TWIN DISC INC
For the period ended Mar 28, 2025. Filed May 7, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 28, 2025 · Filed May 7, 2025
TWIN$22.85-0.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-12-27; filed 2025-02-05.
0001437749-25-002831
Item 2. Management Discussion and AnalysisCurrent report: 10-Q
Period ended 2025-03-28; filed 2025-05-07.
0001437749-25-014928
Item 2. Management Discussion and AnalysisThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 46 previous paragraphs and 58 current paragraphs.
18 unchanged; 27 reworded; 9 added; 0 removed; 1 previous and 4 current paragraphs rearranged.
Tables are not compared: 1 previous and 1 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (9)
Current report
On April 1, 2024, the Company entered into Amendment No. 10 to Credit Agreement (the “Tenth Amendment”) that amended and extended the Credit Agreement. The Tenth Amendment increased the Revolving Credit Commitment from $40.0 million to $45.0 million, and also increased the Borrowing Base for Revolving Loans from the sum of (a) 85% of outstanding unpaid Eligible Receivable and (b) the lesser of $30.0 million and 50% of Eligible Inventory to the sum of (a) 85% of outstanding unpaid Eligible Receivables and (b) the lesser of $35.0 million (reduced to $32.5 million beginning with the first quarter of the 2026 fiscal year) and 60% of Eligible Inventory (reduced to 55% of Eligible Inventory beginning with the third quarter of the 2025 fiscal year, and 50% of Eligible Inventory beginning with the first quarter of the 2026 fiscal year).
Current report
The Company used the increased borrowing capacity under the Credit Agreement to help finance its acquisition of Katsa by TD Finland Holding Oy, a wholly-owned subsidiary of the Company. The Tenth Amendment specifically permitted the Company to use Revolving Loans for the Katsa acquisition. In addition, in determining whether the Company is in compliance with its Total Funded Debt/EBITDA Ratio, the Company’s EBITDA will include transaction expenses of up to $0.6 million for the Katsa acquisition, as well as pro-forma EBITDA of Katsa as permitted by the Bank.
Current report
The Tenth Amendment also extended the Credit Agreement through April 1, 2027 and extended the maturity date of the Term Loan and the Term Loan Commitment Date to April 1, 2027.
Current report
The Tenth Amendment also increased the Applicable Margins under the Credit Agreement for purposes of determining interest rates on Revolving Loans, Letters of Credit, Term Loans, and the Unused Revolving Credit Commitment. Prior to the Tenth Amendment, the Applicable Margins were between 1.25% and 2.75% for Revolving Loans and Letters of Credit; 1.375% and 2.875% for Term Loans; and .10% and .15% for the Unused Revolving Credit Commitment (each depending on the Company’s Total Funded Debt to EBITDA ratio). Under the Tenth Amendment, the Applicable Margins are between 2% and 3.5% for Revolving Loans and Letters of Credit; 2.125% and 3.625% for Term Loans; and .15% and .3% for the Unused Revolving Credit Commitment (each depending on the Company’s Total Funded Debt to EBITDA ratio).
Current report
The Tenth Amendment also increased the amount of Restricted Payments that the Company may make in the form of cash dividends, distributions, purchases, redemptions, or other acquisitions of its common stock from $3.0 million to $5.0 million in any fiscal year.
Current report
On February 14, 2025, the Company entered into a Credit Agreement (the “New Agreement”) with Bank of Montreal (the “Bank”) that refinances and replaces the credit agreement dated as of June 29, 2018, as amended between the Company and BMO.
Current report
Pursuant to the New Agreement, the Bank made a Term Loan to the Company in the principal amount of $15 million, consisting of as assignment of a term loan under the Credit Agreement from BMO to the Bank with a remaining principal of $8.5 million and an additional advance of $6.5 million. The maturity date of the Term Loan is April 1, 2027, and the Company is required to make principal installments on the Term Loan of at least $0.750 million per quarter. Under the new agreement, the Company is restricted in making dividend payments beyond $5 million in any fiscal year.
Current report
In addition, the Company may, from time to time prior to the maturity date, enter into Revolving Loans in amounts not to exceed, in the aggregate and subject to a Borrowing Base, $50 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 million for each fiscal month ending on or prior to August 31, 2025 (reduced to $35 million for each fiscal month ending on or prior to August 31, 2026, and further reduced to $32.5 million for each fiscal month ending thereafter) and 60% of Eligible Inventory for each fiscal month ending on or prior to August 31, 2025 (reduced to 55% of Eligible Inventory for each fiscal month ending on or prior to February 28, 2026, and 50% of Eligible Inventory for each fiscal month ending thereafter). The New Agreement also allows the Company to obtain Letters of Credit from the Bank, which if drawn upon by the beneficiary thereof and paid by the Bank, would become Revolving Loans. Under the New Agreement, the Company may not pay cash dividends on its common stock in excess of $5.0 million in any fiscal year. The term of the Revolving Loans under the New Agreement runs through April 1, 2027.
Current report
The Company used the increased borrowing capacity under the New Agreement to help finance its acquisition of Kobelt Manufacturing Co. Ltd. (“Kobelt”), as described elsewhere in this current report. Kobelt is included as a Borrower under the New Agreement, and may borrow directly under the New Agreement up to the lesser of the Revolving Credit Commitment or $25 million. For purposes of determining the Borrowing Base under the Credit Agreement, Eligible Receivables and Eligible Inventory of Kobelt are included. In addition, in determining whether the Company is in compliance with its Total Funded Debt/EBITDA Ratio, the Company’s EBITDA will include transaction expenses of up to $0.6 million for each of the Company’s Kobelt Acquisition and the Company’s prior Katsa Oy acquisition, as well as pro-forma EBITDA of Katsa Oy and Kobelt as permitted by the Bank.
Reworded paragraphs (27)
Previous wording
Comparison of the Second Quarter of Fiscal 2025 with the Second Quarter of Fiscal 2024
Current wording
Comparison of the Third Quarter of Fiscal 2025 with the Third Quarter of Fiscal 2024
Previous wording
Net sales for the second quarter increased 23.2%, or $16.9 million, to $89.9 million from $73.0 million in the same quarter a year ago. The acquisition of Katsa Oy, completed in the fourth quarter of fiscal 2024, contributed $10.0 million of additional revenue in the quarter. This was partially offset by the sale of the boat management system product line in the prior year, reducing revenue by $0.8 million in the quarter. The remaining increase of $7.1 million primarily reflects continued growth in demand for the company’s Veth propulsion systems, along with improved shipments of the Company’s products for the airport rescue and firefighting (“ARFF”) market. The Company experienced a decline in demand for oilfield transmissions, negatively impacting revenue for the quarter. Global sales of marine and propulsion products improved 20.8% from the prior year, while shipments of industrial products improved by 44.8%. Shipments of off-highway transmission products improved by 19.8%, with improving ARFF shipments. The European region saw a significant increase in revenue ($5.4 million or 21.5%) thanks primarily to the acquisition of Katsa. Sales into North America increased 13.3%, or $2.7 million, on improved industrial and commercial marine shipments in the quarter. The Asia Pacific region increased 2.1%, or $0.4 million, on flat demand for oilfield transmissions into China. Currency translation had a favorable impact on second quarter fiscal 2025 sales compared to the second quarter of the prior year totaling $0.4 million primarily due to the strengthening of the euro, Singapore dollar and Australian dollar against the U.S. dollar.
Current wording
Net sales for the third quarter increased 9.5%, or $7.1 million, to $81.2 million from $74.2 million in the same quarter a year ago. The acquisition of Katsa Oy, completed in the fourth quarter of fiscal 2024, contributed $7.1 million of additional revenue in the quarter. In addition, the acquisition of Kobelt, completed in the current quarter, contributed $1.2 million of additional revenue. The remaining decrease of $1.2 million primarily reflects weaker demand for oil and gas transmissions in China, along with some softening in North American commercial marine activity, partially offset by continued growth in demand for the company’s Veth propulsion systems. Global sales of marine and propulsion products improved 9.0% from the prior year, while shipments of industrial products improved by 56.2%. Shipments of off-highway transmission products declined by 6.9%, with reduced Chinese demand for oil and gas transmissions. The European region saw a significant increase in revenue ($9.1 million or 35.8%) thanks primarily to the acquisition of Katsa and continued growth of the Veth product line. Sales into North America and Asia were essentially flat with the prior period quarter. Currency translation had an unfavorable impact on third quarter fiscal 2025 sales compared to the third quarter of the prior year totaling $2.5 million primarily due to the strengthening of the US dollar against the euro, Singapore dollar and Australian dollar.
Previous wording
Sales at our manufacturing segment increased 31.0%, or $18.1 million, versus the same quarter last year. The Company’s new acquisition, Katsa Oy, in Finland contributed $10.0 million of incremental revenue. The U.S. manufacturing operations experienced a 10.3%, or $2.9 million, increase in sales versus the second fiscal quarter of 2024, with improvement in demand for ARFF and industrial products. The Company’s operation in the Netherlands saw increased revenue of $8.2 million (48.6%) compared to the second fiscal quarter of 2024, as this operation continues to experience record demand for its propulsion systems. The Company’s Belgian operation saw a decrease compared to the prior year first quarter (20.3% or $1.4 million), with weaker demand for its marine transmission products. The Company’s Italian manufacturing operations were down $2.4 million (47.8%) compared to the second quarter of fiscal 2024, due primarily to the sale of the boat management product line in the prior year, along with weaker European demand for industrial and commercial marine products. The Company’s Swiss manufacturing operation, which supplies customized propellers for the global mega yacht and patrol boat markets, was up $0.1 million (6.1%) compared to the prior year second quarter.
Current wording
Sales at our manufacturing segment increased 12.8%, or $8.2 million, versus the same quarter last year. The Company’s recent acquisition, Katsa Oy, in Finland contributed $7.1 million of incremental revenue. The acquisition of Kobelt within the quarter contributed $1.2 million of incremental revenue. The U.S. manufacturing operations were essentially flat, showing a 1.2% decline from the prior third quarter, with consistent demand for airport rescue and firefighting (“ARFF”), marine and industrial products. The Company’s operation in the Netherlands saw increased revenue of $3.4 million (17.4%) compared to the third fiscal quarter of 2024, as this operation continues to experience record demand for its propulsion systems. The Company’s Belgian operation saw a decrease compared to the prior year third quarter (27.9% or $2.2 million), with weaker demand for its marine transmission products. The Company’s Italian manufacturing operations were down $0.8 million (14.4%) compared to the third quarter of fiscal 2024, due to weaker demand for industrial and commercial marine products in the region. The Company’s Swiss manufacturing operation, which supplies customized propellers for the global mega yacht and patrol boat markets, was down $0.1 million (9.7%) compared to the prior year third quarter.
Previous wording
Our distribution segment experienced a decrease in sales of $1.5 million (6.1%) in the second quarter of fiscal 2025 compared to the second quarter of fiscal 2024. The Company’s Asian distribution operations in Singapore, China and Japan were up 39.8% or $4.6 million from the prior year on improved deliveries of commercial marine transmissions. The Company’s North America distribution operation saw a decrease ($2.2 million or 27.2%) on timing of shipments from European manufacturing operations and some softening in North American demand. The Company’s European distribution operation saw a decline ($0.9 million or 12.3%) on weaker shipments of commercial marine projects. The Company’s distribution operation in Australia and New Zealand, which provides boat accessories, propulsion and marine transmission systems for the pleasure craft market, saw a decrease in revenue of 17.9% from the prior year first fiscal quarter, primarily due to weaker pleasure craft demand partially offset by a favorable currency impact.
Current wording
Our distribution segment experienced a decrease in sales of $5.3 million (14.9%) in the third quarter of fiscal 2025 compared to the third quarter of fiscal 2024. The Company’s Asian distribution operations in Singapore, China and Japan were down 8.9% or $1.2 million from the prior year on reduced Chinese demand for oil and gas transmissions. The Company’s North America distribution operation also saw a decrease ($3.9 million or 43.4%) on some softening in North American demand for commercial marine products. The Company’s European distribution operation saw a decline ($0.6 million or 8.2%) on a weaker shipments of commercial marine projects. The Company’s distribution operation in Australia and New Zealand, which provides boat accessories, propulsion and marine transmission systems for the pleasure craft market, saw an increase in revenue of 5.9% from the prior year third fiscal quarter), primarily due to improved pleasure craft demand.
Previous wording
For the fiscal 2025 second quarter, marketing, engineering and administrative (“ME&A”) expenses, as a percentage of sales, were 21.0%, compared to 23.6% for the fiscal 2024 second quarter. ME&A expenses increased $1.7 million (9.9%) over the same period last fiscal year. The increase in ME&A spending for the quarter was comprised of the addition of Katsa ($1.6 million) and an increase in professional fees ($0.8 million). These increases were offset by a decrease in global bonus expense ($0.8 million).
Current wording
For the fiscal 2025 third quarter, marketing, engineering and administrative (“ME&A”) expenses, as a percentage of sales, were 24.0%, compared to 23.2% for the fiscal 2024 third quarter. ME&A expenses increased $2.3 million (13.2%) over the same period last fiscal year. The increase in ME&A spending for the quarter was comprised of the addition of Katsa and Kobelt ($1.7 million), an inflationary increase to wages ($0.6 million) and an increase in professional fees ($0.5 million). These increases were offset by a decrease in global bonus expense ($0.1 million), telephone expense ($0.1 million) and the impact of currency translation ($0.4 million).
Previous wording
Interest expense was up $0.1 million to $0.5 million in the second quarter of fiscal 2025, with a higher average outstanding revolver balance following the Katsa acquisition.
Current wording
Interest expense was up $0.4 million to $0.7 million in the third quarter of fiscal 2025, with a higher average outstanding revolver balance following the Katsa and Kobelt acquisitions.
Previous wording
Other expense (benefit) of ($0.4) million for the second fiscal quarter was primarily attributable to a currency gain ($0.5 million), partially offset by pension amortization expense ($0.2 million).
Current wording
Other expense (benefit) of $1.6 million for the third fiscal quarter was primarily attributable to a currency loss ($1.3 million) resulting from the weakening of the US dollar against the euro, along with pension amortization expense ($0.2 million).
Previous wording
The fiscal 2025 second quarter effective tax rate was 58.5% compared to 64.0% in the prior fiscal year second quarter. The full domestic valuation allowance, along with the mix of foreign earnings by jurisdiction, resulted in the change to the effective tax rate.
Current wording
The fiscal 2025 third quarter effective tax rate was (407.9%) compared to 9.3% in the prior fiscal year third quarter. The full domestic valuation allowance, along with the mix of foreign earnings by jurisdiction, resulted in the change to the effective tax rate, which becomes very volatile when pre-tax results are very close to breakeven.
Previous wording
Comparison of the First Six Months of Fiscal 2025 with the First Six Months of Fiscal 2024
Current wording
Comparison of the First Nine Months of Fiscal 2025 with the First Nine Months of Fiscal 2024
Previous wording
Net sales for the first six months increased 19.2%, or $26.3 million, to $162.8 million from $136.5 million in the same period a year ago. The acquisition of Katsa Oy, completed in the fourth quarter of fiscal 2024, contributed $19.2 million of additional revenue in the first half. This was partially offset by the sale of the boat management system product line in the prior year, reducing revenue by $2.6 million in the period. The remaining increase of $9.7 million primarily reflects continued growth in demand for the company’s Veth propulsion systems, along with improved shipments of the Company’s products for the airport rescue and firefighting (“ARFF”) market. Global sales of marine and propulsion products improved 19.6% from the prior year, driven by strong demand for the Veth product. Shipments of industrial products improved by 52.5%, driven by the addition of Katsa. Shipments of off-highway transmission products improved by 5.4%, with improving ARFF shipments. The European region saw a significant increase in revenue ($19.5 million or 41.6%) thanks primarily to the acquisition of Katsa. Sales into North America increased 4.3%, or $1.7 million, on improved industrial and commercial marine shipments in the second quarter. The Asia Pacific region increased 6.6%, or $2.6 million, on steady demand for oilfield transmissions into China, strong commercial marine activity and a favorable currency impact. Currency translation had a favorable impact on first half fiscal 2025 sales compared to the first half of the prior year totaling $1.0 million primarily due to the strengthening of the euro, Singapore dollar and Australian dollar against the U.S. dollar.
Current wording
Net sales for the first nine months increased 15.8%, or $33.4 million, to $244.1 million from $210.7 million in the same period a year ago. The acquisition of Katsa Oy, completed in the fourth quarter of fiscal 2024, contributed $26.3 million of additional revenue in the first nine months, while the recently announced acquisition of Kobelt contributed $1.2 million. This was partially offset by the sale of the boat management system product line in the prior year, reducing revenue by $2.6 million in the period. The remaining increase of $8.5 million primarily reflects continued growth in demand for the company’s Veth propulsion systems, along with improved shipments of the Company’s products for the ARFF market. Global sales of marine and propulsion products improved 16.1% from the prior year, driven by strong demand for the Veth product. Shipments of industrial products improved by 53.7%, driven by the addition of Katsa. Shipments of off-highway transmission products improved by just 1.0%, with improving ARFF shipments being offset by weaker Chinese demand for oil and gas transmissions. The European region saw a significant increase in revenue ($28.7 million or 39.6%) thanks primarily to the acquisition of Katsa and continued growth of the Veth product. Sales into North America increased 2.4%, or $1.5 million, on improved industrial and commercial marine shipments in the first half of the fiscal year. The Asia Pacific region decreased 4.7%, or $2.7 million, on weaker demand for oilfield transmissions into China in the first fiscal quarter. Currency translation had an unfavorable impact on the first nine months of fiscal 2025 sales compared to the comparable period of the prior year totaling $1.5 million primarily due to the weakening of the euro, Singapore dollar and Australian dollar against the U.S. dollar.
Previous wording
Sales at our manufacturing segment increased 22.8%, or $26.9 million, versus the same period last year. The Company’s new acquisition, Katsa Oy, in Finland contributed $19.2 million of incremental revenue. The U.S. manufacturing operations experienced a 6.1%, or $3.4 million, increase in sales versus the first half of fiscal 2024, with improvement in demand for ARFF and industrial products. The Company’s operation in the Netherlands saw increased revenue of $8.9 million (27.9%) compared to the first half of fiscal 2024, as this operation continues to experience record demand for its propulsion systems and has begun to increase capacity to satisfy the growing demand. The Company’s Belgian operation saw a decrease compared to the prior year first half (14.6% or $1.8 million), with weaker demand for its marine transmission products. The Company’s Italian manufacturing operations were down $4.4 million (44.4%) compared to the first half of fiscal 2024, due primarily to the sale of the boat management product line in the prior year, along with weaker European demand for industrial and commercial marine products. The Company’s Swiss manufacturing operation, which supplies customized propellers for the global mega yacht and patrol boat markets, was up $0.3 million (8.9%) compared to the prior year first half.
Current wording
Sales at our manufacturing segment increased 18.4%, or $33.1 million, versus the same period last year. The Company’s new acquisition, Katsa Oy, in Finland contributed $26.3 million of incremental revenue, while the recently announced acquisition of Kobelt contributed $1.2 million. The U.S. manufacturing operations experienced a 3.5%, or $3.0 million, increase in sales versus the first nine months of fiscal 2024, with improvement in demand for ARFF and industrial products. The Company’s operation in the Netherlands saw increased revenue of $12.4 million (23.9%) compared to the first nine months of fiscal 2024, as this operation continues to experience record demand for its propulsion systems and has begun to increase capacity to satisfy the growing demand. The Company’s Belgian operation saw a decrease compared to the prior year first half (19.9% or $4.0 million), with weaker demand for its marine transmission products. The Company’s Italian manufacturing operations were down $3.3 million (22.3%) compared to the first nine months of fiscal 2024, due primarily to the sale of the boat management product line in the prior year, along with weaker European demand for industrial and commercial marine products. The Company’s Swiss manufacturing operation, which supplies customized propellers for the global mega yacht and patrol boat markets, was up $0.1 million (2.5%) compared to the prior year comparable period.
Previous wording
Our distribution segment experienced a decrease in sales of $4.8 million (6.8%) in the first half of fiscal 2025 compared to the first half of fiscal 2024. The Company’s Asian distribution operations in Singapore, China and Japan were down 5.7% or $1.7 million from the prior year on weaker demand for oilfield transmissions into China. The Company’s North America distribution operation saw a decrease ($1.9 million or 14.5%) on timing of shipments from European manufacturing operations and some softening in North American demand. The Company’s European distribution operation saw an increase ($1.2 million or 11.3%) on stronger shipments of commercial marine projects. The Company’s distribution operation in Australia and New Zealand, which provides boat accessories, propulsion and marine transmission systems for the pleasure craft market, saw a decrease in revenue of 2.4% from the prior year first fiscal half, primarily due to weaker pleasure craft demand partially offset by a favorable currency impact.
Current wording
Our distribution segment experienced a decrease in sales of $8.0 million (7.7%) in the first nine months of fiscal 2025 compared to the first nine months of fiscal 2024. The Company’s Asian distribution operations in Singapore, China and Japan were down 6.7% or $2.9 million from the prior year on weaker demand for oilfield transmissions into China. The Company’s North America distribution operation saw a decrease ($5.8 million or 26.4%) on some softening in North American demand for commercial marine products. The Company’s European distribution operation saw an increase ($0.6 million or 3.7%) on stronger shipments of commercial marine projects. The Company’s distribution operation in Australia and New Zealand, which provides boat accessories, propulsion and marine transmission systems for the pleasure craft market, saw a decrease in revenue of 0.1% from the prior year comparable period, on stable demand.
Previous wording
Gross profit as a percentage of sales for the first half of fiscal 2025 declined to 25.2%, compared to 27.3% for the same period last year. The current year includes the impact of a non-cash inventory write-down of $1.6 million. This write-down reflects the results of a product rationalization exercise of the Company’s industrial product line following the acquisition of Katsa. Excluding this adjustment, the first half gross profit percent was 26.2%. The shortfall to the prior year gross profit percentage is attributed to a less favorable product mix, along with purchase accounting amortization related to Katsa.
Current wording
Gross profit as a percentage of sales for the first nine months of fiscal 2025 declined to 25.7%, compared to 27.6% for the same period last year. The current year includes the impact of a non-cash inventory write-down of $1.6 million. This write-down reflects the results of a product rationalization exercise of the Company’s industrial product line following the acquisition of Katsa. Excluding this adjustment, the first nine months gross profit percent was 26.3%. The remaining shortfall to the prior year gross profit percentage is attributed to a less favorable product mix, along with purchase accounting amortization related to Katsa.
Previous wording
For the fiscal 2025 first half, marketing, engineering and administrative (“ME&A”) expenses, as a percentage of sales, were 23.6%, compared to 25.0% for the first half of fiscal 2024. ME&A expenses increased $4.3 million (12.5%) over the same period last fiscal year. The increase in ME&A spending for the first half was comprised of the addition of Katsa ($3.0 million), a catch up adjustment to non-cash stock compensation ($0.6 million), a legal settlement ($0.4 million), an increase in professional fees ($0.4 million) and other inflation related increases ($0.7 million). These increases were offset by a decrease in global bonus expense ($0.8 million).
Current wording
For the fiscal 2025 first nine months, marketing, engineering and administrative (“ME&A”) expenses, as a percentage of sales, were 23.7%, compared to 24.3% for the first nine months of fiscal 2024. ME&A expenses increased $6.5 million (12.8%) over the same period last fiscal year. The increase in ME&A spending for the first nine months was comprised of the addition of Katsa and Kobelt ($4.7 million), a catch-up adjustment to non-cash stock compensation ($0.6 million), a legal settlement ($0.4 million), an increase in professional fees ($0.9 million) and other inflation related increases ($0.6 million). These increases were offset by a decrease in global bonus expense ($0.7 million).
Previous wording
Interest expense was up $0.3 million to $1.1 million in the first half of fiscal 2025, with a higher average outstanding revolver balance following the Katsa acquisition.
Current wording
Interest expense was up $0.7 million to $1.8 million in the first nine months of fiscal 2025, with a higher average outstanding revolver balance following the Katsa and Kobelt acquisitions.
Previous wording
Other expense of $1.0 million for the first half was primarily attributable to a currency loss ($0.6 million), along with pension amortization expense ($0.5 million).
Current wording
Other expense of $2.5 million for the first nine months was primarily attributable to a currency loss ($1.9 million), along with pension amortization expense ($0.7 million).
Previous wording
The fiscal 2025 first half effective tax rate was 430.6% compared to 107.2% in the prior fiscal year first half. The full domestic valuation allowance, along with the mix of foreign earnings by jurisdiction, resulted in the change to the effective tax rate.
Current wording
The fiscal 2025 first nine month effective tax rate was 1,469.0% compared to 41.0% in the prior fiscal year comparable period. The full domestic valuation allowance, along with the mix of foreign earnings by jurisdiction, resulted in the change to the effective tax rate. This rate becomes very volatile when pre-tax results are very close to breakeven.
Previous wording
As of December 27, 2024, the Company had net working capital of $113.9 million, which represents a decrease of $6.2 million, or 5.2%, from the net working capital of $120.1 million as of June 30, 2024.
Current wording
As of March 28, 2024, the Company had net working capital of $123.1 million, which represents an increase of $3.0 million, or 2.5%, from the net working capital of $120.1 million as of June 30, 2024.
Previous wording
Cash decreased by $4.2 million to $15.9 million as of December 27, 2024, versus $20.1 million as of June 30, 2024. As of December 27, 2024, the majority of the cash is at the Company’s overseas operations in Europe ($4.6 million) and Asia-Pacific ($9.0 million).
Current wording
Cash decreased by $3.8 million to $16.2 million as of March 28, 2025, versus $20.1 million as of June 30, 2024. As of March 28, 2025, the majority of the cash is at the Company’s overseas operations in Europe ($4.8 million) and Asia-Pacific ($11.2 million).
Previous wording
Trade receivables of $53.7 million were down $1.5 million, or 2.8%, when compared to last fiscal year-end. The impact of foreign currency translation was to decrease accounts receivable by $0.9 million versus June 30, 2024. As a percent of sales, trade receivables finished at 59.7% in the second quarter of fiscal 2025 compared to 56.8% for the comparable period in fiscal 2024 and 61.8% for the fourth quarter of fiscal 2024.
Current wording
Trade receivables of $57.3 million were up $5.1 million, or 9.8%, when compared to last fiscal year-end. The impact of foreign currency translation was to decrease accounts receivable by $0.2 million versus June 30, 2024. As a percent of sales, trade receivables finished at 70.5% in the third quarter of fiscal 2025 compared to 55.2% for the comparable period in fiscal 2024 and 61.8% for the fourth quarter of fiscal 2024. The current quarter was unfavorably impacted by timing of sales within the quarter, heavily weighted toward the end of the quarter.
Previous wording
Inventories decreased by $2.2 million, or 1.7%, versus June 30, 2024 to $128.3 million. The impact of foreign currency translation was to decrease inventories by $2.6 million versus June 30, 2024. The largest decrease came at our operations in the United States ($2.4 million), favorably impacted by the non-cash write down of industrial inventory in the quarter ($1.6 million). Our operation in the Netherlands saw an increase ($1.4 million) in support of growing backlog for the Veth product. The Singapore distribution entity experienced a $4.1 million increase primarily related to customer delays of deliveries on oilfield transmissions into China. Additional increases were seen at our facilities in Belgium ($1.1 million) and Australia ($0.8 million). The global operations team is focused on driving inventory improvements in the second half and beyond. On a consolidated basis, as of December 27, 2024, the Company’s backlog of orders to be shipped over the next six months approximates $124.0 million, compared to $133.7 million at June 30, 2024 and $125.2 million at December 29, 2023. The reduction in backlog since June 30, 2024 ($9.7 million) is largely due to a currency translation impact ($5.5 million). As a percentage of six-month backlog, inventory has increased from 98% at June 30, 2024 to 103% at December 27, 2024.
Current wording
Inventories increased by $7.5 million, or 5.7%, versus June 30, 2024 to $138.0 million. The impact of foreign currency translation was to decrease inventories by $0.6 million versus June 30, 2024. The largest increase is the result of the Kobelt acquisition during the quarter ($6.0 million). The Singapore distribution entity experienced a $2.4 million increase primarily related to customer delays of deliveries on oilfield transmissions into China. Additional increases were seen at our US distribution operation ($1.6 million) and Australia ($0.6 million). Offsetting decreases came at our operations in the United States ($1.9 million), favorably impacted by the non-cash write down of industrial inventory in the second fiscal quarter ($1.6 million). Our operation in Finland saw a decrease ($1.7 million) on a softening in demand during the quarter. The global operations team is focused on driving inventory improvements in the second half and beyond. On a consolidated basis, as of March 28, 2025, the Company’s backlog of orders to be shipped over the next six months approximates $133.7 million, compared to $133.7 million at June 30, 2024 and $130.5 million at March 29, 2024. As a percentage of six-month backlog, inventory has increased from 98% at June 30, 2024 to 103% at March 28, 2025.
Previous wording
Net property, plant and equipment increased $0.4 million (0.7%) to $58.5 million versus $58.1 million at June 30, 2024. The Company had capital spending of $5.1 million in the first half, and an unfavorable exchange impact of $0.8 million. These increases were offset by depreciation of $4.0 million. Capital spending occurring in the first half was primarily related to replacement capital, along with capital to drive growth and operating efficiencies. In total, the Company expects to invest between $12 and $15 million in capital assets in fiscal 2025. The Company continues to review its capital plans based on overall market conditions and availability of capital and may make changes to its capital plans accordingly. The Company’s capital program is focused on modernizing key core manufacturing, assembly and testing processes and improving efficiencies at its facilities around the world.
Current wording
Net property, plant and equipment increased $5.6 million (9.6%) to $63.7 million versus $58.1 million at June 30, 2024. The Company had capital spending of $7.5 million in the first three quarters, along with the impact of the Kobelt acquisition ($5.0 million). This increase was offset by depreciation of $6.2 million and an unfavorable exchange impact ($0.9 million). Capital spending occurring in the first nine months was primarily related to replacement capital, along with capital to drive growth and operating efficiencies. In total, the Company expects to invest between $10 and $12 million in capital assets in fiscal 2025. The Company continues to review its capital plans based on overall market conditions and availability of capital and may make changes to its capital plans accordingly. The Company’s capital program is focused on modernizing key core manufacturing, assembly and testing processes and improving efficiencies at its facilities around the world.
Previous wording
Accounts payable as of December 27, 2024 of $28.6 million was down $4.0 million, or 12.3%, from June 30, 2024. The impact of foreign currency translation was to decrease accounts payable by $0.4 million versus June 30, 2024. The remaining decrease is primarily related to the inventory reduction during the second quarter.
Current wording
Accounts payable as of March 28, 2025 of $31.6 million was down $1.0 million, or 3.1%, from June 30, 2024. The impact of foreign currency translation was essentially neutral to accounts payable. The decrease is primarily related to reduced purchasing activity toward the end of the quarter.
Previous wording
Total borrowings and long-term debt as of December 27, 2024 decreased $0.9 million to $24.9 million versus $25.8 million at June 30, 2024. During the first half, the Company reported negative free cash flow of $0.5 million (defined as operating cash flow less acquisitions of fixed assets), driven by favorable working capital movement offset by capital spending. The Company ended the quarter with total debt, net of cash, of $9.0 million, compared to $5.7 million at June 30, 2024, for a net degradation of $3.3 million.
Current wording
Total borrowings and long-term debt as of March 28, 2025 increased $15.0 million to $40.8 million versus $25.8 million at June 30, 2024. The increase is primarily related to the acquisition of Kobelt in the quarter ($16.7 million). During the first nine months, the Company reported positive free cash flow of $0.5 million (defined as operating cash flow less acquisitions of fixed assets), driven by improved earnings. The Company ended the quarter with total debt, net of cash, of $24.5 million, compared to $5.7 million at June 30, 2024, for a net increase of $18.8 million.
Previous wording
Total equity decreased $7.4 million, or 4.8%, to $147.6 million as of December 27, 2024. The net loss during the first half decreased equity by $1.7 million, while other decreases related to a favorable foreign currency translation of $4.1 million and dividends paid to shareholders of $1.1 million. The net change in common stock and treasury stock resulting from the accounting for stock-based compensation increased equity by $0.6 million. The net remaining decrease in equity of $1.1 million primarily represents the amortization of net actuarial loss and prior service cost on the Company’s defined benefit pension plans, along with the unrealized loss on cash flow hedges.
Current wording
Total equity decreased $4.9 million, or 3.1%, to $150.2 million as of March 28, 2025. The net loss during the first nine months decreased equity by $3.1 million, while other decreases related to dividends paid to shareholders of $1.7 million. The net change in common stock and treasury stock resulting from the accounting for stock-based compensation decreased equity by $0.9 million. The net remaining decrease in equity of $1.0 million primarily represents the amortization of net actuarial loss and prior service cost on the Company’s defined benefit pension plans, along with the unrealized loss on cash flow hedges.
Previous wording
Other significant contractual obligations as of December 27, 2024 are disclosed in Note M "Lease Liabilities" in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. There are no material undisclosed guarantees. As of December 27, 2024, the Company had no additional material purchase obligations other than those created in the ordinary course of business related to inventory and property, plant, and equipment, which generally have terms of less than 90 days. The Company has long-term obligations related to its postretirement plans which are discussed in detail in Note G "Pension and Other Postretirement Benefit Plans” in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1of this Quarterly Report on Form 10-Q. Postretirement medical claims are paid by the Company as they are submitted. In fiscal 2025, the Company expects to contribute $0.5 million to postretirement benefits based on actuarial estimates; however, these amounts can vary significantly from year to year because the Company is self-insured. In fiscal 2025, the Company expects to contribute $0.5 million to its defined benefit pension plans. The Company does not have any material off-balance sheet arrangements.
Current wording
Other significant contractual obligations as of March 28, 2025 are disclosed in Note O "Lease Liabilities" in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. There are no material undisclosed guarantees. As of March 28, 2025, the Company had no additional material purchase obligations other than those created in the ordinary course of business related to inventory and property, plant, and equipment, which generally have terms of less than 90 days. The Company has long-term obligations related to its postretirement plans which are discussed in detail in Note H "Pension and Other Postretirement Benefit Plans” in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1of this Quarterly Report on Form 10-Q. Postretirement medical claims are paid by the Company as they are submitted. In fiscal 2025, the Company expects to contribute $0.5 million to postretirement benefits based on actuarial estimates; however, these amounts can vary significantly from year to year because the Company is self-insured. In fiscal 2025, the Company expects to contribute $0.7 million to its defined benefit pension plans. The Company does not have any material off-balance sheet arrangements.
Previous wording
Management believes that available cash, the Credit Agreement, the unsecured lines of credit, cash generated from future operations, and potential access to debt markets will be adequate to fund the Company's cash and capital requirements for the foreseeable future.
Current wording
Management believes that available cash, the New Agreement, the unsecured lines of credit, cash generated from future operations, and potential access to debt markets will be adequate to fund the Company's cash and capital requirements for the foreseeable future.
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
Gross profit as a percentage of sales for the third quarter of fiscal 2025 declined to 26.7%, compared to 28.2% for the same period last year. The shortfall to the prior year gross profit percentage is attributed primarily to a less favorable product mix, along with purchase accounting amortization related to Katsa and Kobelt.
Current report — wording carried from elsewhere
Interest rates under the New Agreement are based on the secured overnight financing rate (“SOFR”), the euro interbank offered rate (the “EURIBO Rate”), or the Canadian Overnight Repo Rate Average (the “CORRA”). Loans under the New Agreement are designated as either as “SOFR Loans,” which accrue interest at an Adjusted Term SOFR plus an Applicable Margin; “Eurodollar Loans,” which accrue interest at the EURIBO Rate plus an Applicable Margin; “Term CORRA Loans,” which accrue interest at an Adjusted Term CORRA plus an Applicable Margin; “Daily Compounded CORRA Loans,” which accrue interest at a Daily Compounded CORRA plus an Applicable Margin; or Canadian Prime Rate Loans,” which accrue interest at the Canadian Prime Rate plus an Applicable Margin. The Applicable Margins are between 2% and 3.5% for Revolving Loans and Letters of Credit; 2.125% and 3.625% for Term Loans; and .15% and .3% for the Unused Revolving Credit Commitment (each depending on the Company’s Total Funded Debt to EBITDA ratio).
Current report — wording carried from elsewhere
Borrowings under the New Agreement are secured by substantially all of the Company’s and Kobelt’s personal property, including accounts receivable, inventory, machinery and equipment, and intellectual property. The Company has also pledged 65% of its equity interests in certain foreign subsidiaries. To effect these security interests, the Company entered into various amendment and assignment agreements that consent to the assignment to the Bank of certain agreements previously entered into between the Company and the Bank in connection with an April 22, 2016 credit agreement between the Company and the Bank, and further amended such agreements pursuant to the terms of the New Agreement. Specifically, the Company amended and agreed to the assignment to the Bank of a Security Agreement, IP Security Agreement, Pledge Agreement, Perfection Certificate, and Assignment as to Liens and Encumbrances. The Company also amended and assigned to the Bank a Negative Pledge Agreement, pursuant to which it agreed not to sell, lease or otherwise encumber real estate that it owns except as permitted by the New Agreement and the Negative Pledge Agreement. The Company also entered into a Collateral Assignment of Rights under Purchase Agreement for its acquisition of Kobelt, described in Item 8.01 below.
Current report — wording carried from elsewhere
Upon the occurrence of an Event of Default, the Bank may take the following actions upon written notice to the Company: (1) terminate its remaining obligations under the New Agreement; (2) declare all amounts outstanding under the New Agreement to be immediately due and payable; and (3) demand the Company to immediately Cash Collateralize L/C Obligations in an amount equal to 105% of the aggregate L/C Obligations or a greater amount if the Bank determines a greater amount is necessary. If such Event of Default is due to the Company’s bankruptcy, the Bank may take the three actions listed above without notice to the Company.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Gross profit as a percentage of sales for the second quarter of fiscal 2025 declined to 24.1%, compared to 28.3% for the same period last year. The current quarter includes the impact of a non-cash inventory write-down of $1.6 million. This write-down reflects the results of a product rationalization exercise of the Company’s industrial product line following the acquisition of Katsa. Excluding this adjustment, the second quarter gross profit percent was 26.0%. The shortfall to the prior year gross profit percentage is attributed to a less favorable product mix, purchase accounting amortization related to Katsa and surcharges related to the purchase of electric motors in the quarter.