TWIN DISC INC
For the period ended Dec 26, 2025. Filed Feb 4, 2026.
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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.
Dec 26, 2025 · Filed Feb 4, 2026
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 2025-09-26; filed 2025-11-05.
0001437749-25-033138
Item 2. Management Discussion and AnalysisCurrent report: 10-Q
Period ended 2025-12-26; filed 2026-02-04.
0001437749-26-002879
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 39 previous paragraphs and 48 current paragraphs.
22 unchanged; 16 reworded; 7 added; 1 removed; 0 previous and 3 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 (7)
Current report
Net sales for the second quarter increased 0.3%, or $0.3 million, to $90.2 million from $89.9 million in the same quarter a year ago. The acquisition of Kobelt, completed in the third quarter of fiscal 2025, contributed $3.2 million of additional revenue in the quarter. The remaining decrease of $2.9 million primarily reflects temporary weakness in commercial marine demand, impacted by the existing tariff structure, along with continued soft demand for oil and gas transmissions into China. These decreases were partially offset by continued growth in demand for the Company’s Veth propulsion systems, along with improved shipments of the Company’s Katsa products acquired in fiscal 2024. Global sales of marine and propulsion products were flat with the prior year, as weakness in commercial marine demand was offset by strength in demand for the Veth product. Shipments of off-highway transmission products decreased by 8.1%, with weakness in demand for oil and gas transmissions into China and delayed airport rescue and firefighting transmissions (“ARFF”) shipments resulting from ongoing tariff concerns. Shipments of industrial products improved nearly 22% as demand for Katsa product continues to grow, along with the favorable impact from the Kobelt acquisition. The European region saw a significant increase in revenue ($3.1 million or 8.4%) thanks primarily to strong regional demand for Veth and Katsa products. Sales into North America increased 9.6%, or $2.2 million, driven by the addition of Kobelt. The Asia Pacific region decreased 24.5%, or $5.0 million, on weaker demand for commercial marine and oilfield transmissions in the region. Currency translation had a favorable impact on second quarter fiscal 2026 sales compared to the second quarter of the prior year totaling $4.1 million primarily due to the strengthening of the euro against the U.S. dollar.
Current report
Gross profit as a percentage of sales for the second quarter of fiscal 2026 improved to 24.8%, compared to 24.1% for the same period last year. The prior year quarter includes the impact of a non-cash inventory write-down of $1.6 million. This write-down reflected the results of a product rationalization exercise of the Company’s industrial product line following the acquisition of Katsa. The current quarter was impacted by a less favorable product mix, dilution of margin due to invoicing of tariffs and isolated operational/quality issues within the quarter.
Current report
Comparison of the First Six Months of Fiscal 2026 with the First Six Months of Fiscal 2025
Current report
Gross profit as a percentage of sales for the first half of fiscal 2026 improved to 26.6%, compared to 25.2% for the same period last year. The prior year includes the impact of a non-cash inventory write-down of $1.6 million. This write-down reflected the results of a product rationalization exercise of the Company’s industrial product line following the acquisition of Katsa. Excluding this adjustment, the fiscal 2025 first half gross profit percentage was 26.2%. The improvement in gross profit percentage versus the prior year first half is attributed to improved operational execution at our Veth operation and successful margin improvement initiatives, partially offset by isolated quality and facility charges.
Current report
For the fiscal 2026 first half, ME&Aexpenses, as a percentage of sales, were 24.3%, compared to 23.6% for the first half of fiscal 2025. ME&A expenses increased $3.0 million (7.7%) over the same period last fiscal year. The increase in ME&A spending for the first half was comprised of the addition of Kobelt ($1.1 million), a foreign currency translation impact ($1.0 million), an increase in professional fees ($0.7 million) and the net of savings initiatives offset by inflation related increases ($0.2 million).
Current report
Other expense of $1.5 million for the first half was primarily attributable to pension amortization expense ($1.4 million), along with a small currency loss ($0.1 million).
Current report
The fiscal 2026 first half effective tax rate was -1,638.9% compared to 430.6% in the prior fiscal year first half. The change in the effective tax rate for the first half resulted from a full reversal of the domestic valuation allowance.
Removed paragraphs (1)
Previous 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.
Reworded paragraphs (16)
Previous wording
Comparison of the First Quarter of Fiscal 2026 with the First Quarter of Fiscal 2025
Current wording
Comparison of the Second Quarter of Fiscal 2026 with the Second Quarter of Fiscal 2025
Previous 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.
Current wording
Our distribution segment experienced a decrease in sales of $10.4 million (29.0%) in the second quarter of fiscal 2026 compared to the second quarter of fiscal 2025. The Company’s Asian distribution operations in Singapore, China and Japan were down 37.2%, or $6.0 million, from the prior year on reduced demand for commercial marine transmissions and oil and gas transmissions for China. The Company’s North America distribution operation saw a decrease ($1.9 million or 32.7%) impacted by the existing tariff structure and related impact on goods coming from European manufacturing operations. Similarly, the Company’s European distribution operation saw a decline ($1.9 million or 30.9%) 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 6.9% from the prior year second fiscal quarter, primarily due to weaker pleasure craft demand.
Previous 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).
Current wording
For the fiscal 2026 second quarter, marketing, engineering and administrative (“ME&A”) expenses, as a percentage of sales, were 22.9%, compared to 21.0% for the fiscal 2025 second quarter. ME&A expenses increased $1.7 million (9.2%) over the same period last fiscal year. The increase in ME&A spending for the quarter was comprised of the addition of Kobelt ($0.5 million), a foreign currency impact ($0.5 million), increased commission expense ($0.5 million) and a small net inflationary impact of $0.3 million.
Previous 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.
Current wording
Interest expense was up $0.3 million to $0.8 million in the second quarter of fiscal 2026, with a higher average outstanding revolver balance following the Katsa and Kobelt acquisitions.
Previous 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).
Current wording
Other income (expense) of $0.6 million for the second fiscal quarter was primarily attributable to a currency gain ($0.1 million), partially offset by pension amortization expense ($0.7 million).
Previous 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.
Current wording
The fiscal 2026 second quarter effective tax rate was -3,120.4% compared to 58.5% in the prior fiscal year second quarter. The change in the effective tax rate for the quarter resulted from a full reversal of the domestic valuation allowance.
Previous 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.
Current wording
Net sales for the first six months increased 4.5%, or $7.4 million, to $170.2 million from $162.8 million in the same period a year ago. The acquisition of Kobelt, completed in the third quarter of fiscal 2025, contributed $6.3 million of additional revenue in the first half. The remaining increase of $1.1 million reflects continued growth in demand for the Company’s Veth propulsion systems, along with improved shipments of the Company’s Katsa products acquired in fiscal 2024. These increases were partially offset by temporary weakness in commercial marine demand, impacted by the existing tariff structure, along with continued soft demand for oil and gas transmissions into China. Global sales of marine and propulsion products improved 5.9% from the prior year, driven by strong demand for Veth product offset by some weakness in commercial marine demand. Shipments of industrial products improved by 17.7%, driven by the addition of Katsa and Kobelt. Shipments of off-highway transmission products declined by 3.5%, with delayed ARFF shipments. The European region saw a significant increase in revenue ($5.1 million or 7.7%) thanks primarily to growing demand for Veth and Katsa products in the region. Sales into North America increased 26.7%, or $10.9 million, on improved industrial and commercial marine shipments in the second quarter. The Asia Pacific region decreased 20.0%, or $7.4 million, on weaker demand for commercial marine and oil and gas transmissions in the region. Currency translation had a favorable impact on first half fiscal 2026 sales compared to the first half of the prior year totaling $4.1 million primarily due to the strengthening of the euro against the U.S. dollar.
Previous 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.
Current wording
Sales at our manufacturing segment increased 11.7%, versus the same period last year. The Company’s new acquisition, Kobelt, in Canada contributed $6.3 million of incremental revenue. The U.S. manufacturing operations experienced a 6.2%, or $3.7 million, decline in sales versus the first half of fiscal 2025, with tariff concerns creating a drag on shipments. The Company’s operation in the Netherlands saw increased revenue of $8.4 million (20.7%) compared to the first half of fiscal 2025, 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 (16.4% or $1.7 million), with weaker US demand for its marine transmission products, impacted by tariffs. The Company’s Italian manufacturing operation was up $3.1 million (45.4%) compared to the first half of fiscal 2025, due primarily to stronger European demand for industrial and commercial marine products. The Company’s operation in Finland saw revenue increase 14.7% ($2.8 million), with improving demand for defense related 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 $1.1 million (33.7%) compared to the prior year first half.
Previous 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.
Current wording
As of December 26, 2025, the Company had net working capital of $133.3 million, which represents an increase of $12.2 million, or 10.1%, from the net working capital of $121.1 million as of June 30, 2025.
Previous 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).
Current wording
Cash decreased by $1.2 million to $14.9 million as of December 26, 2025, versus $16.1 million as of June 30, 2025. As of December 26, 2025, the majority of the cash is at the Company’s overseas operations in Europe ($5.8 million) and Asia-Pacific ($8.1 million).
Previous 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.
Current wording
Trade receivables of $53.6 million were down $5.3 million, or 9.0%, when compared to last fiscal year-end. The impact of foreign currency translation was essentially neutral versus June 30, 2025. As a percent of sales, trade receivables finished at 59.5% in the second quarter of fiscal 2026 compared to 59.7% for the comparable period in fiscal 2025 and 61.0% for the fourth quarter of fiscal 2025.
Previous 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.
Current wording
Inventories increased by $11.2 million, or 7.4%, versus June 30, 2025 to $163.2 million. The impact of foreign currency translation was essentially neutral versus June 30, 2025. The largest increase came at our operations in the United States ($6.0 million), unfavorably impacted by tariff related shipment delays. Our operation in the Netherlands saw an increase ($2.9 million) in support of growing backlog for the Veth product. The Singapore distribution entity experienced a $2.3 million increase primarily related to customer delays of deliveries on oilfield transmissions into China. Our operation in Finland also experienced an increase ($1.2 million or 8.4%) on strong demand for industrial products include defense applications. The global operations team is focused on driving inventory improvements in the second half and beyond. On a consolidated basis, as of December 26, 2025, the Company’s backlog of orders to be shipped over the next six months grew to $175.3 million, compared to $150.5 million at June 30, 2025 and $124.0 million at December 27, 2024. The increase in backlog since June 30, 2025 ($24.8 million) is largely reflective of strong market conditions for the Veth product and increasing global defense spending. As a percentage of six-month backlog, inventory has decreased from 99% at June 30, 2025 to 93% at December 26, 2025.
Previous 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.
Current wording
Net property, plant and equipment increased $1.8 million (2.6%) to $71.4 million versus $69.6 million at June 30, 2025. The Company had capital spending of $6.8 million in the first half, and a relatively neutral exchange impact. This increase was offset by depreciation of $4.5 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 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 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.
Current wording
Accounts payable as of December 26, 2025 of $36.7 million was down $2.1 million, or 5.4%, from June 30, 2025. The impact of foreign currency translation was to decrease accounts payable by $0.2 million versus June 30, 2025. The remaining decrease is related to the normal timing of purchasing activity and related payments.
Previous 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.
Current wording
Total borrowings and long-term debt as of December 26, 2025 increased $13.1 million to $44.5 million versus $31.4 million at June 30, 2025. During the first half, the Company reported negative free cash flow of $9.6 million (defined as operating cash flow less acquisitions of fixed assets), driven by an increase to inventory and capital spending. The Company ended the quarter with total debt, net of cash, of $29.7 million, compared to $15.3 million at June 30, 2025, for a net degradation of $14.3 million.
Previous 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.
Current wording
Total equity increased $20.8 million, or 12.6%, to $185.2 million as of December 26, 2025. The net earnings during the first half increased equity by $21.9 million, while other decreases related to a favorable foreign currency translation of $1.4 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 increase in equity of $1.4 million primarily represents the amortization of benefit plan adjustments on the Company’s defined benefit pension plans, along with the unrealized loss on cash flow hedges.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
Sales at our manufacturing segment increased 3.3%, or $2.4 million, versus the same quarter last year. The Company’s new acquisition, Kobelt, in Canada contributed $3.2 million of incremental revenue. The U.S. manufacturing operations experienced a 10.6%, or $3.3 million, decrease in sales versus the second fiscal quarter of 2025, with shipment delays for ARFF products and weaker demand for oil and gas transmissions in China. The Company’s operation in the Netherlands saw increased revenue of $1.6 million (6.4%) compared to the second fiscal quarter of 2025, 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 second quarter (16.6% or $0.9 million), with weaker demand for its marine transmission products due in part to the domestic tariff structure. The Company’s Italian manufacturing operation was up $2.5 million (77.7%) compared to the second quarter of fiscal 2025, due primarily to stronger European demand for industrial and commercial marine products. The Company’s operation in Finland saw revenue increase 21.2% ($2.1 million), with strong demand for defense related 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 $0.4 million (23.7%) compared to the prior year second quarter.
Current report — wording carried from elsewhere
Our distribution segment experienced a decrease in sales of $18.2 million (27.8%) in the first half of fiscal 2026 compared to the first half of fiscal 2025. The Company’s Asian distribution operations in Singapore, China and Japan were down 31.9% or $9.0 million from the prior year on weaker commercial marine activity in the region, along with reduced demand for oilfield transmissions into China. The Company’s North America distribution operation saw a decrease ($4.0 million or 36.9%) on softening North American demand for European manufactured product, impacted by the current tariff structure. The Company’s European distribution operation saw a decrease ($4.4 million or 37.8%) on soft demand for commercial marine projects in the region. 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 5.0% from the prior year first fiscal half, primarily due to weaker pleasure craft demand partially offset by a favorable currency impact.
Current report — wording carried from elsewhere
Interest expense was up $0.4 million to $1.6 million in the first half of fiscal 2026, with a higher average outstanding revolver balance following the Katsa and Kobelt acquisitions.