TWIN DISC INC
For the period ended Jun 30, 2026. Filed Sep 4, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2026 · Filed Sep 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-K
Period ended 2025-06-30; filed 2025-09-05.
0001437749-25-028487
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2026-06-30; filed 2026-09-04.
0001437749-26-029700
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe 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 61 previous paragraphs and 63 current paragraphs.
28 unchanged; 27 reworded; 8 added; 6 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 0 previous and 0 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 (8)
Current report
Current Credit Agreement
Current report
On June 30, 2026, Twin Disc, Incorporated (the “Company”) entered into a Credit Agreement (the “Credit Agreement”) among the Company, as Borrower; Kobelt Manufacturing Co. Ltd. ("Kobelt"), as Guarantor; Bank of Montreal, as a Lender, Administrative Agent, Swing Line Lender, and L/C Issuer; and JPMorgan Chase Bank, N.A. ("Chase"), as a Lender. The Credit Agreement refinanced and replaced the credit agreement dated February 14, 2025 among the Company, Kobelt, and Bank of Montreal. Capitalized terms in this Annual Report that are not otherwise defined herein are defined in the Credit Agreement.
Current report
Pursuant to the Credit Agreement, Bank of Montreal and Chase (the “Lenders”) made Term Loans to the Company in an aggregate principal amount of $30,000,000. The maturity date of the Term Loans is June 30, 2031, and the Company is required to make principal installments on the Term Loans of at least $375,000, per quarter (increasing to $562,500 per quarter for the quarter ending on or about September 30, 2028, and $750,000 per quarter for the quarter ending on or about September 30, 2030).
Current report
The Credit Agreement also allows the Company to enter into Revolving Loans with the Lenders from time to time prior to June 30, 2031 (the “Revolving Credit Termination Date”) in amounts not to exceed $60,000,000 (the “Revolving Credit Commitment”). The Revolving Credit Commitment includes a $5,000,000 sublimit for Swing Loans and a $4,000,000 sublimit for Letters of Credit that may be requested by the Company from time to time until the Revolving Credit Termination Date. Each Swing Loan or Letter of Credit provided pursuant to the terms of the Credit Agreement shall be a Revolving Loan provided under the Revolving Credit Commitment.
Current report
Considering the impact of the inventory valuation accounting method change from LIFO to FIFO on the prior year adjusted numbers (an increase in inventory of approximately $32 million), in fiscal 2026, net working capital increased $6.4 million, or 4.2%, during fiscal 2026 and the current ratio (calculated as total current assets divided by total current liabilities) increased to 2.3 at June 30, 2026 compared to 2.2 for June 30, 2025.
Current report
Increases in trade receivables ($7.8 million), decrease in other current assets ($2.5 million) and decreases in trade accounts payable ($7.9 million) increased net working capital. These increases were partially offset by decreases in inventories, net ($6.1 million).
Current report
During fiscal 2026, the Company reassessed the realizability of its deferred tax assets and concluded that substantially all of its U.S. and state valuation allowance was no longer required. As a result, the Company released the valuation allowance and recognized a corresponding income tax benefit. The release was supported by the Company's sustained profitability, including a three-year cumulative income position, as well as tax planning strategies available to support the realization of deferred tax assets. The Company released $23.9 million of valuation allowance during fiscal 2026, of which $16.4 million was recognized as an income tax benefit in the Consolidated Statement of Operations and Comprehensive Income (Loss), and $7.4 million was recorded directly to retained earnings in connection with the change in inventory valuation method from LIFO to FIFO. The Company's valuation allowance was $0.1 million and $16.5 million as of June 30, 2026 and 2025, respectively, with prior-year amounts adjusted to reflect the change in inventory valuation method.
Current report
As of June 30, 2026, the identified tax planning strategies had been fully implemented. The Company's determination that substantially all of the valuation allowance was no longer required as of December 26, 2025 involved significant judgment and consideration of all available positive and negative evidence, including the prudence, feasibility, and expected implementation of the tax planning strategies.
Removed paragraphs (6)
Previous report
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 report
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 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, $50.0 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 report
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 report
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 report
Net working capital increased $1.0 million, or 0.8%, during fiscal 2025 and the current ratio (calculated as total current assets divided by total current liabilities) decreased to 2.0 at June 30, 2025 compared to 2.2 for June 30, 2024. The increase in net working capital was primarily the result of an increase to inventory ($21.5 million) and trade receivables ($6.7 million). These increases were partially offset by increases in trade payables ($6.2 million) and accrued liabilities ($18.2 million).
Reworded paragraphs (27)
Previous wording
Net sales for fiscal 2025 increased 15.5%, or $45.6 million, to $340.7 million from $295.1 million in fiscal 2024. The Company’s acquisition of Katsa at the beginning of fiscal 2025 contributed $39.1 million of incremental revenue, while the acquisition of Kobelt in the Company’s third fiscal quarter contributed $4.9 million of incremental revenue. Excluding the impact of these acquisitions, the Company’s revenue was relatively flat with the prior year, as strong growth in the Veth product was offset by weaker oil and gas transmission shipments into China and some weakness in the European industrial and commercial marine markets. Currency translation had a favorable impact on fiscal 2025 sales compared to the prior year totaling $1.5 million, primarily due to the strengthening of the euro against the U.S. dollar.
Current wording
Net sales for fiscal 2026 increased 11.9%, or $40.5 million, to $381.3 million from $340.7 million in fiscal 2025. The Company’s acquisition of Kobelt in the third fiscal quarter of fiscal 2025 contributed approximately $7.6 million of incremental revenue. Excluding the impact of this acquisition, the Company’s revenue grew by 9.7% in fiscal 2026, as strong growth in the Veth product combined with growing global military demand for both marine and industrial products, along with generally strong market conditions. Currency translation had a favorable impact on fiscal 2026 sales compared to the prior year totaling $17.2 million, primarily due to the strengthening of the euro against the U.S. dollar.
Previous wording
Excluding the impact of the Katsa and Kobelt acquisitions, sales for our manufacturing segment decreased 2.5%, or $7.5 million, versus the same period last year. The largest improvement was seen at the Company’s Veth propulsion operation in the Netherlands, which experienced a 12.3% increase in sales compared to fiscal 2024. The primary driver for this increase was growing demand through market and geographic penetration for the Company’s innovative propulsion solutions around the globe, along with improving supply chain and operational performance. The Company’s domestic manufacturing operation experienced a 1.8% decrease in sales in fiscal 2025, driven by some softening demand for oil and gas transmissions in China. The Company’s Italian manufacturing operations reported a 29.7% decrease in sales from fiscal 2024, primarily due to the sale of the BCS business during fiscal 2024. The Company’s Belgian manufacturing operation saw an 18.4% decrease in sales from fiscal 2024 with softer demand in the European marine markets. The Company’s Swiss manufacturing operation, which supplies customized propellers for the global mega yacht and patrol boat markets, experienced a 3.9% increase in sales compared to fiscal 2024, primarily due to a strengthening European propulsion market.
Current wording
Sales for our manufacturing segment increased 15.2%, or $44.9 million, versus the same period last year. The Company’s Veth propulsion operation in the Netherlands experienced an 16.4% increase in sales compared to fiscal 2025. The primary driver for this increase remains growing demand through market and geographic penetration for the Company’s innovative propulsion solutions around the globe, along with improving supply chain and operational performance. The Company’s Katsa operation in Finland experienced an increase of 30.8%, with acceleration in demand from European military applications. The Company’s domestic manufacturing operation experienced a 3.8% increase in sales in fiscal 2026, driven in part by some improvement in oil and gas demand. The Company’s Italian manufacturing operations reported a 29.9% increase in sales from fiscal 2025, with a positive currency impact combining with an improved European industrial demand. The Company’s Belgian manufacturing operation saw a 7.7% decrease in sales from fiscal 2025 with softer demand from domestic customers due to the impact of tariffs. The Company’s Swiss manufacturing operation, which supplies customized propellers for the global mega yacht and patrol boat markets, experienced a 45.9% increase in sales compared to fiscal 2025, primarily due to the collaboration with Veth driving improved pleasure craft demand.
Previous wording
Sales for our distribution segment were down 8.6%, or $12.4 million, compared to fiscal 2024. The Company’s Asian distribution operations in Singapore, China and Japan experienced a 6.7% decrease in sales on softening demand for energy related products in China. The Company’s North American distribution operation saw a 26.9% decrease on weaker domestic demand for marine products from the European operations. The Company’s European distribution operation was essentially flat with the prior year. The Company’s distribution operation in Australia, which provides boat accessories, propulsion and marine transmission systems for the pleasure craft market, saw a slight decrease in revenue (0.7%) on consistent demand for pleasure craft products in the region.
Current wording
Sales for our distribution segment were down 11.6%, or $15.2 million, compared to fiscal 2025. The Company’s Asian distribution operations in Singapore, China and Japan experienced a 7.8% decrease in sales on somewhat softer demand for energy related products in China. The Company’s North American distribution operation saw a 32.0% decrease on weaker domestic demand for marine products from the European operations due primarily to the impact of tariffs. The Company’s European distribution operation was down 19.0% from the prior year, driven by weaker European demand. 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 increase in revenue (2.3%) on consistent demand for pleasure craft products in the region.
Previous wording
Net sales for the Company’s marine transmission and propulsion systems were up 17.1% in fiscal 2025 compared to the prior fiscal year. This increase reflects generally strong market conditions, continued global growth of the Veth product, the addition of the Katsa and Kobelt product lines and a general easing of supply chain constraints during the fiscal year. In the off-highway transmission market, the year-over-year increase of 2.1% can be attributed primarily to the historically high demand for the Company’s ARFF (airport rescue and firefighting) transmissions. The increase experienced in the Company’s industrial products of 61.8% was a function of stronger demand in the North American construction and recycling markets, along with the addition of the Katsa and Kobelt product lines.
Current wording
Net sales for the Company’s marine transmission and propulsion systems were up 13.2% in fiscal 2026 compared to the prior fiscal year. This increase reflects generally strong market conditions, continued global growth of the Veth product, the addition of the Kobelt product line for the full fiscal year and improved military demand for marine transmissions. In the off-highway transmission market, the year-over-year increase of 11.9% can be attributed primarily to an increase in global demand for energy related products. The increase experienced in the Company’s industrial products of 11.0% was a function of stronger demand in the North American construction and recycling markets, along with the addition of the Kobelt product line for the full fiscal year.
Previous wording
Geographically, sales to the U.S. and Canada improved 10% in fiscal 2025 compared to fiscal 2024, representing 27% of consolidated sales for fiscal 2025 compared to 28% in fiscal 2024. The increase is primarily due to the addition of Kobelt, improving Veth demand in the region and recovering industrial sales. Sales into the Asia Pacific market decreased 20% compared to fiscal 2024 and represented approximately 22% of sales in fiscal 2025, compared to 32% in fiscal 2024. The decrease in fiscal 2025 reflects softening demand for the Company’s oil and gas transmissions in the Chinese market. Sales into the European market improved approximately 40% from fiscal 2024 levels while accounting for 41% of consolidated net sales in fiscal 2025 compared to 33% of net sales in fiscal 2024. The addition of Katsa revenue in fiscal 2025, along with strong demand for the Company’s Veth propulsion products, drove much of the fiscal 2025 growth. See Note K, Business Segments and Foreign Operations, of the notes to the consolidated financial statements for more information on the Company’s business segments and foreign operations.
Current wording
Geographically, sales to the U.S. and Canada improved 23% in fiscal 2026 compared to fiscal 2025, representing 29.7% of consolidated sales for fiscal 2026 compared to 27.0% in fiscal 2025. The increase is primarily due to the addition of Kobelt, improving Veth demand in the region, improved industrial sales and strong oil and gas related shipments in the fourth quarter. Sales into the Asia Pacific market decreased 3.1% compared to fiscal 2025 and represented approximately 19.2% of sales in fiscal 2026, compared to 22.2% in fiscal 2025. The decrease in fiscal 2026 reflects softening demand for the Company’s oil and gas transmissions in the Chinese market. Sales into the European market improved approximately 16% from fiscal 2025 levels while accounting for 42% of consolidated net sales in fiscal 2026 compared to 41% of net sales in fiscal 2025. The growth is primarily the result of strong demand for the Company’s Veth and Katsa products. See Note J, Business Segments and Foreign Operations, of the notes to the consolidated financial statements for more information on the Company’s business segments and foreign operations.
Previous wording
In fiscal 2025, gross profit improved $9.4 million, or 11.3%, to $92.7 million on a sales increase of $45.6 million. Gross profit as a percentage of sales decreased 100 basis points in fiscal 2025 to 27.2%, compared to 28.2% in fiscal 2024.
Current wording
Considering the impact of the inventory valuation accounting method change from LIFO to FIFO, which increased prior-year gross profit by approximately $1.2 million, fiscal 2026 gross profit increased $8.6 million, or 9.2%, to $102.6 million on a sales increase of $40.5 million. Gross profit as a percentage of sales decreased 70 basis points in fiscal 2026 to 26.9%, compared to 27.6% in fiscal 2025.
Previous wording
There were a number of factors that impacted the Company’s overall gross profit rate in fiscal 2025. Gross profit for the year was primarily impacted by improved volumes (approximately $12.9 million). This was offset by a less favorable product mix (approximately $3.1 million), primarily related to weaker demand for oil and gas related products. The company also recorded purchase accounting amortization in cost of goods sold totaling $0.9 million in fiscal 2025. The remaining increase ($0.5 million) is the result of price realization, cost reduction efforts and improved productivity at our operating facilities.
Current wording
In addition to the impact of the accounting method change from LIFO to FIFO discussed above, several other factors affected the Company’s overall gross profit rate in fiscal 2026. Gross profit for the year was primarily impacted by improved volumes (approximately $11.0 million). This was offset by a less favorable product mix (approximately $1.2 million), primarily related to reduced aftermarket demand and growth in lower margin products. The Company’s margin percentage was diluted by approximately 50 basis points in the year due to the invoicing of tariffs with no margin ($1.9 million). The remaining increase ($1.9 million) is the result of price realization, cost reduction efforts, improved productivity and other adjustments at our operating facilities.
Previous wording
Marketing, engineering, and administrative (ME&A) expenses of $82.4 million were up $10.8 million, or 15.1%, in fiscal 2025 compared to the prior fiscal year. As a percentage of sales, ME&A expenses decreased to 24.2% of sales versus 24.3% of sales in fiscal 2024. The increase in ME&A spending in fiscal 2025 compared to the prior year was primarily driven by the addition of the Katsa and Kobelt operations ($8.6 million). The remaining increase was driven by an inflationary increase to salaries and benefits ($1.5 million), stock compensation expense ($0.7 million), professional fees ($1.3 million), and a legal settlement ($0.4 million). These increases were partially offset by reductions to the global bonus expense ($1.0 million), bad debt expense ($0.3 million) and other cost savings ($0.4 million).
Current wording
Marketing, engineering, and administrative (ME&A) expenses of $84.5 million were up $2.1 million, or 2.5%, in fiscal 2026 compared to the prior fiscal year. As a percentage of sales, ME&A expenses decreased to 22.2% of sales versus 24.2% of sales in fiscal 2025. The increase in ME&A spending in fiscal 2026 compared to the prior year was primarily driven by the addition of the Kobelt operations for a full year ($1.4 million), an inflationary increase to salaries and benefits ($1.0 million) and a currency translation effect ($2.5 million). These increases were partially offset by reductions to the global bonus expense ($1.1 million), lower depreciation and amortization ($1.0 million) and other cost savings ($0.8 million).
Previous wording
During the course of fiscal 2025 and fiscal 2024 the Company incurred $0.4 million and $0.2 million in restructuring charges, respectively. These charges relate to a continued restructuring program at the Company’s Belgian operation to focus resources on core manufacturing process, while allowing for savings on the outsourcing of non-core processes.
Current wording
During the course of fiscal 2026 and fiscal 2025 the Company incurred $0.4 million and $0.4 million in restructuring charges, respectively. These charges relate to a continued restructuring program at the Company’s Belgian operation to focus resources on core manufacturing process, while allowing for savings on the outsourcing of non-core processes.
Previous wording
Interest expense of $2.6 million for fiscal 2025 was $1.2 million higher than fiscal 2024 due to an increased average balance following the two completed acquisitions.
Current wording
Interest expense of $3.1 million for fiscal 2026 was $0.4 million higher than fiscal 2025 due to an increased average balance following the two recently completed acquisitions.
Previous wording
In fiscal 2025, other expense, net, of $5.5 million increased by $10.8 million from the prior fiscal year other income, net, of $5.3 million. This change is primarily due to an increase in currency translation losses ($5.2 million), an increase in defined benefit pension amortization ($2.0 million) and the prior year impact of a bargain purchase gain related to the acquisition of Katsa ($3.7 million).
Current wording
In fiscal 2026, other expense, net, of $1.3 million decreased by $4.0 million from the prior fiscal year other expense, net, of $5.5 million. This change is primarily due to a decrease in currency translation losses ($6.5 million), offset by an increase in defined benefit pension amortization ($2.0 million) and other miscellaneous items ($0.3 million).
Previous wording
The effective tax rate for fiscal 2025 is 190.4% compared to 26.8% for fiscal 2024.
Current wording
The effective tax rate for fiscal 2026 is (102.8%) compared to 113.6% for fiscal 2025.
Previous wording
The Company maintains valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the tax provision in the period of change. In determining whether a valuation allowance is required, the Company takes into account such factors as prior earnings history, expected future earnings, carry-back and carry-forward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. Management believes that it is more likely than not that the results of future operations will not generate sufficient taxable income and foreign source income to realize all the domestic deferred tax assets, therefore, the company recorded in fiscal year 2025 and 2024, the valuation allowance of $24.0 million and $24.0 million, respectively.
Current wording
The Company maintains valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the tax provision in the period of change. In determining whether a valuation allowance is required, the Company takes into account such factors as prior earnings history, expected future earnings, carry-back and carry-forward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. During fiscal 2026, the Company reassessed the realizability of its deferred tax assets and concluded that substantially all of its U.S. valuation allowance was no longer required. As a result, the Company released the valuation allowance and recognized a corresponding income tax benefit. The Company's valuation allowance was $0.1 million and $16.5 million as of June 30, 2026 and 2025, respectively, with prior-year amounts adjusted to reflect the change in inventory valuation method.
Previous wording
As of June 30, 2025, the Company’s backlog of orders scheduled for shipment during the next six months (six-month backlog) was $150.5 million or approximately 13% higher than the six-month backlog of $133.7 million as of June 30, 2024. The increased backlog is primarily attributable to continued strength in order rates throughout the fiscal year, led by continued growth in demand for the Veth product, along with the addition of Kobelt backlog ($2.8 million).
Current wording
As of June 30, 2026, the Company’s backlog of orders scheduled for shipment during the next six months (six-month backlog) was $178.3 million or approximately 18.5% higher than the six-month backlog of $150.5 million as of June 30, 2025. The increased backlog is primarily attributable to continued strength in order rates throughout the fiscal year, led by continued growth in demand for the Veth product, along with the addition of Kobelt backlog ($2.8 million).
Previous wording
The net cash provided by operating activities in fiscal 2025 totaled $24.0 million, a decrease of $9.7 million from the prior fiscal year cash provided by operating activities of $33.7 million. The reduction in operating cash flow from the prior year was primarily due to an increase in inventory in fiscal 2025. This increase was driven by some shipping delays at the end of fiscal 2025, along with operational increases to support a growing backlog. The Company expects to drive inventory reductions through fiscal 2026. The unfavorable movement in inventory was partially offset by favorable movements in trade payables and accrued liabilities.
Current wording
The net cash provided by operating activities in fiscal 2026 totaled $22.9 million, a decrease of $1.1 million from the prior fiscal year cash provided by operating activities of $24.0 million. The slight reduction in operating cash flow from the prior year was primarily due to an increase in trade receivables, offset by improved operating results and reduced inventory levels. The increase to trade receivables was volume driven, with the Company reporting a record revenue in the fourth quarter of fiscal 2026. The Company expects trade receivables to continue to move with revenue and will continue to focus on driving inventory reductions through fiscal 2027.
Previous wording
The net cash used by investing activities for fiscal 2025 primarily represents the acquisition of Kobelt ($17.2 million) and the acquisition of property, plant and equipment ($15.2 million). The capital spending amount reflects a significant increase from the prior year, driven by the additional capital needs of Katsa and the timing of machine tool deliveries.
Current wording
The net cash used by investing activities for fiscal 2026 primarily represents the acquisition of capital expenditures ($13.7 million). The capital spending amount reflects a decrease from the prior year, driven by some extended lead times on capital equipment.
Previous wording
The net cash used by financing activities relates primarily to payments for dividends ($2.6 million), payments on finance lease obligations ($1.1 million) and payments on stock compensation withholding taxes ($1.3 million). These uses were partially offset by incremental borrowings of $4.0 million. During fiscal 2025, the Company did not purchase any shares as part of its Board-authorized stock repurchase program. The Company has 315,000 shares remaining under its authorized stock repurchase plan.
Current wording
The net cash provided by financing activities relates primarily to additional borrowings to finance growth ($0.9 million). This was partially offset by payments for dividends ($2.7 million), payments on finance lease obligations ($1.2 million) and payments on stock compensation withholding taxes ($1.7 million). During fiscal 2026, the Company did not purchase any shares as part of its Board-authorized stock repurchase program. The Company has 315,000 shares remaining under its authorized stock repurchase plan.
Previous 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).
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”), the Canadian Overnight Repo Rate Average (the “CORRA”), or a Base Rate based on the highest of the prime rate, federal funds rate, or Term SOFR. Loans under the Credit Agreement are designated as either as SOFR Loans, which accrue interest at a Term SOFR plus an Applicable Margin; Base Rate Loans, which accrue interest at the Base Rate plus an Applicable Margin; Eurodollar Loans, which accrue interest at the EURIBO Rate plus an Applicable Margin; Term CORRA Loans, which accrue interest at an Adjusted Term CORRA plus an Applicable Margin; Daily Compounded CORRA Loans, which accrue interest at a Daily Compounded CORRA plus an Applicable Margin; or Canadian Prime Rate Loans, which accrue interest at the Canadian Prime Rate plus an Applicable Margin. The Applicable Margin for Loans is between 1.50% and 3.00%, and the Applicable Margin for the Unused Revolving Credit Commitment is between 0.15% and 0.30% (each depending on the Company’s Total Funded Debt to EBITDA ratio). The Term Loan has been designated as a SOFR Loan.
Previous 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.
Current wording
Borrowings under the Credit Agreement are secured by substantially all of the Company’s and Kobelt’s personal property, including accounts receivable, inventory, machinery and equipment, and intellectual property. The Company has also pledged 65% of its equity interests in certain foreign subsidiaries. To effect these security interests, the Company entered into an Amended and Restated Security Agreement, Amended and Restated IP Security Agreement, Amended and Restated Pledge Agreement, and Amended and Restated Perfection Certificate with the Administrative Agent, and the Company has entered into an Amended Restated Agreement as to Liens and Encumbrances and an Amended and Restated Negative Pledge Agreement with the Administrative Agent with regard to the Company’s real property.
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 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.
Current wording
Upon the occurrence of an Event of Default, the Administrative Agent may take the following actions upon written notice to the Company: (1) terminate the remaining Commitments and all obligations of the Lenders under the Credit Agreement; (2) declare the principal and accrued interest of all Loans outstanding under the Credit Agreement to be immediately due and payable; and (3) demand the Company to immediately Cash Collateralize the outstanding L/C Obligations in an amount equal to 105% of the aggregate L/C Obligations. If such Event of Default is due to the Company’s bankruptcy, the actions and obligations listed above shall occur without notice to the Company.
Previous wording
The Company’s balance sheet remains strong, there are no material off-balance-sheet arrangements, and it continues to have sufficient liquidity for its near-term needs. The Company had approximately $32.1 million of available borrowings under the Credit Agreement as of June 30, 2025. The Company expects to continue to generate enough cash from operations, as well as its credit facilities, to meet its operating and investing needs. As of June 30, 2025, the Company also had cash of $16.1 million, primarily at its overseas operations. These funds, with some restrictions and tax implications, are available for repatriation as deemed necessary by the Company. In fiscal 2026, the Company expects to contribute $0.7 million to its defined benefit pension plans, the minimum contribution required.
Current wording
The Company’s balance sheet remains strong, there are no material off-balance-sheet arrangements, and it continues to have sufficient liquidity for its near-term needs. The Company had approximately $60.0 million of available borrowings under the Credit Agreement as of June 30, 2026. The Company expects to continue to generate enough cash from operations, as well as its credit facilities, to meet its operating and investing needs. As of June 30, 2026, the Company also had cash of $16.0 million, primarily at its overseas operations. These funds, with some restrictions and tax implications, are available for repatriation as deemed necessary by the Company. In fiscal 2027, the Company expects to contribute $2.0 million to its defined benefit pension plans, the minimum contribution required.
Previous wording
The Company expects capital expenditures to be approximately $17 million - $19 million in fiscal 2026. These anticipated expenditures reflect the Company’s plans to invest in modern equipment to drive growth, efficiencies, quality improvements and cost reductions.
Current wording
The Company expects capital expenditures to be approximately $23 million - $27 million in fiscal 2027. These anticipated expenditures reflect the Company’s plans to invest in modern equipment to drive growth, efficiencies, quality improvements and cost reductions.
Previous wording
The Company's significant contractual obligations as of June 30, 2025 are discussed in Note I “Lease Obligations” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this 2025 Annual Report on Form 10-K. There are no material undisclosed guarantees. As of June 30, 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 also has long-term obligations related to its postretirement plans which are discussed in detail in Note N “Pension and Other Postretirement Benefit Plans” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this 2025 Annual Report on Form 10-K. Postretirement medical claims are paid by the Company as they are submitted, and they are anticipated to be $0.5 million in fiscal 2026 based on actuarial estimates; however, these amounts can vary significantly from year to year because the Company is self-insured. In fiscal 2026, the Company expects to contribute $0.7 million to its defined benefit pension plans, the minimum contribution required.
Current wording
The Company's significant contractual obligations as of June 30, 2026 are discussed in Note H, Lease Obligations in the notes to the consolidated financial statements in Part II, Item 8 of this 2026 Annual Report on Form 10-K. There are no material undisclosed guarantees. As of June 30, 2026, 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 also has long-term obligations related to its postretirement plans which are discussed in detail in Note M, Pension and Other Postretirement Benefit Plans in the notes to consolidated financial statements in Part II, Item 8 of this 2026 Annual Report on Form 10-K. Postretirement medical claims are paid by the Company as they are submitted, and they are anticipated to be $0.6 million in fiscal 2027 based on actuarial estimates; however, these amounts can vary significantly from year to year because the Company is self-insured. In fiscal 2027, the Company expects to contribute $2.0 million to its defined benefit pension plans, the minimum contribution required.
Previous wording
The Company’s significant accounting policies are described in Note A, Significant Accounting Policies, of the notes to the consolidated financial statements. Not all of these significant accounting policies require management to make difficult, subjective, or complex judgments or estimates. However, the policies management considers most critical to understanding and evaluating its reported financial results are the following:
Current wording
The Company’s significant accounting policies are described in Note A, Description of Business and Summary of Significant Accounting Policies, of the notes to the consolidated financial statements. Not all of these significant accounting policies require management to make difficult, subjective, or complex judgments or estimates. However, the policies management considers most critical to understanding and evaluating its reported financial results are the following:
Previous wording
The Company provides a wide range of benefits to employees and retired employees, including pensions and postretirement health care coverage. Plan assets and obligations are recorded annually based on the Company’s measurement date utilizing discount rates as the significant assumption in determining the obligation as of that date. The approach used to determine the discount rates is based on the Willis Towers Watson BOND:Link model at June 30, 2025 as applied to the expected payouts from the pension plans. This yield curve is made up of Corporate Bonds rated AA or better.
Current wording
The Company provides a wide range of benefits to employees and retired employees, including pensions and postretirement health care coverage. Plan assets and obligations are recorded annually based on the Company’s measurement date utilizing discount rates as the significant assumption in determining the obligation as of that date. The approach used to determine the discount rates is based on FTSE Above Median Pension Discount Curve model at June 30, 2026, as applied to the expected payouts from the pension plans. This yield curve is made up of Corporate Bonds rated AA or better.
Previous wording
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company maintains valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be realized. In determining whether a valuation allowance is required, several factors are considered (e.g., prior earnings history, carry-back and carry-forward periods, etc.) but the most significant factors are expected future earnings that could potentially enhance the likelihood of realization of a deferred tax asset and tax strategies. Based on the above criteria the Company has determined that a full valuation allowance is appropriate as relates to its domestic operations. A full domestic valuation allowance of $24.0 million has been recognized at June 30, 2025. The recognition of a valuation allowance does not affect the availability of the tax credits as the Company realizes earnings.
Current wording
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company maintains valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be realized. In determining whether a valuation allowance is required, the Company takes into account such factors as prior earnings history, expected future earnings, carry-back and carry-forward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. In addition, all other available positive and negative evidence is taken into consideration, including impacts of tax reform.
Previous wording
See Note A, Significant Accounting Policies, of the notes to the consolidated financial statements for a discussion of recently issued accounting standards.
Current wording
See Note A, Description of Business and Summary of Significant Accounting Policies, of the notes to the consolidated financial statements for a discussion of recently issued accounting standards.