TWIN DISC INC
For the period ended Sep 26, 2025. Filed Nov 5, 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.
Sep 26, 2025 · Filed Nov 5, 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 2025-03-28; filed 2025-05-07.
0001437749-25-014928
Item 2. Management Discussion and AnalysisCurrent report: 10-Q
Period ended 2025-09-26; filed 2025-11-05.
0001437749-25-033138
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 58 previous paragraphs and 39 current paragraphs.
12 unchanged; 26 reworded; 1 added; 14 removed; 6 previous and 0 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 (1)
Current report
Gross profit as a percentage of sales for the first quarter of fiscal 2026 improved to 28.7%, compared to 26.5% for the same period last year. The improvement in the current year first quarter compared to the prior year result reflects the impact of additional volume and the success of margin improvement initiatives across the manufacturing operations.
Removed paragraphs (14)
Previous report
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.
Previous report
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 report
Comparison of the First Nine Months of Fiscal 2025 with the First Nine Months of Fiscal 2024
Previous report
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 report
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 report
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 report
On June 29, 2018, the Company entered into a Credit Agreement (the “Credit Agreement”) with BMO Harris Bank N.A. (“BMO”) that provided for the assignment and assumption of the previously existing loans between the Company and Bank of Montreal (the “2016 Credit Agreement”) and subsequent amendments into a term loan (the “Term Loan”) and revolving credit loans (each a “Revolving Loan” and, collectively, the “Revolving Loans,” and, together with the Term Loan, the “Loans”). Pursuant to the Credit Agreement, BMO agreed to make the Term Loan to the Company in a principal amount not to exceed $35.0 million and the Company may, from time to time prior to the maturity date, enter into Revolving Loans in amounts not to exceed, in the aggregate, $50.0 million (the “Revolving Credit Commitment”), subject to a Borrowing Base based on Eligible Inventory and Eligible Receivables. Subsequent amendments to the Credit Agreement reduced the Term Loan to $20.0 million, extended the maturity date of the Term Loan to April 1, 2027, and require the Company to make principal installment payments on the Term Loan of $0.5 million per quarter. In addition, under subsequent amendments to the Credit Agreement, BMO’s Revolving Credit Commitment is currently $45.0 million. The Credit Agreement also allows the Company to obtain Letters of Credit from BMO, which if drawn upon by the beneficiary thereof and paid by BMO, would become Revolving Loans. Under the Credit Agreement, the Company may not pay cash dividends on its common stock in excess of $5.0 million in any fiscal year. The term of the Revolving Loans under the Credit Agreement currently runs through April 1, 2027.
Previous report
Under the Credit Agreement as amended, interest rates are based on either the secured overnight financing rate (“SOFR”) or the euro interbank offered rate (the “EURIBO Rate”). Loans are designated either as “SOFR Loans,” which accrue interest at an Adjusted Term SOFR plus an Applicable Margin, or “Eurodollar Loans,” which accrue interest at the EURIBO Rate plus an Applicable Margin. Amounts drawn on a Letter of Credit that are not timely reimbursed to the Bank bear interest at a Base Rate plus an Applicable Margin. The Company also pays a commitment fee on the average daily Unused Revolving Credit Commitment equal to an Applicable Margin. Currently, the Applicable Margins are between 2.00% and 3.50% for Revolving Loans and Letters of Credit; 2.125% and 3.625% for Term Loans; and 0.15% and 0.30% for the Unused Revolving Credit Commitment (each depending on the Company’s Total Funded Debt to EBITDA ratio).
Previous report
The Company has also entered into a Deposit Account Control Agreement with the Bank, reflecting the Bank’s security interest in deposit accounts the Company maintains with the Bank. The Bank may not provide a notice of exclusive control of a deposit account (thereby obtaining exclusive control of the account) prior to the occurrence or existence of a Default or an Event of Default under the Credit Agreement or otherwise upon the occurrence or existence of an event or condition that would, but for the passage of time or the giving of notice, constitute a Default or an Event of Default under the Credit Agreement.
Previous 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).
Previous 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.
Previous 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.
Previous 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).
Previous 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.
Reworded paragraphs (26)
Previous wording
In the financial review that follows, we discuss our results of operations, financial condition, and certain other information. This discussion should be read in conjunction with our consolidated financial statements as of March 28, 2025, and related notes, as reported in Item 1 of this Quarterly Report.
Current wording
In the financial review that follows, we discuss our results of operations, financial condition and certain other information. This discussion should be read in conjunction with our condensed consolidated financial statements as of September 26, 2025, and related notes, as reported in Item 1 of this Quarterly Report.
Previous wording
Comparison of the Third Quarter of Fiscal 2025 with the Third Quarter of Fiscal 2024
Current wording
Comparison of the First Quarter of Fiscal 2026 with the First Quarter of Fiscal 2025
Previous 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.
Current wording
Net sales for the first quarter increased 9.7%, or $7.1 million, to $80.0 million from $72.9 million in the same quarter a year ago. The acquisition of Kobelt, completed in the third quarter of fiscal 2025, contributed $3.1 million of additional revenue in the quarter. The remaining increase primarily reflects continued growth in demand for the company’s Veth propulsion systems. Global sales of marine and propulsion products improved 14.6% from the prior year, largely on the strength of the Veth product demand. Sales of industrial products improved 13.2% from the prior year first quarter, with a significant contribution from the Kobelt acquisition. Shipments of off-highway transmission products improved slightly (1.5%), with generally stable demand across end markets. The North American region saw a significant increase in revenue ($8.7 million or 48.9%) thanks to the acquisition of Kobelt and expansion of Veth product sales into the region. Sales into Europe increased 6.8%, or $2.0 million, on growing demand for the Veth product. The Asia Pacific region declined 14.5%, or $2.4 million, on weaker commercial marine demand and reduced shipments of oilfield transmissions into China. Currency translation had a favorable impact on first quarter fiscal 2026 sales compared to the first quarter of the prior year totaling $3.2 million primarily due to the strengthening of the euro against the U.S. dollar.
Previous 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.
Current wording
Sales at our manufacturing segment increased 17.0%, or $10.7 million, versus the same quarter last year. The Company’s new Canadian acquisition, Kobelt, contributed $3.1 million of incremental revenue. The U.S. manufacturing operations experienced a 1.4%, or $0.4 million, decrease in sales versus the first fiscal quarter of 2025, driven by a reduction in aftermarket demand. The Company’s operation in the Netherlands saw increased revenue of $6.8 million (43.6%) compared to the first fiscal quarter of 2025, as this operation continues to ramp up production to meet record demand for its propulsion systems. The Company’s Finnish operation saw an increase in revenue ($0.7 million or 7.7%) as demand for European defense applications continues to improve. The Company’s Belgian operation saw a decrease compared to the prior year first quarter (16.2% or $0.8 million), with weaker demand for its marine transmission products. The Company’s Italian manufacturing operation was up $0.6 million (16.7%) compared to the first quarter of fiscal 2025, due primarily to some strengthening demand for marine products in the region. The Company’s Swiss manufacturing operation, which supplies customized propellers for the global mega yacht and patrol boat markets, was up $0.7 million (44.4%) compared to the prior year first quarter.
Previous 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.
Current wording
Our distribution segment experienced a decrease in sales of $7.8 million (26.4%) in the first quarter of fiscal 2026 compared to the first quarter of fiscal 2025. The Company’s Asian distribution operations in Singapore, China and Japan were down 24.7% or $2.9 million from the prior year on reduced demand for commercial marine products. The Company’s North America distribution operation saw a $2.1 million decrease (41.6%) on reduced demand for European produced goods, somewhat impacted by the changing tariff structure. Similarly, the Company’s European distribution operation saw a significant decrease ($2.5 million or 45.5%) on reduced activity in commercial marine projects. The Company’s distribution operation in Australia and New Zealand, which provides boat accessories, propulsion and marine transmission systems for the pleasure craft market, saw a slight decrease in revenue (3.0% from the prior year first fiscal quarter), on relatively stable demand.
Previous 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).
Current wording
For the fiscal 2026 first quarter, marketing, engineering and administrative (“ME&A”) expenses, as a percentage of sales, were 25.9%, compared to 26.7% for the fiscal 2025 first quarter. ME&A expenses increased $1.2 million (6.2%) over the same period last fiscal year. The increase in ME&A spending for the quarter was comprised of the addition of Kobelt ($0.6 million) and a currency translation impact ($0.5 million).
Previous 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.
Current wording
Interest expense was up $0.2 million to $0.8 million in the first quarter of fiscal 2026, with a higher average outstanding revolver balance following the Katsa and Kobelt acquisitions.
Previous 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).
Current wording
Other expense of $0.9 million for the first fiscal quarter was primarily attributable to a currency loss ($0.2 million) and pension amortization expense ($0.7 million).
Previous 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.
Current wording
The fiscal 2026 first quarter effective tax rate was 172.2% compared to (29.2%) in the prior fiscal year first quarter. The full domestic valuation allowance provides for a very volatile effective tax rate. This, along with the mix of foreign earnings by jurisdiction, resulted in the change to the effective tax rate.
Previous 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.
Current wording
As of September 26, 2025, the Company had net working capital of $132.3 million, which represents an increase of $11.2 million, or 9.3%, from the net working capital of $121.1 million as of June 30, 2025.
Previous 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).
Current wording
Cash decreased by $1.9 million to $14.2 million as of September 26, 2025, versus $16.1 million as of June 30, 2025. As of September 26, 2025, the majority of the cash is at the Company’s overseas operations in Europe ($4.4 million) and Asia-Pacific ($9.1 million).
Previous 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.
Current wording
Trade receivables of $63.9 million were up $5.0 million, or 8.5%, when compared to last fiscal year-end. The impact of foreign currency translation was to decrease accounts receivable by $0.4 million versus June 30, 2025. As a percent of sales, trade receivables finished at 79.9% in the first quarter of fiscal 2026 compared to 70.7% for the comparable period in fiscal 2025 and 61.0% for the fourth quarter of fiscal 2025.
Previous 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.
Current wording
Inventories increased by $6.3 million, or 4.2%, versus June 30, 2025 to $158.3 million. The impact of foreign currency translation was to decrease inventories by $1.1 million versus June 30, 2025. The largest increase came at our domestic operation ($3.9 million) due to delayed shipments. Our operation in the Netherlands increased $1.3 million in support of growing backlog for the Veth product, also impacted by delayed shipment of a large project. The Singapore distribution entity experienced a $2.0 million increase related to customer delays of deliveries on oilfield transmissions into China. Our operation in Finland saw a $1.3 million increase driven by growing demand for product in the defense market. Our Australian distribution operation saw a $1.0 million decrease in inventory. On a consolidated basis, as of September 26, 2025, the Company’s backlog of orders to be shipped over the next six months approximates $163.3 million, compared to $150.5 million at June 30, 2025 and $144.3 million at September 27, 2024. As a percentage of six-month backlog, inventory has decreased from 101% at June 30, 2025 to 97% at September 26, 2025.
Previous 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.
Current wording
Net property, plant and equipment increased $0.6 million (0.8%) to $70.2 million versus $69.6 million at June 30, 2025. The Company had capital spending of $3.4 million in the quarter. This increase was offset by depreciation of $2.3 million and an unfavorable exchange impact of $0.3 million. Capital spending occurring in the first quarter was primarily related to replacement capital, along with capital to drive growth and operating efficiencies. In total, the Company expects to invest between $15 and $17 million in capital assets in fiscal 2026. 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 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.
Current wording
Accounts payable as of September 26, 2025 of $37.1 million was down $1.7 million, or 4.3%, from June 30, 2025. The impact of foreign currency translation was to decrease accounts payable by $0.3 million versus June 30, 2025. The remaining decrease is primarily related to the normal timing of inventory receipts and payments within the quarter.
Previous 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.
Current wording
Total borrowings and long-term debt as of September 26, 2025 increased $12.3 million to $43.7 million versus $31.4 million at June 30, 2025. During the first quarter, the Company reported negative free cash flow of $11.0 million (defined as operating cash flow less acquisitions of fixed assets), driven by unfavorable working capital movement related primarily to inventory, the payment of the annual bonus for fiscal 2025, timing of trade receivable receipts and capital spending. The Company ended the quarter with total debt, net of cash, of $29.5 million, compared to $15.3 million at June 30, 2025, for a net degradation of $14.2 million.
Previous 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.
Current wording
Total equity decreased $3.5 million, or 2.1%, to $160.9 million as of September 26, 2025. The net loss during the first quarter decreased equity by $0.4 million, along with an unfavorable foreign currency translation of $2.4 million. The net change in common stock and treasury stock resulting from the accounting for stock-based compensation decreased equity by $0.8 million. The quarterly dividend decreased equity by $0.6 million. The net remaining increase in equity of $0.7 million primarily represents the amortization of net actuarial loss and prior service cost on the Company’s defined benefit pension plans, along with the unrealized gain on cash flow hedges.
Previous wording
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 wording
On February 14, 2025, the Company entered into an amended and restated Credit Agreement (the “Credit Agreement”) with Bank of Montreal (the “Bank”) that refinances and replaces the credit agreement dated as of June 29, 2018, as amended, between the Company and BMO Harris Bank, N.A. (the “Prior Credit Agreement”).
Previous wording
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 wording
Pursuant to the Credit Agreement, the Bank made a Term Loan to the Company in the principal amount of $15.0 million, consisting of an assignment of a term loan under the Prior Credit Agreement from BMO to the Bank with a remaining principal of $8.5 million and an additional advance of $6.5 million. The maturity date of the Term Loan is April 1, 2027, and the Company is required to make principal installments on the Term Loan of at least $0.75 million per quarter. Under the Credit Agreement, the Company is restricted in making dividend payments beyond $5 million in any fiscal year.
Previous wording
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 wording
In addition, the Company may, from time to time prior to the maturity date, enter into Revolving Loans in amounts not to exceed, in the aggregate and subject to a Borrowing Base, $50.0 million (the “Revolving Credit Commitment”). The Borrowing Base is the sum of (a) 85% of outstanding unpaid Eligible Receivables and (b) the lesser of $40.0 million for each fiscal month ending on or prior to August 31, 2025 (reduced to $35.0 million for each fiscal month ending on or prior to August 31, 2026, and further reduced to $32.5 million for each fiscal month ending thereafter) and 60% of Eligible Inventory for each fiscal month ending on or prior to August 31, 2025 (reduced to 55% of Eligible Inventory for each fiscal month ending on or prior to February 28, 2026, and 50% of Eligible Inventory for each fiscal month ending thereafter). The Credit Agreement also allows the Company to obtain Letters of Credit from the Bank, which if drawn upon by the beneficiary thereof and paid by the Bank, would become Revolving Loans. Under the Credit Agreement, the Company may not pay cash dividends on its common stock in excess of $5.0 million in any fiscal year. The term of the Revolving Loans under the Credit Agreement runs through April 1, 2027.
Previous wording
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.
Current wording
The Company used the increased borrowing capacity under the Credit Agreement to help finance its acquisition of Kobelt. Kobelt is included as a Borrower under the Credit Agreement, and may borrow directly under the Credit Agreement up to the lesser of the Revolving Credit Commitment or $25.0 million. For purposes of determining the Borrowing Base under the Credit Agreement, Eligible Receivables and Eligible Inventory of Kobelt are included.
Previous wording
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 wording
Interest rates under the Credit Agreement are based on the secured overnight financing rate (“SOFR”), the euro interbank offered rate (the “EURIBO Rate”), or the Canadian Overnight Repo Rate Average (the “CORRA”). Loans under the Credit Agreement are designated as either as “SOFR Loans,” which accrue interest at an Adjusted Term SOFR plus an Applicable Margin; “Eurodollar Loans,” which accrue interest at the EURIBO Rate plus an Applicable Margin; “Term CORRA Loans,” which accrue interest at an Adjusted Term CORRA plus an Applicable Margin; “Daily Compounded CORRA Loans,” which accrue interest at a Daily Compounded CORRA plus an Applicable Margin; or Canadian Prime Rate Loans,” which accrue interest at the Canadian Prime Rate plus an Applicable Margin. The Applicable Margins are between 2% and 3.5% for Revolving Loans and Letters of Credit; 2.125% and 3.625% for Term Loans; and .15% and .3% for the Unused Revolving Credit Commitment (each depending on the Company’s Total Funded Debt to EBITDA ratio).
Previous wording
The Credit Agreement, as amended, requires the Company to meet certain financial covenants. Specifically, the Company’s Total Funded Debt to EBITDA ratio may not exceed 3.50 to 1.00, and the Company’s Fixed Charge Coverage Ratio may not be less than 1.10 to 1.00. In determining whether the Company is in compliance with its Total Funded Debt/EBITDA Ratio, the Company’s EBITDA will include transaction expenses of up to $0.6 million for the Katsa acquisition, as well as pro-forma EBITDA of Katsa as permitted by the Bank. The Company’s Tangible Net Worth may not be less than $100.0 million plus 50% of positive Net Income for each fiscal year ending on or after June 30, 2023.
Current wording
The Credit Agreement requires the Company to meet certain financial covenants. Specifically, the Company’s Total Funded Debt to EBITDA ratio may not exceed 3.50 to 1.00, and the Company’s Fixed Charge Coverage Ratio may not be less than 1.10 to 1.00. In determining whether the Company is in compliance with its Total Funded Debt/EBITDA Ratio, the Company’s EBITDA will include transaction expenses of up to $0.6 million for each of the Company’s Kobelt Acquisition and the Company’s prior Katsa acquisition, as well as pro-forma EBITDA of Katsa and Kobelt as permitted by the Bank. The Company’s Tangible Net Worth may not be less than $100.0 million plus 50% of positive Net Income for each fiscal year ending on or after June 30, 2024.
Previous wording
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 wording
Borrowings under the Credit Agreement secured by substantially all of the Company’s and Kobelt’s personal property, including accounts receivable, inventory, machinery and equipment, and intellectual property. The Company has also pledged 65% of its equity interests in certain foreign subsidiaries. To effect these security interests, the Company entered into various amendment and assignment agreements that consent to the assignment to the Bank of certain agreements previously entered into between the Company and the Bank in connection with an April 22, 2016 credit agreement between the Company and the Bank, and further amended such agreements pursuant to the terms of the Credit Agreement. Specifically, the Company amended and agreed to the assignment to the Bank of a Security Agreement, IP Security Agreement, Pledge Agreement, Perfection Certificate, and Assignment as to Liens and Encumbrances. The Company also amended and assigned to the Bank a Negative Pledge Agreement, pursuant to which it agreed not to sell, lease or otherwise encumber real estate that it owns except as permitted by the Credit Agreement and the Negative Pledge Agreement. The Company also entered into a Collateral Assignment of Rights under Purchase Agreement for its acquisition of Kobelt. Borrowings under the Credit Agreement are also required to be guaranteed by each U.S. subsidiary of the Company.
Previous wording
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.
Current wording
Upon the occurrence of an Event of Default, the Bank may take the following actions upon written notice to the Company: (1) terminate its remaining obligations under the Credit Agreement; (2) declare all amounts outstanding under the Credit Agreement to be immediately due and payable; and (3) demand the Company to immediately Cash Collateralize L/C Obligations in an amount equal to 105% of the aggregate L/C Obligations or a greater amount if 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.
Previous 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.
Current 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.
Rearranged previous paragraphs (6)
Previous report — wording carried elsewhere
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 report — wording carried elsewhere
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 report — wording carried elsewhere
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 report — wording carried elsewhere
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 report — wording carried elsewhere
Borrowings under the Credit Agreement are secured by substantially all of the Company’s personal property, including accounts receivable, inventory, machinery and equipment, and intellectual property. The Company has also pledged 100% of its equity interests in certain domestic subsidiaries and 65% of its equity interests in certain foreign subsidiaries. The Company also entered into a Collateral Assignment of Rights under Purchase Agreement for its acquisition of Veth Propulsion. To effect these security interests, the Company entered into various amendment and assignment agreements that consent to the assignment of certain agreements previously entered into between the Company and the Bank of Montreal in connection with the 2016 Credit Agreement. The Company also amended and assigned to BMO a Negative Pledge Agreement that it has previously entered into with Bank of Montreal, pursuant to which it agreed not to sell, lease or otherwise encumber real estate that it owns except as permitted by the Credit Agreement and the Negative Pledge Agreement.
Previous report — wording carried elsewhere
Upon the occurrence of an Event of Default, BMO may take the following actions upon written notice to the Company: (1) terminate its remaining obligations under the Credit Agreement; (2) declare all amounts outstanding under the Credit Agreement to be immediately due and payable; and (3) demand the Company to immediately Cash Collateralize L/C Obligations in an amount equal to 105% of the aggregate L/C Obligations or a greater amount if BMO determines a greater amount is necessary. If such Event of Default is due to the Company’s bankruptcy, BMO may take the three actions listed above without notice to the Company.