UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended March 27, 2020 (262) 638-4000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Exchange Act: | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | --- | --- | --- | | Common Stock (No Par Value) | TWIN | The NASDAQ Stock Mark ...

Twin Disc, Incorporated (NASDAQ:TWIN) Q3 2020 Earnings Conference Call May 1, 2020 11:00 AM ET Company Participants Stanley Berger - Investor Relations John Batten - Chief Executive Officer Jeffrey Knutson - Vice President of Finance, Chief Financial Officer, Treasurer & Secretary Conference Call Participants Noah Kaye - Oppenheimer & Co, Inc. Josh Chan - Robert W. Baird & Co. Simon Wong - Gabelli Securities, Inc. Operator Good day and welcome to the Twin Disc, Inc. Fiscal Third Quarter 2020 Earnings Confer ...

[Part I. FINANCIAL INFORMATION](index=2&type=section&id=Part%20I.%20FINANCIAL%20INFORMATION) Presents Twin Disc's unaudited condensed consolidated financial statements and related notes [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) Presents Twin Disc's unaudited condensed consolidated financial statements, including balance sheets, income, cash flows, and notes [Condensed Consolidated Balance Sheets](index=2&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) Details the company's assets, liabilities, and equity at specific reporting dates CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) | ASSETS (in thousands) | December 27, 2019 | June 30, 2019 | | :---------------------- | :------------------ | :------------ | | Cash | $14,836 | $12,362 | | Trade accounts receivable, net | $33,302 | $44,013 | | Inventories | $134,658 | $125,893 | | Total current assets | $195,862 | $202,369 | | Total assets | $343,281 | $346,870 | | LIABILITIES AND EQUITY (in thousands) | | | | Total current liabilities | $75,989 | $75,114 | | Long-term debt | $50,512 | $40,491 | | Total liabilities | $173,796 | $164,052 | | Total equity | $169,485 | $182,818 | | Total liabilities and equity | $343,281 | $346,870 | [Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20(LOSS)%20INCOME) Reports the company's revenues, expenses, and net income or loss for the specified periods CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA) | (IN THOUSANDS, EXCEPT PER SHARE DATA) | For the Quarter Ended Dec 27, 2019 | For the Quarter Ended Dec 28, 2018 | For the Two Quarters Ended Dec 27, 2019 | For the Two Quarters Ended Dec 28, 2018 | | :------------------------------------ | :--------------------------------- | :--------------------------------- | :------------------------------------ | :------------------------------------ | | Net sales | $59,536 | $78,107 | $118,826 | $152,796 | | Gross profit | $15,711 | $26,088 | $25,347 | $50,073 | | (Loss) income from operations | $(4,950) | $6,745 | $(11,781) | $11,572 | | Net (loss) income attributable to Twin Disc | $(6,516) | $4,073 | $(12,827) | $6,935 | | Basic (loss) income per share | $(0.49) | $0.31 | $(0.98) | $0.56 | | Diluted (loss) income per share | $(0.49) | $0.31 | $(0.98) | $0.56 | | Comprehensive (loss) income attributable to Twin Disc | $(4,175) | $2,778 | $(13,086) | $5,575 | [Condensed Consolidated Statements of Cash Flows](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Summarizes the cash inflows and outflows from operating, investing, and financing activities CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) | (IN THOUSANDS) | For the Two Quarters Ended Dec 27, 2019 | For the Two Quarters Ended Dec 28, 2018 | | :------------------------------------ | :-------------------------------------- | :-------------------------------------- | | Net (loss) income | $(12,759) | $6,982 | | Net cash provided (used) by operating activities | $116 | $(3,779) | | Net cash used by investing activities | $(6,934) | $(66,393) | | Net cash provided by financing activities | $9,220 | $73,324 | | Net change in cash | $2,474 | $3,371 | | Cash, end of period | $14,836 | $18,542 | [A. Basis of Presentation](index=5&type=section&id=A.%20Basis%20of%20Presentation) Explains the accounting principles and policies used in preparing the financial statements - The unaudited condensed consolidated financial statements are prepared in accordance with SEC rules and include adjustments for fair statement of results. They should be read in conjunction with the Company's Annual Report on Form 10-K for June 30, 2019[14](index=14&type=chunk) - The financial results include Veth Propulsion Holding BV, acquired on July 2, 2018, with acquisition method accounting finalized[15](index=15&type=chunk) - The Company adopted ASU 2018-07 (share-based payments to nonemployees) effective July 1, 2019, with no material impact. It is evaluating ASU 2018-13 (fair value measurements), ASU 2018-14 (defined benefit plans), and ASU 2019-12 (income taxes) for future fiscal years[16](index=16&type=chunk)[17](index=17&type=chunk)[18](index=18&type=chunk)[19](index=19&type=chunk) - The Company qualifies as a smaller reporting company and has scaled some disclosures in this report[20](index=20&type=chunk) [B. Inventories](index=6&type=section&id=B.%20Inventories) Provides a breakdown of inventory components and their valuation at period end Inventories (in thousands) | Inventories (in thousands) | December 27, 2019 | June 30, 2019 | | :------------------------ | :------------------ | :------------ | | Finished parts | $68,315 | $57,682 | | Work in process | $22,222 | $23,812 | | Raw materials | $44,121 | $44,399 | | Total | $134,658 | $125,893 | [C. Warranty](index=6&type=section&id=C.%20Warranty) Details the company's warranty obligations, reserve activity, and related expenses - The Company's warranty obligation is based on product failure rates, units affected, and repair expenses, with reserves established on management's best estimate considering warranty coverage, historical claims, new products, and economic trends[23](index=23&type=chunk) Warranty Reserve Activity (in thousands) | Warranty Reserve Activity (in thousands) | For the Quarter Ended Dec 27, 2019 | For the Quarter Ended Dec 28, 2018 | For the Two Quarters Ended Dec 27, 2019 | For the Two Quarters Ended Dec 28, 2018 | | :------------------------------------- | :--------------------------------- | :--------------------------------- | :------------------------------------ | :------------------------------------ | | Reserve balance, beginning of period | $7,107 | $4,667 | $3,736 | $4,407 | | Current period expense and adjustments | $681 | $128 | $6,129 | $1,414 | | Payments or credits to customers | $(2,035) | $(926) | $(4,067) | $(1,946) | | Translation | $22 | $(26) | $(23) | $(32) | | Reserve balance, end of period | $5,775 | $3,843 | $5,775 | $3,843 | - Included in the current fiscal half expense is a non-recurring warranty charge of **$3,889 thousand** for a unique product performance issue[23](index=23&type=chunk) [D. Contingencies](index=6&type=section&id=D.%20Contingencies) Addresses potential liabilities from litigation and other uncertain events - The Company is involved in litigation, but management believes the final disposition will not materially impact its operations, financial position, or cash flows[25](index=25&type=chunk) [E. Business Segments](index=6&type=section&id=E.%20Business%20Segments) Describes the company's operational segments and their financial performance - Twin Disc manufactures and sells marine and heavy-duty off-highway power transmission equipment, including marine transmissions, azimuth drives, power-shift transmissions, and industrial clutches, serving pleasure craft, commercial/military marine, energy, natural resources, government, and industrial markets globally[26](index=26&type=chunk) - The Company operates in two reportable segments: manufacturing and distribution, with performance evaluated based on net income[28](index=28&type=chunk) Segment Performance (in thousands) | Segment Performance (in thousands) | For the Quarter Ended Dec 27, 2019 | For the Quarter Ended Dec 28, 2018 | For the Two Quarters Ended Dec 27, 2019 | For the Two Quarters Ended Dec 28, 2018 | | :--------------------------------- | :--------------------------------- | :--------------------------------- | :------------------------------------ | :------------------------------------ | | Manufacturing segment sales | $57,173 | $70,986 | $111,734 | $139,899 | | Distribution segment sales | $22,025 | $27,090 | $44,452 | $50,010 | | Total Net sales | $59,536 | $78,107 | $118,826 | $152,796 | | Manufacturing segment net (loss) income | $(2,936) | $7,924 | $(7,791) | $15,159 | | Distribution segment net income | $842 | $569 | $1,934 | $1,434 | | Total Net (loss) income attributable to Twin Disc | $(6,516) | $4,073 | $(12,827) | $6,935 | Net Sales by Product Group (in thousands) | Net Sales by Product Group (in thousands) | Q2 FY2020 Total | Q2 FY2019 Total | YTD FY2020 Total | YTD FY2019 Total | | :-------------------------------------- | :-------------- | :-------------- | :--------------- | :--------------- | | Industrial | $6,625 | $9,116 | $14,088 | $16,162 | | Land-based transmissions | $15,305 | $29,778 | $30,824 | $59,414 | | Marine and propulsion systems | $36,699 | $37,856 | $71,720 | $74,131 | | Other | $907 | $1,357 | $2,194 | $3,089 | | Total | $59,536 | $78,107 | $118,826 | $152,796 | [F. Stock-Based Compensation](index=8&type=section&id=F.%20Stock-Based%20Compensation) Outlines the types of stock-based awards granted and their associated expenses - The Company grants Performance Stock Awards (PSAs) tied to average return on invested capital, annual sales, and EPS targets over three fiscal years. For fiscal 2020, **131.7 target PSAs** were granted, with **214.0 unvested PSAs** outstanding at December 27, 2019[31](index=31&type=chunk)[33](index=33&type=chunk) - Restricted Stock Awards (RS) vest based on service conditions, typically 1-3 years. **180.4 service-based restricted shares** were granted in the first half of fiscal 2020, with **231.4 unvested shares** outstanding at December 27, 2019[34](index=34&type=chunk) - Restricted Stock Unit Awards (RSU) entitle employees to common stock if employment is maintained for a specified period, generally three years. **38.0 unvested RSUs** were outstanding at December 27, 2019[35](index=35&type=chunk) Stock-Based Compensation Expense (in thousands) | Stock-Based Compensation Expense (in thousands) | For the Quarter Ended Dec 27, 2019 | For the Quarter Ended Dec 28, 2018 | For the Two Quarters Ended Dec 27, 2019 | For the Two Quarters Ended Dec 28, 2018 | | :---------------------------------------------- | :--------------------------------- | :--------------------------------- | :------------------------------------ | :------------------------------------ | | PSAs | $(52) | $242 | $20 | $788 | | RS Awards | $218 | $266 | $524 | $516 | | RSUs | $81 | $82 | $163 | $136 | [G. Pension and Other Postretirement Benefit Plans](index=9&type=section&id=G.%20Pension%20and%20Other%20Postretirement%20Benefit%20Plans) Details the company's defined benefit and postretirement benefit plans and their costs - The Company maintains non-contributory, qualified defined benefit plans for domestic and certain foreign employees, and provides health care and life insurance benefits for some domestic retirees[37](index=37&type=chunk) Net Periodic Benefit Cost (in thousands) | Net Periodic Benefit Cost (in thousands) | For the Quarter Ended Dec 27, 2019 | For the Quarter Ended Dec 28, 2018 | For the Two Quarters Ended Dec 27, 2019 | For the Two Quarters Ended Dec 28, 2018 | | :------------------------------------- | :--------------------------------- | :--------------------------------- | :------------------------------------ | :------------------------------------ | | Pension Benefits | $632 | $689 | $1,290 | $1,382 | | Postretirement Benefits | $(10) | $12 | $(19) | $24 | | Expected contributions to pension plans in fiscal 2020 | | | $1,936 | | | Contributions made as of Dec 27, 2019 | | | $785 | | [H. Income Taxes](index=9&type=section&id=H.%20Income%20Taxes) Explains the company's effective income tax rate, deferred taxes, and unrecognized tax benefits - The Company's effective income tax rate for the two quarters ended December 27, 2019, was **4.3%**, significantly lower than **25.1%** in the prior year, primarily due to the impact of GILTI provisions of the Tax Cuts and Jobs Act, which decreased the rate by **18.55%** due to foreign income inclusions and no GILTI deductions in a domestic loss position[39](index=39&type=chunk) - The Company maintains valuation allowances for deferred tax assets when realization is uncertain, considering factors like earnings history and tax strategies. No valuation allowances were required as of December 27, 2019[40](index=40&type=chunk) - As of December 27, 2019, the Company had approximately **$1,158 thousand** in unrecognized tax benefits, which would favorably impact the effective tax rate if recognized. Ongoing audit activity may lead to changes in the next twelve months[43](index=43&type=chunk) [I. Goodwill and Other Intangibles](index=10&type=section&id=I.%20Goodwill%20and%20Other%20Intangibles) Discusses accounting for goodwill and other acquired intangible assets, including impairment testing - Goodwill is reviewed for impairment annually and when triggering events occur, using a discounted cash flow model and market approach data. No triggering events were identified in the first half of fiscal 2020[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk) Goodwill (in thousands) | Goodwill (in thousands) | December 27, 2019 | June 30, 2019 | | :---------------------- | :------------------ | :------------ | | Balance at period end | $25,561 | $25,954 | | European Propulsion | $23,013 | $23,371 | | European Industrial | $2,548 | $2,583 | Acquired Intangible Assets (in thousands) | Acquired Intangible Assets (in thousands) | December 27, 2019 | June 30, 2019 | | :---------------------------------------- | :------------------ | :------------ | | Net Book Value | $22,425 | $25,153 | | Customer Relationships | $13,009 | $14,843 | | Technology Know-how | $6,329 | $7,025 | | Trade Name | $2,563 | $2,733 | | Other | $524 | $552 | | Weighted average remaining useful life | 9 years | | Estimated Intangible Amortization Expense (in thousands) | Estimated Intangible Amortization Expense (in thousands) | | :------------------------------------------------------- | | Fiscal Year 2020 (remainder) | $2,297 | | Fiscal Year 2021 | $3,305 | | Fiscal Year 2022 | $3,120 | | Fiscal Year 2023 | $2,960 | | Fiscal Year 2024 | $2,748 | | Fiscal Year 2025 | $2,562 | [J. Long-term Debt](index=11&type=section&id=J.%20Long-term%20Debt) Provides information on the company's long-term borrowing arrangements and related covenants - The Company's long-term debt primarily consists of a Term Loan and Revolving Loans under a Credit Agreement with BMO Harris Bank N.A., secured by substantially all of the Company's personal property[52](index=52&type=chunk)[127](index=127&type=chunk) - An amendment to the Credit Agreement was finalized on January 28, 2020, increasing the maximum allowable total funded debt to EBITDA ratio for specific quarters (e.g., **4.00 to 1.00** for Q2 FY2020, **5.00 to 1.00** for Q3 FY2020) and adjusting interest rate margins. Prior to the amendment, the Company's ratio exceeded the previous covenant of **3.00 to 1.00**[53](index=53&type=chunk)[124](index=124&type=chunk)[126](index=126&type=chunk) Long-term Debt (in thousands) | Long-term Debt (in thousands) | December 27, 2019 | June 30, 2019 | | :---------------------------- | :------------------ | :------------ | | Revolving loans | $33,229 | $22,666 | | Term loan (due March 2026) | $19,000 | $19,500 | | Other | $283 | $325 | | Subtotal | $52,512 | $42,491 | | Less: current maturities | $(2,000) | $(2,000) | | Total long-term debt | $50,512 | $40,491 | | Average interest rate (YTD FY2020) - Term Loan | 3.58% | | | Average interest rate (YTD FY2020) - Revolving Loans | 2.48% | | - As of December 27, 2019, the Company had approximately **$8,470 thousand** of available borrowings under the Revolving Loans[57](index=57&type=chunk) [K. Shareholders' Equity](index=12&type=section&id=K.%20Shareholders'%20Equity) Details the components of shareholders' equity, including common stock and retained earnings - The Company is authorized to purchase **315,000 shares** of its common stock under Board authorizations, but no open market purchases were made during the quarters ended December 27, 2019, and December 28, 2018[60](index=60&type=chunk)[145](index=145&type=chunk) Twin Disc, Inc. Shareholders' Equity (in thousands) | Twin Disc, Inc. Shareholders' Equity (in thousands) | December 27, 2019 | June 30, 2019 | | :------------------------------------------------ | :------------------ | :------------ | | Common Stock | $42,305 | $45,047 | | Retained Earnings | $183,645 | $196,472 | | Accumulated Other Comprehensive Loss | $(38,230) | $(37,971) | | Less Treasury Stock | $(18,796) | $(21,332) | | Total Twin Disc Shareholders' Equity | $168,924 | $182,216 | | Noncontrolling Interest | $561 | $602 | | Total Equity | $169,485 | $182,818 | [L. Restructuring of Operations](index=14&type=section&id=L.%20Restructuring%20of%20Operations) Describes the company's restructuring initiatives, charges, and accrued liabilities - The Company has implemented restructuring programs since fiscal 2015, primarily involving workforce reductions in manufacturing and reorganization for productivity in European operations, eliminating **203 full-time employees** in the manufacturing segment to date[64](index=64&type=chunk)[65](index=65&type=chunk) Restructuring Charges (in thousands) | Restructuring Charges (in thousands) | For the Quarter Ended Dec 27, 2019 | For the Quarter Ended Dec 28, 2018 | For the Two Quarters Ended Dec 27, 2019 | For the Two Quarters Ended Dec 28, 2018 | | :----------------------------------- | :--------------------------------- | :--------------------------------- | :------------------------------------ | :------------------------------------ | | Restructuring charges | $1,063 | $434 | $1,184 | $607 | - During Q2 FY2020, a marine propulsion development program was terminated, resulting in a **$3,185 thousand** restructuring charge, including a **$2,185 thousand** non-cash write-off of assets/liabilities and **$1,000 thousand** cash settlement for supplier commitments[66](index=66&type=chunk) Accrued Restructuring Liability (in thousands) | Accrued Restructuring Liability (in thousands) | | :--------------------------------------------- | | Accrued restructuring liability, June 30, 2019 | $0 | | Additions related to workforce reduction | $1,184 | | Additions related to program termination | $3,185 | | Payments, adjustments and write-offs during the year | $(2,710) | | Accrued restructuring liability, December 27, 2019 | $1,659 | [M. Earnings Per Share](index=15&type=section&id=M.%20Earnings%20Per%20Share) Explains the calculation of basic and diluted earnings per share - Basic EPS is calculated on weighted average common shares outstanding, while diluted EPS includes the dilutive effect of potential common shares, excluding anti-dilutive effects[68](index=68&type=chunk) Earnings Per Share Data | Earnings Per Share Data | For the Quarter Ended Dec 27, 2019 | For the Quarter Ended Dec 28, 2018 | For the Two Quarters Ended Dec 27, 2019 | For the Two Quarters Ended Dec 28, 2018 | | :---------------------- | :--------------------------------- | :--------------------------------- | :------------------------------------ | :------------------------------------ | | Basic (Loss) Income Per Share | $(0.49) | $0.31 | $(0.98) | $0.56 | | Diluted (Loss) Income Per Share | $(0.49) | $0.31 | $(0.98) | $0.56 | | Weighted average shares outstanding - basic | 13,164 | 12,909 | 13,135 | 12,233 | | Weighted average shares outstanding - diluted | 13,164 | 12,997 | 13,135 | 12,304 | - Potential common shares related to unvested PSAs, RS awards, and RSUs were excluded from diluted EPS for the quarter and two quarters ended December 27, 2019, due to the Company reporting a net loss[70](index=70&type=chunk) [N. Lease Liabilities](index=15&type=section&id=N.%20Lease%20Liabilities) Outlines the company's lease agreements, associated assets, and liabilities - The Company leases office/warehouse space and equipment, determining lease terms and using an incremental borrowing rate when an implicit rate is unavailable[71](index=71&type=chunk)[72](index=72&type=chunk) Lease Expense (in thousands) | Lease Expense (in thousands) | For the Quarter Ended Dec 27, 2019 | For the Quarter Ended Dec 28, 2018 | For the Two Quarters Ended Dec 27, 2019 | For the Two Quarters Ended Dec 28, 2018 | | :--------------------------- | :--------------------------------- | :--------------------------------- | :------------------------------------ | :------------------------------------ | | Total lease cost | $888 | $860 | $1,750 | $1,758 | | Net lease cost | $834 | $859 | $1,643 | $1,741 | Lease Liabilities (in thousands) | Lease Liabilities (in thousands) | December 27, 2019 | June 30, 2019 | | :------------------------------- | :------------------ | :------------ | | Operating lease right-of-use assets | $15,180 | $14,138 | | Finance lease right-of-use assets | $746 | $545 | | Operating lease liabilities (current) | $1,936 | $1,933 | | Operating lease liabilities (long-term) | $13,253 | $12,197 | | Finance lease liabilities (current) | $167 | $104 | | Finance lease liabilities (long-term) | $597 | $449 | [O. Derivative Financial Instruments](index=17&type=section&id=O.%20Derivative%20Financial%20Instruments) Discusses the company's use of derivatives to manage financial risks - The Company uses derivative instruments, specifically an interest rate swap contract, to manage interest rate volatility on its LIBOR-based indebtedness, designating it as a cash flow hedge[77](index=77&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) - Net unrealized after-tax losses from cash flow hedging activities included in accumulated other comprehensive loss were **$506 thousand** as of December 27, 2019. The Company estimates **$144 thousand** of these losses will be reclassified into earnings within the next twelve months[81](index=81&type=chunk)[82](index=82&type=chunk) Fair Value of Derivative Instruments (in thousands) | Fair Value of Derivative Instruments (in thousands) | December 27, 2019 | June 30, 2019 | | :------------------------------------------------ | :------------------ | :------------ | | Interest rate swap (current) | $144 | $122 | | Interest rate swap (long-term) | $518 | $544 | [Item 2. Management Discussion and Analysis](index=18&type=section&id=Item%202.%20Management%20Discussion%20and%20Analysis) Analyzes Twin Disc's financial condition and results of operations for Q2 and YTD FY2020, covering performance, liquidity, and accounting policies [Results of Operations](index=18&type=section&id=Results%20of%20Operations) Analyzes the company's financial performance, including sales, gross profit, and operating income Results of Operations (In thousands) | (In thousands) | Quarter Ended Dec 27, 2019 | Quarter Ended Dec 28, 2018 | Two Quarters Ended Dec 27, 2019 | Two Quarters Ended Dec 28, 2018 | | :------------- | :------------------------- | :------------------------- | :------------------------------ | :------------------------------ | | Net sales | $59,536 | $78,107 | $118,826 | $152,796 | | Gross profit | $15,711 (26.4%) | $26,088 (33.4%) | $25,347 (21.3%) | $50,073 (32.8%) | | Marketing, engineering and administrative expenses | $16,413 (27.6%) | $18,909 (24.2%) | $32,759 (27.6%) | $37,894 (24.8%) | | Restructuring of operations | $4,248 (7.1%) | $434 (0.6%) | $4,369 (3.7%) | $607 (0.4%) | | (Loss) income from operations | $(4,950) (-8.3%) | $6,745 (8.6%) | $(11,781) (-9.9%) | $11,572 (7.6%) | - Q2 FY2020 net sales decreased **23.8%** (**$18.6 million**) YoY, driven by a **$16.5 million** decline in North American oil and gas products, a **$2.5 million** decrease in global industrial products, and a **$1.2 million** decline in global commercial marine products. North America's sales share dropped from **51%** to **39%**, while Europe saw **9.1% growth**, increasing its share to **37%**[89](index=89&type=chunk) - YTD FY2020 net sales decreased **22.2%** (**$34.0 million**) YoY, primarily due to a **$31.3 million** decline in North American oil and gas products. Gross profit percentage decreased to **21.3%** (from **32.8%** YoY) due to unfavorable product mix, reduced volume, and a **$3.9 million** charge for a product performance issue[99](index=99&type=chunk)[103](index=103&type=chunk) - Restructuring charges for Q2 FY2020 totaled **$4.2 million**, including **$3.2 million** for the termination of a marine propulsion program (comprising a **$2.2 million** non-cash write-off and **$1.0 million** cash settlement) and **$1.0 million** for cost reduction actions in domestic and European operations[95](index=95&type=chunk) - The YTD FY2020 effective tax rate was **4.3%**, significantly lower than **25.1%** in the prior year, mainly due to the GILTI provisions of the Tax Cut and Jobs Act, which reduced the rate by **18.55%** due to foreign income inclusions without corresponding deductions in a domestic loss position[108](index=108&type=chunk) [Financial Condition, Liquidity and Capital Resources](index=21&type=section&id=Financial%20Condition,%20Liquidity%20and%20Capital%20Resources) Reviews the company's financial position, cash flow, and funding strategies - Net working capital decreased by **$7.4 million** (**5.8%**) to **$119.9 million** as of December 27, 2019, from **$127.3 million** at June 30, 2019. Cash increased by **$2.5 million** to **$14.8 million**, with the majority held in overseas operations[109](index=109&type=chunk)[110](index=110&type=chunk) - Trade receivables decreased by **$10.7 million** (**24.3%**) to **$33.3 million**, driven by volume and sales timing. Inventories increased by **$8.8 million** (**7.0%**) to **$134.7 million**, partly due to a **$2.3 million** write-off from a terminated marine propulsion program and temporary increases in Asian and North American distribution operations[111](index=111&type=chunk)[112](index=112&type=chunk) - Total borrowings and long-term debt increased by **$10.0 million** to **$52.5 million**, primarily due to operating losses and capital spending, partially offset by favorable working capital movement. The Company ended the quarter with total debt, net of cash, of **$37.7 million**[115](index=115&type=chunk) - Total equity decreased by **$13.3 million** (**7.3%**) to **$169.5 million**, mainly due to a net loss of **$12.8 million** and unfavorable foreign currency translation of **$1.3 million**[117](index=117&type=chunk) - The Company had approximately **$8.5 million** of available borrowings under its Credit Agreement as of December 27, 2019, and expects to fund capital requirements through available cash, the credit facility, and potential access to debt markets[129](index=129&type=chunk)[132](index=132&type=chunk) - Capital expenditures are projected to be **$11 million - $13 million** in fiscal 2020, focused on modernizing manufacturing, assembly, and testing processes[113](index=113&type=chunk)[131](index=131&type=chunk) [Critical Accounting Policies](index=24&type=section&id=Critical%20Accounting%20Policies) Identifies key accounting policies requiring significant management judgment and estimates - The preparation of this report requires management's judgment, estimates, and assumptions. There have been no significant changes to the Company's critical accounting policies since June 30, 2019[137](index=137&type=chunk)[138](index=138&type=chunk) [Item 3. Quantitative and Qualitative Disclosure About Market Risk](index=24&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) The Company elects not to provide market risk disclosures due to its Smaller Reporting Company status - The Company is electing not to provide this disclosure due to its status as a Smaller Reporting Company[139](index=139&type=chunk) [Item 4. Controls and Procedures](index=24&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective, with no material changes to internal control - The Company's Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of the end of the reporting period[140](index=140&type=chunk) - No changes were made during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[141](index=141&type=chunk) [Part II. OTHER INFORMATION](index=24&type=section&id=Part%20II.%20OTHER%20INFORMATION) Presents additional required disclosures not included in the financial statements [Item 1. Legal Proceedings](index=24&type=section&id=Item%201.%20Legal%20Proceedings) The Company is a defendant in several product liability or related claims, believed to be immaterial or insured - The Company is a defendant in several product liability or related claims, which are considered either adequately covered by appropriate liability insurance or involving amounts not deemed material to the business or financial condition of the Company[142](index=142&type=chunk) [Item 1A. Risk Factors](index=24&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors previously disclosed in the Company's 2019 Annual Report on Form 10-K - There have been no material changes to the risk factors previously disclosed in response to Item 1A to Part I of the Company's 2019 Annual Report on Form 10-K[143](index=143&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=24&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or common stock repurchases occurred during the quarter - There were no unregistered sales of equity securities by the Company during the quarter ended December 27, 2019[144](index=144&type=chunk) - The Company did not purchase any shares of its common stock under its Board authorizations during the quarter ended December 27, 2019. As of this date, **315,000 shares** remain authorized for purchase[145](index=145&type=chunk) [Item 3. Defaults Upon Senior Securities](index=25&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the reporting period - None[147](index=147&type=chunk) [Item 5. Other Information](index=25&type=section&id=Item%205.%20Other%20Information) No other information is reported in this section - None[148](index=148&type=chunk) [Item 6. Exhibits](index=26&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with the quarterly report, including CEO/CFO certifications and XBRL documents Exhibits Filed | Exhibit Number | Description | | :------------- | :---------- | | 31a | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | 31b | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | 32a | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | 32b | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | 101.INS | XBRL Instance Document | | 101.SCH | XBRL Schema | | 101.CAL | XBRL Calculation Linkbase | | 101.DEF | XBRL Definition Linkbase | | 101.LAB | XBRL Label Linkbase | | 101.PRE | XBRL Presentation Linkbase |

Twin Disc, Incorporated (NASDAQ:TWIN) Q2 2020 Earnings Conference Call January 31, 2020 11:00 AM ET Company Participants Stan Berger - Investor Relations John Batten - Chief Executive Officer Jeff Knutson - Vice President of Finance, Chief Financial Officer, Treasurer & Secretary Conference Call Participants Noah Kaye - Oppenheimer Tim Wojs - Robert W. Baird Rand Gesing - Neuberger Berman Simon Wong - G.research Operator Good day, and welcome to the Twin Disc Fiscal Second Quarter 2020 Financial Results Cal ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended September 27, 2019 Commission File Number 1-7635 TWIN DISC, INCORPORATED (Exact name of registrant as specified in its charter) (State or other jurisdiction of (I.R.S. Employer Incorporation or organization) Identification No.) Wisconsin 39-0667110 1328 Racine Street, Racine, Wisconsin 53403 (Address of principal execu ...

Twin Disc, Inc. (NASDAQ:TWIN) Q1 2020 Results Earnings Conference Call November 1, 2019 11:00 AM ET Company Participants Stanley Berger - Investor Relations John Batten - Chief Executive Officer Jeff Knutson - Chief Financial Officer Conference Call Participants Noah Kaye - Oppenheimer Josh Chan - Baird Operator Good day, ladies and gentlemen, and welcome to the Twin Disc, Inc. Fiscal First Quarter 2020 Earnings Conference Call and Webcast. Please note, today's conference is being recorded. At this time, I ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended June 30, 2019 Commission File Number 1-7635 TWIN DISC, INCORPORATED (Exact Name of Registrant as Specified in its Charter) (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification Number) 1328 Racine Street, Racine, Wisconsin 53403 (Address of Principal Executive Office) (Zip Cod ...

Twin Disc, Inc. (NASDAQ:TWIN) Q4 2019 Earnings Conference Call August 9, 2019 11:00 AM ET Company Participants Stanley Berger - SM Berger John Batten - President and Chief Executive Officer Jeffrey Knutson - Vice President of Finance, Chief Financial Officer, Treasurer and Secretary Conference Call Participants Noah Kaye - Oppenheimer Tim Wojs - Baird Christina Bronec - Gamco Investors Operator Good day and welcome to the Twin Disc, Incorporated Fiscal Fourth Quarter 2019 Earnings Conference Call and Webcas ...

Third Quarter Fiscal 2019 INVESTOR PRESENTATION SAFE HARBOR STATEMENT 2 | --- | --- | |------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------| | | | | This presentation contains statements that are forward-looking within the meaning | | | of Section 21E of the Securities Exchange Act of 1934, as amended. These | | | statements are ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended March 29, 2019 Commission File Number 1-7635 TWIN DISC, INCORPORATED (Exact name of registrant as specified in its charter) Wisconsin 39-0667110 (State or other jurisdiction of (I.R.S. Employer Incorporation or organization) Identification No.) 1328 Racine Street, Racine, Wisconsin 53403 (Address of principal executive ...