury department and restrict all derivative transactions to those intended for hedging purposes. The use of financial instruments for trading purposes is prohibited. The Company uses derivative financial instruments to manage certain financial risks. The Company enters into forward contracts to reduce the earnings and cash flow impact of non-functional currency denominated receivables and payables. The Company uses interest rate swap contracts to reduce the exposure to variability in interest rates on floating debt borrowings. The Company designates certain financial instruments as cash flow hedges for accounting purposes. The Company designates certain financial instruments as net investment hedges to reduce the exposure in its foreign currency denominated net investments in wholly-owned subsidiaries. See Note R, Derivative Financial Instruments, for additional information. Pension and Other Postretirement Benefits Plans -- The Company provides a wide range of benefits to employees and retired employees, including pensions and postretirement health care coverage. Plan assets and obligations are recorded annually based on the Company’s measurement date utilizing various actuarial assumptions such as discount rates, expected return on plan assets, compensation increases, retirement and mortality tables, and health care cost trend rates as of that date. Income Taxes --The Company recognizes deferred tax assets and liabilities for the expected future income tax consequences of events that have been recognized in the Company’s financial statements. Under this method, deferred tax assets and liabilities are determined based on the temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates in effect in the years in which temporary differences are expected to reverse. 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. The Company evaluates its uncertain tax positions as new information becomes available. Tax benefits are recognized to the extent a position is more likely than not to be sustained upon examination by the taxing authority. Segment Reporting --Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated on a regular basis by the chief operating decision maker, or decision making group, in deciding how to allocate resources to an individual segment and in assessing performance. As of June 30, 2026, the Company identified two operating segments. 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: 1. Identify the contract with a customer ; The Company’s customers consist of distributors and direct end-users. With regard to distributors, the Company generally has written distribution agreements which describe the terms of the distribution arrangement, such as the product range, the sales territory, product pricing, sales support, payment and returns policy, etc. Customer contracts are generally in the form of acknowledged purchase orders. Services to be rendered, as part of the delivery of those products, are also generally specified. Such services include installation reviews and technical commissioning. 2. Identify the performance obligations in the contract ; The Company’s performance obligations primarily consist of product delivery and certain service obligations such as technical commissioning, repair services, installation reviews, and shift development. 3. Determine the transaction price ; The transaction price is determined based on the consideration to which the Company expects to be entitled in exchange for those goods or services, including the expected value of variable consideration. Variable consideration is immaterial. 4. Allocate the transaction price to the performance obligations in the contract ; The Company determined that the most relevant allocation method for its service obligations is to apply the expected cost plus appropriate margin. This is the Company’s practice of billing for repairs, overhaul, and other product service related time incurred by its technicians. 33 5. Recognize revenue ; Revenue is recognized as each performance obligation is satisfied which is typically when the Company transfers control of a good or service to a customer, which can occur over time or at a point in time. For technical commissioning, repairs, installation review, and shift development services, revenue is recognized upon completion of the service. The customer’s ability and intent to pay the transaction price is assessed in determining whether a contract exists with the customer. If collectability of substantially all of the consideration in a contract is not probable, consideration received is not recognized as revenue unless the consideration is nonrefundable and the Company no longer has an obligation to transfer additional goods or services to the customer or collectability becomes probable. Goods sold to third party distributors are subject to an annual return policy, for which a provision is made at the time of shipment based upon historical experience. 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; 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 Contract Liabilities Costs in Excess of Billings, Net Trade Accounts Receivable, Net Total Contract Assets Customer Deposits Deferred Revenue Total Contract Liabilities 2024 $ 5,216 $ 52,207 $ 57,423 $ 26,540 $ 2,025 $ 28,565 2025 6,988 58,941 65,929 13,538 29,664 43,202 2026 $ 4,617 $ 66,761 $ 71,378 $ 14,538 $ 36,211 $ 50,749 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. The cost associated with shipping and handling of products is reflected in cost of goods sold. Recently Issued Not Yet Adopted Accounting Standards -- In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2024 - 03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures” (“ASU 2024 - 03” ) to expand expense disclosures by requiring disaggregated disclosure of certain income statement expense line items, including those that contain purchases of inventory, employee compensation, depreciation, and amortization. ASU 2024 - 03 is effective for fiscal years beginning after December 15, 2026, or the Company’s fiscal 2028, and subsequent interim periods, with early adoption permitted. The amendments should be applied prospectively, but retrospective application is permitted. The company is currently assessing the impact of the requirements on our Consolidated Financial Statements. Recently Adopted Accounting Standards -- In November 2023, the FASB issued guidance ASU 2023 - 07, "Segment Reporting (Topic 280 ): Improvements to Reportable Segment Disclosures," which is intended to improve reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment and contain other disclosure requirements. The Company adopted the new annual disclosures as required for fiscal 2025 and adopted the interim disclosures as required beginning with the first quarter of fiscal 2026. 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 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; 34 - 83550, Amendments to Smaller Reporting Company Definition, the Company qualifies as a smaller reporting company based on its public float as of the last business day of the second quarter of fiscal 2026. Accordingly, it has scaled some of its disclosures of financial and non-financial information in this annual report. 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. 34 B. INVENTORIES, NET The major classes of inventories at June 30 were as follows: As Adjusted 2026 2025 Finished parts $ 79,297 $ 99,171 Work in process 38,830 27,229 Raw materials 59,901 57,685 $ 178,028 $ 184,085 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. 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. 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. 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. 35 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) As Computed Under Previous Method Effect of Accounting Change As Reported Under New Method Cost of goods sold $ 279,197 $ ( 487 ) $ 278,710 Gross profit 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 As Computed Under Previous Method Effect of Accounting Change As Reported Under New Method 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 As Computed Under Previous Method Effect of Accounting Change As Reported Under New Method 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 36 Consolidated Statements of Changes in Equity As Computed Under Previous Method Effect of Accounting Change As Reported Under New Method 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 C. PROPERTY, PLANT, AND EQUIPMENT, NET Property, plant, and equipment at June 30 were as follows: 2026 2025 Land $ 3,343 $ 3,381 Buildings 47,616 47,438 Machinery and equipment 215,809 212,611 266,768 263,430 Less: accumulated depreciation ( 198,674 ) ( 193,854 ) $ 68,094 $ 69,576 Included in the above amounts are finance lease right-of-use assets of $ 4,960 and $ 5,794 for the years ended June 30, 2026 and 2025, respectively. Depreciation expense for the years ended June 30, 2026 and 2025 was $ 10,538 and $ 10,042 , respectively. At June 30, 2026 and 2025, the Company owned one permanently idle facility with a book value of $ 3.0 million. The asset is presented within property, plant, and equipment, net on the Consolidated Balance Sheets. No impairment losses were recorded in fiscal 2026 or 2025. D. GOODWILL AND INTANGIBLE ASSETS, NET Goodwill represents the excess of the consideration transferred net of the acquisition-date fair values of the identifiable assets acquired and the liabilities assumed. As of June 30, 2026, changes in the carrying amount of goodwill is summarized as follows: Net Book Value Rollforward Balance at June 30, 2025 $ 2,892 Translation adjustment ( 120 ) Balance at June 30, 2026 $ 2,772 37 At June 30, the following acquired intangible assets have definite useful lives and are subject to amortization: Net Book Value Rollforward Net Book Value By Asset Type Gross Carrying Amount Accumulated Amortization / Impairment Net Book Value Customer Relationships Technology Know-how Trade Names Other Total Balance at June 30, 2024 $ 36,427 $ ( 23,741 ) $ 12,686 $ 6,720 $ 2,089 $ 1,520 $ 2,357 $ 12,686 Additions 3,471 - 3,471 1,187 908 628 748 3,471 Amortization - ( 3,959 ) ( 3,959 ) ( 1,341 ) ( 1,312 ) ( 281 ) ( 1,025 ) ( 3,959 ) Translation adjustment 3,505 (2,342 ) 1,163 629 149 169 216 1,163 Balance at June 30, 2025 43,403 ( 30,042 ) 13,361 7,195 1,834 2,036 2,296 13,361 Additions 3,825 - 3,825 - - - 3,825 3,825 Amortization - ( 2,878 ) ( 2,878 ) ( 1,305 ) ( 198 ) ( 307 ) ( 1,068 ) ( 2,878 ) Translation adjustment ( 1,091 ) 904 ( 187 ) ( 159 ) ( 27 ) ( 38 ) 37 ( 187 ) Balance at June 30, 2026 $ 46,137 $ ( 32,016 ) $ 14,121 $ 5,731 $ 1,609 $ 1,691 $ 5,090 $ 14,121 Other intangibles consist mainly of computer software. Amortization is recorded on the basis of straight-line or accelerated, as appropriate, over the estimated useful lives of the assets. The weighted average remaining useful life of the intangible assets included in the table above is approximately 7 years. Intangible amortization expense for the years ended June 30, 2026 and 2025 was $ 2,878 and $ 3,959 , respectively. Estimated intangible amortization expense for each of the next five fiscal years is as follows: Fiscal Year 2027 $ 2,807 2028 2,603 2029 2,272 2030 938 2031 621 Thereafter 4,880 Total $ 14,121 E. ACCRUED LIABILITIES Accrued liabilities at June 30 were as follows: 2026 2025 Deferred Revenue $ 36,211 $ 29,664 Customer deposits 14,538 13,538 Salaries and wages 13,496 14,095 Warranty 4,210 4,174 Distributor rebates 3,052 3,083 Retirement benefits 2,134 1,664 Other 9,098 14,437 $ 82,739 $ 80,655 38 F. WARRANTY 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. Such warranty generally extends from periods ranging from 12 months to 24 months. The Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its suppliers. However, its warranty obligation is affected by product failure rates, the number of units affected by the failure and the expense involved in satisfactorily addressing the situation. The warranty reserve is established based on the Company’s best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. When evaluating the adequacy of the reserve for warranty costs, management takes into consideration the term of the warranty coverage, historical claim rates and costs of repair, knowledge of the type and volume of new products and economic trends. While the Company believes that the warranty reserve is adequate and that the judgment applied is appropriate, such amounts estimated to be due and payable in the future could differ materially from what actually transpires. The following is a listing of the activity in the warranty reserve during the years ended June 30: 2026 2025 Reserve balance, July 1 $ 5,257 $ 4,220 Current period expense and adjustments 4,570 5,499 Payments or credits to customers ( 4,704 ) ( 4,676 ) Translation adjustment 81 214 Reserve balance, June 30 $ 5,204 $ 5,257 The current portion of the warranty accrual ($ 4,210 and $ 4,174 at June 30, 2026 and 2025, respectively) is reflected in accrued liabilities, while the long-term portion ($ 994 and $ 1,083 at June 30, 2026 and 2025, respectively) is included in other long-term liabilities on the consolidated balance sheets. G. DEBT Long-term debt consisted of the following at June 30: 2026 2025 Credit Agreement Debt Revolving loans (expire June 2031) $ - $ 17,921 Term loan (due June 2031) 29,786 13,500 Other 24 25 Subtotal 29,810 31,446 Less: current maturities ( 1,500 ) ( 3,000 ) Total long-term debt $ 28,310 $ 28,446 Net carrying value of term loan at June 30: 2026 2025 Term loan 30,000 13,500 Less: unamortized debt discount ( 134 ) - Less: unamortized debt issuance costs ( 80 ) - Net carrying value of term loan 29,786 13,500 Credit Agreement Debt : Current Credit Agreement On June 30, 2026, Twin Disc, Incorporated (the “Company”) entered into a Credit Agreement (the “Credit Agreement”) among the Company, as Borrower; Kobelt Manufacturing Co. Ltd. ("Kobelt"), as Guarantor; Bank of Montreal, as a Lender, Administrative Agent, Swing Line Lender, and L/C Issuer; and JPMorgan Chase Bank, N.A. ("Chase"), as a Lender. The Credit Agreement refinanced and replaced the credit agreement dated February 14, 2025 among the Company, Kobelt, and Bank of Montreal. Capitalized terms in this Annual Report that are not otherwise defined herein are defined in the Credit Agreement. 39 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; Term CORRA Loans, which accrue interest at an Adjusted Term CORRA plus an Applicable Margin; Daily Compounded CORRA Loans, which accrue interest at a Daily Compounded CORRA plus an Applicable Margin; or Canadian Prime Rate Loans, which accrue interest at the Canadian Prime Rate plus an Applicable Margin. The Applicable 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 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 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. 40 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 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. The Company also amended and assigned to the Bank a Negative Pledge Agreement, pursuant to which it agreed not to sell, lease or otherwise encumber real estate that it owns except as permitted by the 2025 Credit Agreement and the Negative Pledge Agreement. The Company also entered into a Collateral Assignment of Rights under Purchase Agreement for its acquisition of Kobelt. Borrowings under the 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 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 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’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. 41 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: Fiscal Year 2027 $ 1,500 2028 1,500 2029 2,250 2030 2,250 2031 22,286 Thereafter 24 $ 29,810 Other lines of credit: The Company has established unsecured lines of credit, which may be withdrawn at the option of the banks. Under these arrangements, the Company has unused and available credit lines of $ 4,725 with a weighted average interest rate of 2.77 % as of June 30, 2026, and $ 4,531 with a weighted average interest rate of 3.03 % as of June 30, 2025. H. LEASE OBLIGATIONS The following table provides a summary of leases recorded on the consolidated balance sheet at June 30. Consolidated Balance Sheet Location 2026 2025 Lease Assets Right-of-use operating lease assets Right-of-use operating lease assets $ 14,730 $ 17,250 Right-of-use finance lease assets Property, plant and equipment, net 4,960 5,794 Lease Liabilities Right-of use operating lease liabilities, current Current maturities of right-of use operating lease obligations $ 3,527 $ 3,393 Right-of use operating lease liabilities, non-current Right-of use operating lease obligations 11,691 14,357 Right of use finance lease liabilities, current Accrued liabilities 1,103 1,051 Right of use finance lease liabilities, non-current Other long-term liabilities 4,424 5,232 The components of lease expense for the years ended June 30 were as follows: 2026 2025 Finance lease cost: Amortization of right-of-use assets $ 1,213 $ 980 Interest on lease liabilities 402 393 Operating lease cost 4,589 3,840 Short-term lease cost 266 379 Variable lease cost 584 531 Total lease cost 7,054 6,123 Less: Sublease income ( 83 ) ( 111 ) Net lease cost $ 6,971 $ 6,012 42 Other information related to leases was as follows: 2026 2025 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 5,083 $ 4,330 Operating cash flows from finance leases 404 400 Financing cash flows from finance leases 1,246 1,119 Right-of-use-assets obtained in exchange for lease obligations: Operating leases 1,313 2,863 Finance leases 471 1,317 Weighted average remaining lease term (years): Operating leases 6.8 7.3 Finance lease 6.5 7.1 Weighted average discount rate: Operating leases 8.6 % 8.6 % Finance leases 6.5 % 6.8 % Approximate future minimum rental commitments under non-cancellable leases as of June 30, 2026 were as follows: Operating Leases Finance Leases 2027 $ 4,589 $ 1,442 2028 3,140 1,305 2029 2,450 944 2030 1,909 652 2031 1,818 555 Thereafter 6,461 1,793 Total future lease payments 20,367 6,691 Less: Amount representing interest ( 5,149 ) ( 1,164 ) Present value of future payments $ 15,218 $ 5,527 I. SHAREHOLDERS' EQUITY The total number of shares of common stock outstanding at June 30, 2026 and 2025 was 14,423,539 and 14,150,581 , respectively. At June 30, 2026 and 2025, treasury stock consisted of 209,263 and 482,181 shares of common stock, respectively. The Company issued 272,918 and 155,597 shares of treasury stock in fiscal 2026 and 2025, respectively, to fulfill its obligations under its incentive compensation plans. The Company also recorded forfeitures of 2,195 and 0 shares of previously issued restricted stock in fiscal 2026 and 2025, respectively. The difference between the cost of treasury shares and the option price is recorded in common stock. Under an authorization given by the Board of Directors on July 27, 2012, the Company is permitted to make open market purchases of its common stock. The Company did not make any open market purchases during the two most recent fiscal years. As of June 30, 2026 and 2025, 315,000 shares remain authorized for purchase. Cash dividends per share were $ 0.16 and $ 0.16 in fiscal 2026 and 2025. The Company is authorized to issue 200,000 shares of preferred stock, none of which have been issued. The Company has designated 150,000 shares of the preferred stock as Series A Junior Preferred Stock. 43 The components of accumulated other comprehensive income (loss) included in equity as of June 30, 2026 and 2025 are as follows: 2026 2025 Translation adjustments $ 9,041 $ 15,036 Benefit plan adjustments, net of income taxes of ($ 298 ) and $ 154 respectively ( 8,753 ) ( 11,461 ) Net gain (loss) on cash flow hedge derivatives, net of income taxes of $ 0 and $ 210 , respectively - 284 Net gain (loss) on net investment hedge derivatives, net of income taxes of $ 0 and ($ 103 ), respectively - ( 129 ) Accumulated other comprehensive income (loss) $ 288 $ 3,730 A reconciliation for the changes in accumulated other comprehensive income (loss), net of tax, by component for the years ended June 30, 2026 and June 30, 2025 is as follows: Translation Benefit Plan Cash Flow Net Investment Adjustment Adjustment Hedges Hedges Balance at June 30, 2024 $ ( 849 ) $ ( 8,062 ) $ 504 $ 1,502 Other comprehensive income (loss) before reclassifications 15,885 - - - Return on plan assets - ( 1,808 ) - - Amounts reclassified from accumulated other comprehensive income (loss) - ( 1,591 ) ( 220 ) ( 1,631 ) Net current period other comprehensive income (loss) 15,885 ( 3,399 ) ( 220 ) ( 1,631 ) Balance at June 30, 2025 $ 15,036 $ ( 11,461 ) $ 284 $ ( 129 ) Translation Benefit Plan Cash Flow Net Investment Adjustment Adjustment Hedges Hedges Balance at June 30, 2025 $ 15,036 $ ( 11,461 ) $ 284 $ ( 129 ) Other comprehensive income (loss) before reclassifications ( 5,995 ) - - - Amounts reclassified from accumulated other comprehensive income (loss) - 2,708 ( 284 ) 129 Net current period other comprehensive income (loss) ( 5,995 ) 2,708 ( 284 ) 129 Balance at June 30, 2026 $ 9,041 $ ( 8,753 ) $ - $ - Reconciliation for the changes in benefit plan adjustments, net of tax for the year ended June 30, 2026 is as follows: Amount Reclassified Changes in benefit plan items Actuarial income (loss) $ 3,170 Transition asset and prior service benefit 33 Translation ( 43 ) Total amortization 3,160 Income taxes ( 452 ) Total changes, net of tax $ 2,708 44 Reconciliation for the changes in benefit plan adjustments, net of tax for the year ended June 30, 2025 is as follows: Amount Reclassified Changes in benefit plan items Actuarial income (loss) $ ( 1,741 ) Transition asset and prior service benefit 14 Return on plan assets ( 1,808 ) Translation 123 Total amortization ( 3,412 ) Income taxes 13 Total changes, net of tax $ ( 3,399 ) J. BUSINESS SEGMENTS AND FOREIGN OPERATIONS The Company and its subsidiaries are engaged in the manufacture and sale of marine and heavy duty off-highway power transmission equipment. Principal products include marine transmissions, azimuth drives, surface drives, propellers and boat management systems, as well as power-shift transmissions, hydraulic torque converters, power take-offs, industrial clutches and controls systems. The Company sells to both domestic and foreign customers in a variety of market areas, principally pleasure craft, commercial, and military marine markets, energy and natural resources, government, and industrial markets. Net sales by product group for the years ended June 30 is summarized as follows: June 30, 2026 June 30, 2025 Industrial $ 46,067 $ 41,502 Land-based transmissions 89,698 80,192 Marine and propulsion systems 227,675 201,101 Other 17,830 17,943 Total $ 381,270 $ 340,738 Industrial products include clutches, power take-offs and pump drives sold to the agriculture, recycling, construction and oil and gas markets. The land-based transmission products include applications for oil field and natural gas, military, and airport rescue and firefighting. The marine and propulsion systems include marine transmission, azimuth drives, controls, surface drives, and propellers for the global commercial marine, pleasure craft, and patrol boat markets. Other 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 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 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 (loss), operating income (loss), and net earnings (loss). 45 The following table presents the selected financial information with respect to the Company’s reportable segments for the year ended June 30, 2026: Manufacturing Distribution Corporate Elimination and adjustments Consolidated Net sales: Net sales $ 340,456 $ 115,720 $ - $ ( 74,906 ) $ 381,270 Intra-segment sales ( 8,559 ) ( 13,941 ) - 22,500 - Inter-segment sales ( 47,736 ) ( 4,670 ) - 52,406 - Total consolidated net sales 284,161 97,109 - - 381,270 Cost of goods sold: Cost of goods sold 262,298 91,736 - ( 75,324 ) 278,710 Intra-segment cost of goods sold ( 8,559 ) ( 13,941 ) - 22,500 - Inter-segment cost of goods sold ( 47,736 ) ( 4,670 ) - 52,406 - Total consolidated cost of goods sold 206,003 73,125 - ( 418 ) 278,710 Gross profit 78,158 23,984 - ( 418 ) 102,560 Marketing, engineering and administrative expenses 43,729 15,373 25,353 - 84,455 Restructuring expense 366 - - - 366 Other operating income 152 - ( 373 ) - ( 221 ) Operating income (loss) 33,911 8,611 ( 24,980 ) ( 418 ) 17,960 Other income (expense): Interest income 1,567 542 1,880 ( 3,956 ) 33 Interest expense ( 6,958 ) ( 9 ) ( 67 ) 3,956 ( 3,078 ) Other income (expense) ( 13,214 ) ( 6,713 ) 18,711 ( 103 ) ( 1,319 ) Total consolidated other income (expense) ( 18,605 ) ( 6,180 ) 20,524 ( 103 ) ( 4,364 ) Pretax earnings (loss) 15,306 2,431 ( 4,456 ) ( 521 ) 13,596 Income tax benefit (expense) ( 14,085 ) ( 2,132 ) 30,229 ( 38 ) 13,974 Net income (loss) 1,221 299 25,773 ( 559 ) 27,570 Minority interest - 493 - - 493 Net income (loss) attributable to Twin Disc, Incorporated $ 1,221 $ ( 194 ) $ 25,773 $ ( 559 ) $ 27,077 Total consolidated assets $ 521,842 $ 78,369 $ ( 142,599 ) $ ( 56,367 ) $ 401,245 Depreciation and amortization $ 11,925 $ 396 $ 1,425 $ - $ 13,746 Expenditures for segment assets 10,452 1,003 2,258 - 13,713 46 The following table presents the selected financial information with respect to the Company’s reportable segments for the year ended June 30, 2025: Manufacturing Distribution Corporate Elimination and adjustments As Adjusted Consolidated Net sales: Net sales $ 295,550 $ 130,956 $ - $ ( 85,768 ) $ 340,738 Intra-segment sales ( 7,213 ) ( 21,043 ) - 28,256 - Inter-segment sales ( 52,691 ) ( 4,821 ) - 57,512 - Total consolidated net sales 235,646 105,092 - - 340,738 Cost of goods sold: Cost of goods sold 228,610 104,165 - ( 85,960 ) 246,815 Intra-segment cost of goods sold ( 7,213 ) ( 21,043 ) - 28,256 - Inter-segment cost of goods sold ( 52,691 ) ( 4,821 ) - 57,512 - Total consolidated cost of goods sold 168,706 78,301 - ( 192 ) 246,815 Gross profit 66,940 26,791 - ( 192 ) 93,923 Marketing, engineering and administrative expenses 41,388 14,796 26,247 - 82,431 Restructuring expenses 252 93 63 - 408 Operating income (loss) 25,300 11,902 ( 26,310 ) ( 192 ) 11,084 Other income (expense): Interest income 1,045 550 1,801 ( 3,329 ) 67 Interest expense ( 5,900 ) ( 7 ) ( 68 ) 3,329 ( 2,646 ) Other income (expense) ( 14,725 ) ( 6,537 ) 15,818 ( 95 ) ( 5,539 ) Total consolidated other income (expense) ( 19,580 ) ( 5,994 ) 17,551 ( 95 ) ( 8,118 ) Pretax earnings (loss) 5,720 5,908 ( 8,759 ) ( 287 ) 2,966 Income tax benefit (expense) ( 1,476 ) ( 2,151 ) 228 31 ( 3,368 ) Net income (loss) 4,244 3,757 ( 8,531 ) ( 256 ) ( 402 ) Minority interest - ( 295 ) - - ( 295 ) Net income (loss) attributable to Twin Disc, Incorporated $ 4,244 $ 3,462 $ ( 8,531 ) $ ( 256 ) $ ( 697 ) Total consolidated assets $ 519,247 $ 66,087 $ ( 186,291 ) $ ( 11,347 ) $ 387,696 Depreciation and amortization $ 13,281 $ 353 $ 1,265 $ - $ 14,899 Expenditures for segment assets 11,590 1,902 1,665 - 15,157 Corporate expenses pertain to certain costs that are not allocated to the reportable segments, primarily consisting of corporate overhead costs, including administrative functions and global functional expenses. Geographic information about the Company for the years ended June 30 is summarized as follows: 2026 2025 Net sales United States $ 106,207 $ 87,549 Netherlands 61,888 52,735 Finland 32,695 24,618 China 29,100 28,666 Australia 20,356 22,358 Italy 13,111 10,420 Other countries 117,913 114,392 Total $ 381,270 $ 340,738 Net sales by geographic region are based on product shipment destination. 47 Long-lived assets primarily pertain to property, plant, and equipment and exclude goodwill, other intangibles, and deferred income taxes. They are summarized as follows: Long-lived assets 2026 2025 United States $ 36,324 $ 39,949 Netherlands 10,400 11,426 Finland 16,561 15,660 Belgium 7,563 8,184 Canada 4,870 5,952 Other Countries 9,326 8,411 Total $ 85,044 $ 89,582 No one customer accounted for 10% of consolidated net sales in fiscal year 2026 and 2025. Disaggregated revenue: The following tables present details deemed most relevant to the users of the financial statements for the years ended June 30, 2026 and June 30, 2025. Net sales by product group for the year ended June 30, 2026 is summarized as follows: Elimination of Manufacturing Distribution Intercompany Sales Total Industrial $ 45,622 $ 4,265 $ ( 3,820 ) $ 46,067 Land-based transmissions 84,879 19,973 ( 15,154 ) 89,698 Marine and propulsion systems 209,955 71,702 ( 53,982 ) 227,675 Other - 19,780 ( 1,950 ) 17,830 Total $ 340,456 $ 115,720 $ ( 74,906 ) $ 381,270 Net sales by product group for the year ended June 30, 2025 is summarized as follows: Elimination of Manufacturing Distribution Intercompany Sales Total Industrial $ 40,717 $ 5,176 $ ( 4,391 ) $ 41,502 Land-based transmissions 76,171 16,621 ( 12,600 ) 80,192 Marine and propulsion systems 178,553 90,196 ( 67,648 ) 201,101 Other 109 18,963 ( 1,129 ) 17,943 Total $ 295,550 $ 130,956 $ ( 85,768 ) $ 340,738 K. STOCK-BASED COMPENSATION In the first quarter of fiscal 2025, the Company adopted the Twin Disc, Incorporated Amended and Restated 2021 Omnibus Incentive Plan (the “Omnibus Plan”), which was subsequently approved by the Company’s shareholders. The Omnibus Plan amended and restated the Twin Disc, Incorporated 2021 Long-Term Incentive Plan (the “2021 LTI Plan”), and effectively replaced the Twin Disc, Incorporated 2020 Stock Incentive Plan for Non-Employee Directors (the “2020 Directors' Plan”). Benefits under the Omnibus Plan may be granted, awarded or paid in any one or a combination of stock options, stock appreciation rights, restricted stock awards, restricted stock units, cash-settled restricted stock units, performance stock awards, performance stock unit awards, performance unit awards, and dividend equivalent awards. The Omnibus Plan is designed to benefit key employees and consultants of the Company and its subsidiaries, as well as non-employee directors of the Company. 48 There is reserved for issuance under the Plan an aggregate of 1,636,550 shares of the Company’s common stock, which consists of the previously-approved 715,000 shares of common stock reserved for issuance under the 2021 LTI Plan prior to its amendment and restatement to become the Omnibus Plan; 521,550 shares of common stock that remained available for issuance under the 2020 Directors' Plan; and 400,000 newly authorized shares of common stock. Shares issued under the Omnibus Plan may be authorized and unissued shares or shares reacquired by the Company in the open market or a combination of both. The aggregate amount is subject to proportionate adjustments for stock dividends, stock splits and similar changes. 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): 2026 2025 Omnibus Plan 186,786 566,168 Performance Stock Awards ( “ PSA ” ) 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 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 . Based upon actual results to date, the Company is currently accruing compensation expense for these PSAs. There were 280,342 and 233,154 unvested PSAs outstanding at June 30, 2026 and 2025, respectively. The fair value of the PSAs (on the date of grant) is expensed over the performance period for the shares that are expected to ultimately vest. 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, 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 . At June 30, 2026, the Company had $ 1,543 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 $ 2,762 . Performance Stock Unit Awards ( “ PSUA ” ) The PSUAs entitle an individual to shares of common stock of the Company or cash in lieu of shares of Company common stock if specific terms and conditions or restrictions are met through a specified date. 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 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. 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 . 49 Restricted Stock Awards ( “ RS ” ) The Company has unvested RS outstanding that will vest if certain service conditions are fulfilled. The fair value of the RS grants is recorded as compensation over the vesting period, which is generally 1 to 3 years. During fiscal 2026 and 2025, the Company granted 148,750 and 48,733 service based restricted shares, respectively, to employees and non-employee directors in each year. A total of 2,195 and 0 shares of restricted stock were forfeited during fiscal 2026 and 2025, respectively. There were 221,727 and 252,888 unvested shares outstanding at June 30, 2026 and 2025, respectively. Compensation expense of $ 1,196 and $ 1,266 was recognized during the year ended June 30, 2026 and 2025, respectively, related to these service-based awards. The tax benefit from compensation expense for the year ended June 30, 2026 and 2025, related to these service-based awards, was $ 280 and $ 297 , respectively. The total fair value of restricted stock grants vested in fiscal 2026 and 2025 was $ 1,896 and $ 464 , respectively. As of June 30, 2026, the Company had $ 910 of unrecognized compensation expense related to restricted stock which will be recognized over the next three years. Restricted Stock Unit Awards ( “ RSU ” ) The RSUs entitle an individual to shares of common stock of the Company or cash in lieu of shares of Company common stock if specific terms and conditions or restrictions are met through a specified date, generally three years from the date of grant or when performance conditions have been met. In fiscal 2026 and 2025, the Company granted 0 and 77,395 RSUs, respectively, to various employees of the Company, including executive officers. A total of 0 and 1,601 shares of restricted stock unit awards were forfeited during fiscal 2026 and 2025, respectively. There were 79,174 and 82,883 unvested RSUs outstanding at June 30, 2026 and June 30, 2025, respectively. Compensation expense of $ 429 and $ 866 was recognized during the year ended June 30, 2026 and 2025, respectively. The tax benefit from compensation expense for the year ended June 30, 2026 and 2025, related to these service-based awards, was $ 101 and $ 203 , respectively. The total fair value of restricted stock grants vested in fiscal 2026 and 2025 was $ 33 and $ 1,779 , respectively. The weighted average grant date fair value of the unvested awards at June 30, 2026 was $ 12.84 . As of June 30, 2026, the Company had $ 350 of unrecognized compensation expense related to RSUs which will be recognized over the next year. L. ENGINEERING AND DEVELOPMENT COSTS Engineering and development costs include research and development expenses for new products, development and major improvements to existing products, and other costs for ongoing efforts to refine existing products. Research and development costs charged to operations totaled $ 2,856 and $ 2,699 in fiscal 2026 and 2025, respectively. Total engineering and development costs were $ 13,441 and $ 12,236 in fiscal 2026 and 2025, respectively, and are primarily recorded within marketing, engineering and administrative expenses on the consolidated statements of operations and comprehensive income. M. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS The Company has non-contributory, qualified defined benefit pension plans covering substantially all domestic employees hired prior to October 1, 2003, and certain foreign employees. Domestic plan benefits are based on years of service, and, for salaried employees, on average compensation for benefits earned prior to January 1, 1997, and on a cash balance plan for benefits earned from January 1, 1997 through July 31, 2009, at which time the Company froze future accruals under domestic defined benefit pension plans. In addition, the Company has unfunded, non-qualified retirement plans for certain management employees and Directors. In the case of management employees, benefits are based on an annual credit to a bookkeeping account, intended to restore the benefits that would have been earned under the qualified plans, but for the earnings limitations under the Internal Revenue Code. In the case of Directors, benefits are based on years of service on the Board. All benefits vest upon retirement from the Company. In addition to providing pension benefits, the Company provides other postretirement benefits, including healthcare and life insurance benefits for certain domestic retirees. All employees retiring after December 31, 1992, and electing to continue healthcare coverage through the Company's group plan, are required to pay 100 % of the premium cost. 50 The measurement date for the Company’s pension and postretirement benefit plans in fiscal 2026 and 2025 was June 30. Obligations and Funded Status The following table sets forth the Company's defined benefit pension plans’ and other postretirement benefit plans’ funded status and the amounts recognized in the Company's balance sheets and statement of operations and comprehensive income as of June 30: Other Pension Postretirement Benefits Benefits 2026 2025 2026 2025 Change in benefit obligation: Benefit obligation, beginning of year $ 66,424 $ 68,110 $ 2,870 $ 3,169 Service cost 352 352 5 7 Interest cost 3,132 3,404 139 165 Prior service cost (benefit) 21 21 - - Actuarial loss (gain) 82 1,753 ( 9 ) 33 Contributions by plan participants 139 137 159 155 Benefits paid ( 7,977 ) ( 7,353 ) ( 660 ) ( 659 ) Benefit obligation, end of year $ 62,173 $ 66,424 $ 2,504 $ 2,870 Change in plan assets: Fair value of assets, beginning of year $ 56,860 $ 62,660 $ - $ - Actual return on plan assets 3,737 2,616 - - Return on plan assets - (1,808 ) - Employer contribution 656 608 501 504 Contributions by plan participants 139 137 159 155 Benefits paid ( 7,977 ) ( 7,353 ) ( 660 ) ( 659 ) Fair value of assets, end of year $ 53,415 $ 56,860 $ - $ - Funded status $ ( 8,758 ) $ ( 9,564 ) $ ( 2,504 ) $ ( 2,870 ) Amounts recognized in the balance sheet consist of: Other assets - noncurrent $ 40 $ 15 $ - $ - Accrued liabilities - current ( 282 ) ( 380 ) ( 591 ) ( 237 ) Accrued retirement benefits - noncurrent ( 8,516 ) ( 9,199 ) ( 1,913 ) ( 2,633 ) Net amount recognized $ ( 8,758 ) $ ( 9,564 ) $ ( 2,504 ) $ ( 2,870 ) Amounts recognized in accumulated other comprehensive income (loss) consist of (net of tax): Net transition obligation $ - $ 26 $ - $ - Prior service benefit ( 180 ) ( 185 ) - - Actuarial net loss (gain) 9,212 11,937 ( 279 ) ( 317 ) Net amount recognized $ 9,032 $ 11,778 $ ( 279 ) $ ( 317 ) 51 The amounts in accumulated other comprehensive income (loss) that are expected to be recognized as components of net periodic benefit cost during the next fiscal year for the qualified defined benefit and other postretirement benefit plans are as follows: Other Pension Postretirement Benefits Benefits Net transition obligation $ - $ - Prior service cost (benefit) 36 - Actuarial net loss (gain) 226 ( 49 ) Net amount to be recognized $ 262 $ ( 49 ) The accumulated benefit obligation for all defined benefit pension plans was approximately $ 62,173 and $ 66,424 at June 30, 2026 and 2025, respectively. Information for pension plans with an accumulated benefit obligation in excess of plan assets : June 30 2026 2025 Projected and accumulated benefit obligation $ 58,323 $ 62,355 Fair value of plan assets 49,525 52,776 Components of Net Periodic Benefit Cost (Income): Pension Benefits 2026 2025 Service cost $ 356 $ 347 Interest cost 3,134 3,400 Prior service cost 21 21 Expected return on plan assets ( 3,043 ) ( 3,411 ) Amortization of transition obligation 33 42 Amortization of prior service cost - 26 Amortization of actuarial net loss 2,590 984 Net periodic benefit cost (income) $ 3,091 $ 1,409 Other Postretirement Benefits 2026 2025 Service cost $ 5 $ 7 Interest cost 139 165 Amortization of prior service cost - - Amortization of actuarial net loss (gain) ( 53 ) ( 262 ) Net periodic benefit cost (income) $ 91 $ ( 90 ) 52 Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (Loss) for Fiscal 2026 (Pre-tax): Other Postretirement Pension Benefits Net loss (gain) $ ( 624 ) $ ( 10 ) Amortization of transition asset ( 32 ) - Amortization of prior service cost (benefit) ( 1 ) - Amortization of net loss (gain) ( 2,590 ) 53 Translation ( 110 ) - Total recognized in other comprehensive income (loss) ( 3,357 ) 43 Net periodic benefit cost (income) 3,091 91 Total recognized in net periodic benefit cost (income) and other comprehensive income (loss) $ ( 266 ) $ 134 Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Loss for Fiscal 2025 (Pre-tax): Other Postretirement Pension Benefits Net loss (income) $ 2,487 $ 34 Amortization of transition asset ( 43 ) - Amortization of prior service cost (benefit) ( 27 ) - Amortization of net loss (gain) ( 985 ) 262 Translation ( 154 ) - Total recognized in other comprehensive income (loss) 1,278 296 Net periodic benefit cost (income) 1,409 ( 90 ) Total recognized in net periodic benefit cost (income) and other comprehensive income (loss) $ 2,687 $ 206 Additional Information Assumptions Other Pension Benefits Postretirement Benefits Weighted average assumptions used to determine benefit obligations at June 30 2026 2025 2026 2025 Discount rate 4.90 % 5.00 % 5.02 % 5.28 % Expected return on plan assets 5.78 % 5.74 % Other Pension Benefits Postretirement Benefits Weighted average assumptions used to determine net periodic benefit costs for years ended June 30 2026 2025 2026 2025 Discount rate 4.79 % 4.97 % 5.28 % 5.66 % Expected return on plan assets 5.56 % 5.55 % The assumed weighted-average healthcare cost trend rate was 6.2 % in fiscal 2026, grading down to 3.7 % in fiscal 2073. 53 Plan Assets The Company’s Benefits Committee (“Committee”), a non-board management committee, oversees investment matters related to the Company’s funded benefit plans. The Committee works with external actuaries and investment consultants on an ongoing basis to establish and monitor investment strategies and target asset allocations. The overall objective of the Committee’s investment strategy is to earn a rate of return over time to satisfy the benefit obligations of the pension plans and to maintain sufficient liquidity to pay benefits and address other cash requirements of the pension plans. The Committee has established an Investment Policy Statement which provides written documentation of the Company’s expectations regarding its investment programs for the pension plans, establishes objectives and guidelines for the investment of the plan assets consistent with the Company’s financial and benefit-related goals, and outlines criteria and procedures for the ongoing evaluation of the investment program. The Company employs a total return on investment approach whereby a mix of investments among several asset classes are used to maximize long-term return of plan assets while avoiding excessive risk. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews, and annual liability measurements. The Company’s pension plan weighted-average asset allocations at June 30, 2026 and 2025 by asset category were as follows: Target June 30 Asset Category Allocation 2026 2025 Equity securities 15 % 16 % 15 % Debt securities 75 % 76 % 78 % Real estate 10 % 8 % 7 % 100 % 100 % 100 % Due to market conditions and other factors, actual asset allocation may vary from the target allocation outlined above. The U.S. pension plans held 34,211 shares of Company stock with a fair market value of $ 794 ( 1.7 % of total plan assets) at June 30, 2026 and 98,211 shares with a fair market value of $ 867 ( 1.7 % of total plan assets) at June 30, 2025. The U.S. plans have a long-term return assumption of 6.25 %. This rate was derived based upon historical experience and forward-looking return expectations for major asset class categories. Fair value is defined as the price that would be received on the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The inputs used to measure fair value are classified into the following hierarchy: Level I Unadjusted quoted prices in active markets for identical instruments Level II Unadjusted quoted prices in active markets for similar instruments, or Unadjusted quoted prices for identical or similar instruments in markets that are not active, or Other inputs that are observable in the market or can be corroborated by observable market data Level III Use of one or more significant unobservable inputs 54 The following table presents plan assets using the fair value hierarchy as of June 30, 2026: Total Level I Level II Level III Cash and cash equivalents $ 855 $ 855 $ - $ - Equity securities: Company common stock (a) 794 794 - - Common stock (a) 2,647 2,647 - - Mutual funds (b) 4,090 4,090 - - Annuity contracts (c) 6,423 - - 6,423 Total $ 14,809 $ 8,386 $ - $ 6,423 Investments Measured at Net Asset Value (d) 38,606 Total $ 53,415 The following table presents plan assets using the fair value hierarchy as of June 30, 2025: Total Level I Level II Level III Cash and cash equivalents $ 924 $ 924 $ - $ - Equity securities: Company common stock (a) 867 867 - - Common stock (a) 2,537 2,537 - - Mutual funds (b) 4,434 4,434 - - Annuity contracts (c) 7,080 - - 7,080 Total $ 15,842 $ 8,762 $ - $ 7,080 Investments Measured at Net Asset Value (d) 41,018 Total $ 56,860 (a) Common stock is valued at the closing price reported on the active market on which the individual securities are traded. These securities include U.S. equity securities invested in companies that are traded on exchanges inside the U.S. and international equity securities invested in companies that are traded on exchanges outside the U.S. (b) Mutual funds are valued at the daily closing price as reported by the fund. Mutual funds held by the Company’s funded benefit plans are open-end mutual funds that are registered with the Securities Exchange Commission. These funds are required to publish their daily net asset value (“NAV”) and to transact at that price. The mutual funds held by the Company’s funded benefit plans are deemed to be actively traded. (c) Annuity contracts represent contractual agreements in which payments are made to an insurance company, which agrees to pay out an income or lump sum amount at a later date. Annuity contracts are valued at fair value using the net present value of future cash flows. (d) In accordance with ASC 820 - 10, certain investments that were measured at net asset value per share (or its equivalent) have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the fair value of plan assets at the end of the year. The following table sets forth additional disclosures for the fair value measurement of the fair value of pension plan assets that calculate fair value based on NAV per share practical expedient as of June 30, 2026 and June 30, 2025: 2026 2025 Fixed income funds $ 35,118 $ 37,687 Real estate 3,488 3,331 Total $ 38,606 $ 41,018 55 The following tables present a reconciliation of the fair value measurements using significant unobservable inputs (Level III) as of June 30, 2026 and 2025: 2026 2025 Beginning balance $ 7,080 $ 6,264 Actual return on plan assets: Relating to assets still held at reporting date 480 1,362 Purchases, sales and settlements, net ( 1,137 ) ( 546 ) Ending balance $ 6,423 $ 7,080 Cash Flows Contributions The Company expects to contribute $ 1,979 to its defined benefit pension plans in fiscal 2027. The Company expects to contribute $ 591 to its other postretirement benefit plans in fiscal 2027. Estimated Future Benefit Payments The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid: Other Pension Postretirement Benefits Benefits 2027 $ 6,624 $ 591 2028 6,544 449 2029 6,352 305 2030 2,867 273 2031 5,915 239 Years 2032 - 2036 27,160 647 The Company does not expect to make any Part D reimbursements for the periods presented. The Company sponsors defined contribution plans covering substantially all domestic employees and certain foreign employees. These plans provide for employer contributions based primarily on employee participation. The total expense under the plans was $ 2,683 and $ 2,447 in fiscal 2026 and 2025, respectively. These amounts are recorded in cost of goods sold and marketing, engineering and administration costs. N. INCOME TAXES United States and foreign income (loss) before income taxes and minority interest as of June 30 were as follows: As Adjusted 2026 2025 United States $ ( 5,948 ) $ ( 11,132 ) Foreign 19,544 14,098 $ 13,596 $ 2,966 56 The provision (benefit) for income taxes is comprised of the following: As Adjusted 2026 2025 Currently payable: Federal $ ( 331 ) $ ( 32 ) State 438 62 Foreign 3,965 4,919 4,072 4,949 Deferred: Federal $ ( 15,820 ) $ - State ( 2,760 ) ( 289 ) Foreign 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. As Adjusted 2026 2025 Deferred tax assets: Retirement plans and employee benefits $ 4,828 $ 5,065 Foreign tax credit carryforwards 1,502 9,639 Federal tax credits, net of ASU 2013-11 815 1,645 State net operating loss and other state credit carryforwards, net of ASU 2013-11 1,407 2,651 Reserves 1,100 1,053 Inventories 151 1,138 Research & experimental expenditure capitalization 2,068 1,118 Foreign net operating loss carryforwards 265 450 Accrued liabilities 8,943 620 Right of use assets - operating leases 3,875 4,629 Disallowed interest - 1,751 Capital loss carryforward - 108 Translation adjustment 1,094 1,417 Other assets 405 298 26,453 31,582 Valuation allowance ( 58 ) ( 16,502 ) $ 26,395 $ 15,080 Deferred tax liabilities: Inventories $ 1,601 $ 7,521 Property, plant and equipment 2,509 2,719 Intangible assets 1,152 1,058 Long term operating lease obligations 4,169 4,917 Hedging - 11 Other liabilities 351 362 9,782 16,588 Total net deferred tax liabilities $ 16,613 $ ( 1,508 ) 57 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 available tax planning strategies. 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). 58 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 and other comprehensive income (loss) for the year-end June 30, 2026: 2026 Amount Percentage United States Statutory Tax Rate 2,855 21.0 % State and Local Income Taxes, Net of Federal Income Tax Effect (1) ( 2,416 ) ( 17.8 %) Foreign Tax Effects Belgium Other 375 2.8 % Italy Other 202 1.5 % Japan Other 215 1.6 % Netherlands Return to Provision ( 654 ) ( 4.8 %) Innovation box regime ( 583 ) ( 4.3 %) Other 126 0.9 % Singapore Withholding tax 427 3.1 % Other ( 65 ) ( 0.5 %) Other foreign jurisdictions 350 2.6 % Effect of Changes in Tax Laws or Rates Enacted in the Current Period - 0.0 % Effect of Cross-Border Tax Laws Subpart F 1,863 13.7 % Global Intangible Low-Taxed Income 5,471 40.2 % Foreign-derived Intangible Income ( 4,726 ) ( 34.8 %) Other 43 0.3 % Tax Credits Foreign tax credit ( 3,888 ) ( 28.6 %) Other ( 129 ) ( 1.0 %) Changes in Valuation Allowances ( 13,854 ) ( 101.9 %) Nontaxable or Nondeductible items Other 249 1.8 % Changes in Unrecognized Tax Benefits - 0.0 % Other Adjustments Deferred True-ups 131 1.0 % Other 34 0.2 % Effective Tax Rate $ ( 13,974 ) ( 102.8 %) ( 1 ) 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. 59 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: As Adjusted 2025 U.S. federal income tax at 21 % $ 623 Increases (reductions) in tax resulting from: U.S. Foreign inclusion items 902 Foreign rate differences 361 Foreign permanent items 336 Foreign prior period adjustments ( 79 ) Foreign other 5 State taxes ( 242 ) Change in prior year estimate 61 Research & development tax credits ( 13 ) Stock compensation 155 Deferred tax basis adjustments 1,990 Executive compensation 372 Valuation allowance ( 1,173 ) Other, net 70 $ 3,368 The Company has not provided additional U.S. income taxes on cumulative earnings of its consolidated foreign subsidiaries that are considered to be reinvested indefinitely. The Company reaffirms its position that the earnings of those subsidiaries remain permanently invested and has no plans to repatriate funds from any permanently reinvested subsidiaries to the U.S. for the foreseeable future. Such earnings could become taxable upon the sale or liquidation of these foreign subsidiaries or upon dividend repatriation. The Company’s intent is for such earnings to be reinvested by the subsidiaries or to be repatriated only when it would be tax effective through the utilization of foreign tax credits. Annually, the company files income tax returns in various taxing jurisdictions inside and outside the United States. In general, the tax years that remain subject to examination are 2021 through 2026 for our major operations in Belgium, Japan, Netherlands, Singapore and Australia. The tax years open to examination in the U.S. 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. The Company’s policy is to accrue interest and penalties related to unrecognized tax benefits in income tax expense. Below is a reconciliation of beginning and ending amount of unrecognized tax benefits as of June 30: 2026 2025 Unrecognized tax benefits, beginning of year $ 644 $ 766 Additions based on tax positions related to the prior year 44 95 Additions based on tax positions related to the current year 83 38 Reductions based on tax positions related to the prior year - ( 28 ) Subtractions due to statues closing ( 14 ) ( 227 ) Unrecognized tax benefits, end of year $ 757 $ 644 60 Substantially all of the Company’s unrecognized tax benefits as of June 30, 2026, if recognized, would affect the effective tax rate. 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. The Company made tax payments and received tax refunds during the year ended June 30, 2026 as follows: 2026 2025 U.S. Federal $ 165 $ - State: State - Other 149 - Foreign: Belgium 2,879 - Italy 433 - Japan 672 - Netherlands 842 - Singapore 569 - Other 127 - Total cash paid for income taxes (net of refunds) $ 5,836 $ - Total cash paid for income taxes (prior to ASU 2023-09) $ - $ 3,844 O. CONTINGENCIES The Company is involved in litigation of which the ultimate outcome and liability to the Company, if any, are not presently determinable. 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. Tariffs: 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. 61 P. RESTRUCTURING OF OPERATIONS Restructuring expenses The Company has implemented various restructuring programs in response to unfavorable macroeconomic trends in certain of the Company’s markets since the fourth quarter of fiscal 2015. These programs primarily involved the reduction of workforce in several of the Company’s manufacturing locations, under a combination of voluntary and involuntary programs. During the fourth quarter of fiscal 2021, the Company undertook a series of steps to accelerate its focus on its core competencies, improve its fixed cost structure, and monetize some of its under-utilized assets. The Company continued its restructuring plans with regard to its Belgian operations during fiscal year 2026 and 2025. A voluntary program was implemented to reduce the workforce. The action was taken to allow the Belgian operation to focus resources on core manufacturing processes, while allowing for savings on the outsourcing of non-core processes. Total restructuring charges relating to streamlining operations totaled $ 227 and $ 369 in fiscal year June 30, 2026 and June 30, 2025, respectively. The following is a roll-forward of restructuring activity: Accrued restructuring liability, June 30, 2025 $ 39 Additions 366 Payments, adjustments and write-offs during the year ( 227 ) Accrued restructuring liability, June 30, 2026 $ 177 Q. EARNINGS PER SHARE The Company calculates basic earnings per share based upon the weighted average number of common shares outstanding during the period, while the calculation of diluted earnings per share includes the dilutive effect of potential common shares outstanding during the period. The calculation of diluted earnings per share excludes all potential common shares if their inclusion would have an anti-dilutive effect. 62 The components of basic and diluted earnings per share were as follows: As Adjusted 2026 2025 Basic: Net income (loss) $ 27,570 $ ( 402 ) Less: Net income (loss) attributable to noncontrolling interest, net of tax 493 295 Net income (loss) attributable to Twin Disc, Incorporated 27,077 ( 697 ) Weighted average shares outstanding - basic 14,119 13,856 Basic earnings (loss) per share: Basic earnings (loss) per share attributable to Twin Disc, Incorporated common shareholders $ 1.92 $ ( 0.05 ) Diluted: Net income (loss) $ 27,570 $ ( 402 ) Less: Net income (loss) attributable to noncontrolling interest, net of tax 493 295 Net income (loss) attributable to Twin Disc, Incorporated 27,077 ( 697 ) Weighted average shares outstanding - basic 14,119 13,856 Effect of dilutive stock awards 467 - Weighted average shares outstanding - diluted 14,586 13,856 Diluted earnings (loss) per share: Diluted earnings (loss) per share attributable to Twin Disc, Incorporated common shareholders $ 1.86 $ ( 0.05 ) The following potential common shares were excluded from diluted EPS for the year-ended June 30, 2025 as the Company reported a net loss: 404.3 related to the Company’s unvested PSAs, 10.5 related to the Company’s unvested PSAUs, 121.0 related to the Company’s unvested RS awards, and 55.0 related to the Company’s unvested RSUs. R. DERIVATIVE FINANCIAL INSTRUMENTS The Company reports all derivative instruments on its consolidated balance sheets at fair value and establishes criteria for designation and effectiveness of transactions entered into for hedging purposes. As a global organization, the Company faces exposure to market risks, such as fluctuations in foreign currency exchange rates, interest rates and commodity prices. To manage the volatility relating to these exposures, the Company enters into various derivative instruments from time to time under its risk management policies. The Company designates derivative instruments as hedges on a transaction basis to support hedge accounting. The changes in fair value of these hedging instruments offset in part or in whole corresponding changes in the fair value or cash flows of the underlying exposures being hedged. The Company assesses the initial and ongoing effectiveness of its hedging relationships in accordance with its policy. The Company does not purchase, hold or sell derivative financial instruments for trading purposes. The Company’s practice is to terminate derivative transactions if the underlying asset or liability matures or is sold or terminated, or if it determines the underlying forecasted transaction is no longer probable of occurring. 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. 63 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 (loss). 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 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 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 The Company primarily enters into forward exchange contracts to reduce the earnings and cash flow impact of non-functional currency denominated receivables and payables. These contracts are highly effective in hedging the cash flows attributable to changes in currency exchange rates. Gains and losses resulting from these contracts offset the foreign exchange gains or losses on the underlying assets and liabilities being hedged. 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 (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. At June 30, 2026 and 2025, there were no significant forward exchange contracts outstanding. Other Derivative Instruments The Company does not utilize commodity price hedges to manage commodity price risk exposure. Likewise, the Company does not hedge the translation exposure represented by the net assets of its foreign subsidiaries. Fair Value of Derivative Instruments The Company’s interest rate swaps and foreign currency forward contracts are recorded at fair value on the consolidated balance sheets using a discounted cash flow analysis that incorporates observable market inputs. These market inputs include foreign currency spot and forward rates, and various interest rate curves, and are obtained from pricing data quoted by various banks, third -party sources and foreign currency dealers involving identical or comparable instruments (Level 2 ). Counterparties to these foreign currency forward contracts have at least an investment grade rating. Credit ratings on some of the Company’s counterparties may change during the term of the financial instruments. The Company closely monitors its counterparties’ credit ratings and, if necessary, will make any appropriate changes to its financial instruments. The fair value generally reflects the estimated amounts that the Company would receive or pay to terminate the contracts at the reporting date. 64 The fair value of derivative instruments included in the consolidated balance sheets at June 30 were as follows: Balance Sheet Location 2026 2025 Derivative designated as hedge: Interest rate swap Other current assets $ - $ 75 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 (Loss) Location 2026 2025 Derivatives designated as hedges: Interest rate swap Interest expense $ 162 $ 270 Interest rate swap Unrealized gain (loss) on hedges ( 285 ) ( 220 ) Net investment hedge Unrealized gain (loss) on hedges 130 ( 1,631 ) S. 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. 65 Consolidated Statement of Operations and Comprehensive Income (Loss) June 30, 2025 As Computed Under Previous Method Effect of Accounting Change As Reported Under New Method Net sales $ 340,738 $ - $ 340,738 Cost of goods sold 246,433 ( 1,197 ) 245,236 Cost of goods sold - other 1,579 - 1,579 Gross profit 92,726 1,197 93,923 Marketing, engineering and administrative expenses 82,431 - 82,431 Restructuring expenses 408 - 408 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 ) Less: Net earnings (loss) attributable to noncontrolling interest, net of tax 295 - 295 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 Less: Comprehensive income (loss) attributable to noncontrolling interest 334 - 334 Comprehensive income (loss) attributable to Twin Disc, Incorporated $ 8,741 $ 1,197 $ 9,938 66 Consolidated Balance Sheet June 30, 2025 As Computed Under Previous Method Effect of Accounting Change As Reported Under New Method ASSETS Current assets: Cash $ 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 Goodwill 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 Total assets $ 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: 200,000; issued: none; no par value - - - Common shares authorized: 30,000,000; issued: 14,632,802; no par value 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 380 - 380 Total equity 164,391 32,134 196,525 Total liabilities and equity $ 355,562 $ 32,134 $ 387,696 67 Consolidated Statement of Cash Flows June 30, 2025 As Computed Under Previous Method Effect of Accounting Change As Reported Under New Method 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 39 - 39 Provision for deferred income taxes ( 1,581 ) - ( 1,581 ) Stock compensation expense 4,107 - 4,107 Other, net 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 ) Other assets 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 147 - 147 Other, net ( 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 ) Cash: Beginning of period 20,070 - 20,070 End of period $ 16,109 $ - $ 16,109 68 Consolidated Statements of Changes in Equity June 30, 2025 As Computed Under Previous Method Effect of Accounting Change As Reported Under New Method 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 As Computed Under Previous Method Effect of Accounting Change As Reported Under New Method As Computed Under Previous Method Effect of Accounting Change As Reported Under New Method As Computed Under Previous Method Effect of Accounting Change As Reported Under New Method As Computed Under Previous Method Effect of Accounting Change As Reported Under New Method 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 As Computed Under Previous Method Effect of Accounting Change As Reported Under New Method As Computed Under Previous Method Effect of Accounting Change As Reported Under New Method As Computed Under Previous Method Effect of Accounting Change As Reported Under New Method As Computed Under Previous Method Effect of Accounting Change As Reported Under New Method 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) As Computed Under Previous Method Effect of Accounting Change As Reported Under New Method As Computed Under Previous Method Effect of Accounting Change As Reported Under New Method As Computed Under Previous Method Effect of Accounting Change As Reported Under New Method As Computed Under Previous Method Effect of Accounting Change As Reported Under New Method Cost of goods sold $ 57,062 $ - $ 57,062 $ 67,813 $ - $ 67,813 $ 69,563 $ - $ 69,563 $ 84,760 $ ( 487 ) $ 84,273 Gross profit 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 69 For the Quarter Ended September 27, 2024 December 27, 2024 March 28, 2025 June 30, 2025 Consolidated Statement of Operations and Comprehensive Income (Loss) As Computed Under Previous Method Effect of Accounting Change As Reported Under New Method As Computed Under Previous Method Effect of Accounting Change As Reported Under New Method As Computed Under Previous Method Effect of Accounting Change As Reported Under New Method As Computed Under Previous Method Effect of Accounting Change As Reported Under New Method Cost of goods sold $ 53,575 $ - $ 53,575 $ 68,241 $ - $ 68,241 $ 59,536 $ - $ 59,536 $ 66,660 $ ( 1,197 ) $ 65,463 Gross profit 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 70 T. ACQUISITION 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 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. 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. 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 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. 71 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 $ 17,102 Earnout 374 Total consideration $ 17,476 Assets acquired: Cash $ 240 Trade accounts receivable 1,881 Inventories 5,984 Other current assets 290 Property, plant and equipment 5,031 Intangible assets 2,847 Total assets acquired $ 16,273 Liabilities assumed : Accounts payable $ 924 Accrued liabilities 520 Deferred tax liability 159 Total liabilities assumed $ 1,603 Total identified net assets acquired: $ 14,670 Goodwill 2,806 Purchase price consideration $ 17,476 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. 72 The following summarizes the final fair value of the assets acquired and liabilities assumed at the acquisition date: Assets acquired and liabilities assumed: Cash $ 240 Trade accounts receivable 1,881 (a) Inventories, net 5,984 (b) Other current assets 290 Property, plant and equipment 5,031 (c) Intangible assets, net 2,847 (d) Accounts payable ( 924 ) Accrued liabilities ( 520 ) (e) Deferred tax liability ( 159 ) Total identified net assets acquired: 14,670 Goodwill 2,806 (f) Purchase price consideration $ 17,476 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. (a) Accounts receivable represent contractual amounts receivable from customers. The amounts approximate fair value. (b) Inventory consists of: Raw materials $ 4,622 Work in progress at fair value 520 Finished goods at fair value 842 Inventories at fair value $ 5,984 Inventories at book value 5,558 Step-up $ 426 (c) The value of property, plant and equipment is as follows: Dies, tools and fixtures $ 2,976 Machinery and equipment 1,718 Other 337 Property, plant and equipment at fair value $ 5,031 Property, plant and equipment at book value 2,156 Step-up $ 2,875 (d) Intangible assets consist of: Estimated fair value Estimated average useful lives Tradename 636 20 Backlog 21 <1 Customer relationship 1,201 15 Computer Software - External 71 5 Developed technology 918 20 $ 2,847 (e) The amounts approximate fair value. (f) 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. 73 TWIN DISC, INCORPORATED AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS For the years ended June 30, 2026 and 2025 (In thousands) Description Balance at Beginning of Period Charged to Costs and Expenses Adjustments (1) Balance at End of Period 2026: Allowance for credit losses on accounts receivable $ 1,548 $ 206 $ ( 107 ) $ 1,647 Reserve for inventory obsolescence $ 16,016 $ 956 $ ( 782 ) $ 16,190 Deferred tax valuation allowance (As Adjusted) $ 16,502 $ - $ ( 16,444 ) $ 58 2025: Allowance for credit losses on accounts receivable $ 1,383 $ ( 57 ) $ 222 $ 1,548 Reserve for inventory obsolescence $ 12,693 $ 3,773 $ ( 450 ) $ 16,016 Deferred tax valuation allowance (As Adjusted) $ 24,035 $ ( 7,462 ) $ ( 71 ) $ 16,502 ( 1 ) Activity primarily represents amounts written-off during the year, along with other adjustments (primarily foreign currency translation adjustments). 74 EXHIBIT INDEX TWIN DISC, INCORPORATED 10-K for Year Ended June 30, 2026 Exhibit Description Included Herewith 3a) Restated Articles of Incorporation of Twin Disc, Incorporated (Incorporated by reference to Exhibit 3.1 of the Company's Form 8‑ K dated December 6, 2007). File No. 001-07635. 3b) Articles of Amendment to the Restated Articles of Incorporation of Twin Disc, Incorporated (Incorporated by reference to Exhibit 3.1 of the Company's Form 8‑K dated October 29, 2020). File No. 001-07635. 3c) Restated Bylaws of Twin Disc, Incorporated, as amended through October 29, 2021 (Incorporated by reference to Exhibit 3.2 of the Company's Form 8‑K dated October 29, 2020). File No. 001-07635. Exhibit 10 Material Contracts Included Herewith a) Director Tenure and Retirement Policy (Incorporated by reference to Exhibit 10.A of the Company’ s Form 10-K dated September 2, 2021). File No. 001-07635. b) 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). File No. 001-07635. c) 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). File No. 001-07635. d) 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). File No. 001-07635. e) 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). File No. 001-07635. f) 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). File No. 001-07635. g) 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). File No. 001-07635. h) Form of Performance Stock Award Grant Agreement for performance stock grants on August 1, 2024 (Incorporated by reference to Exhibit 10.3 of the Company’s Form 8-K dated August 6, 2024). File No. 001-07635. i) Form of Restricted Stock Grant Agreement for restricted stock grants on August 6, 2025 (Incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K dated August 12, 2025). File No. 001-07635. j) 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). File No. 001-07635. k) 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). File No. 001-07635. l) 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). File No. 001-07635. 75 m) 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). File No. 001-07635. n) Form of Change in Control Severance Agreements (Incorporated by reference to Exhibit 10.4 of the Company’ s Form 8-K dated August 3, 2022). File No. 001-07635. o) Form of Indemnity Agreement (Incorporated by reference to Exhibit 10.5 of the Company’ s Form 8-K dated August 2, 2005). File No. 001-07635. p) 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). File No. 001-07635. q) 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). File No. 001-07635. r) 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). File No. 001-07635. s) 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). File No. 001-07635. t) 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). File No. 001-07635. u) 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). File No. 001-07635. v) 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). File No. 001-07635. w) 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). File No. 001-07635. x) 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). File No. 001-07635. y) 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). File No. 001-07635. z) 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). File No. 001-07635. aa) 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). File No. 001-07635. 76 Exhibit Description Herewith 18 Preferability Letter from RSM U.S., LLP X 19 Insider Trading Policy X 21 Subsidiaries of the Registrant X 23a Consent of Independent Registered Public Accounting Firm X 24 Power of Attorney X 31a Certification X 31b Certification X 32a Certification pursuant to 18 U.S.C. Section 1350 X 32b Certification pursuant to 18 U.S.C. Section 1350 X 97 Policy Relating to Recovery of Erroneously Awarded Compensation X 101.INS Inline XBRL Instance Document, filed herewith 101.SCH Inline XBRL Schema Document, filed herewith 101.CAL Inline XBRL Calculation Linkbase Document, filed herewith 101.DEF Inline XBRL Definition Linkbase Document, filed herewith 101.LAB Inline XBRL Label Linkbase Document, filed herewith 101.PRE Inline XBRL Presentation Linkbase, filed herewith 104 Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101) 77 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. September 4, 2026 TWIN DISC, INCORPORATED By: /s/ JOHN H. BATTEN John H. Batten President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. September 4, 2026 By: /s/ MICHAEL C. SMILEY Michael C. Smiley Chairman of the Board September 4, 2026 By: /s/ JOHN H. BATTEN John H. Batten President and Chief Executive Officer September 4, 2026 By: /s/ JEFFREY S. KNUTSON Jeffrey S. Knutson Vice President - Finance, Chief Financial Officer, Treasurer, and Secretary September 4, 2026 Michael Doar, Director Janet P. Giesselman, Director David W. Johnson, Director Juliann Larimer, Director Kevin M. Olsen, Director By: /s/ JEFFREY S. KNUTSON Jeffrey S. Knutson Vice President - Finance, Chief Financial Officer, Treasurer, and Secretary (Attorney in Fact) 78