UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended ~~Dec~~~~ember~~March 29,~~, 2017~~ 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-7635

TWIN DISC, INCORPORATED

(Exact name of registrant as specified in its charter)

Wisconsin	39~~-0667110~~39-0667110
(State or other jurisdiction of	(I.R.S. Employer
Incorporation or organization)	Identification No.)

~~1328 Racine~~222 East Erie Street,~~, Racine,~~ Suite 400, Milwaukee, Wisconsin ~~53403~~53202

(Address of principal executive offices)

(262) 638-4000

(~~Registrant~~'sRegistrant'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 Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes √ ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

Yes √ ~~No__~~ ☑No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See ~~definition~~definitions of “large accelerated filer,” “accelerated ~~filer”~~filer,” “smaller reporting company” and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check one):~~

	Large Accelerated Filer ☐	Accelerated Filer√ ☑
	Non-accelerated filer~~(Do not check if a smaller~~ ☐	Smaller reporting ~~company)~~company ☑
S~~maller reporting company___~~	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. __☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No √ ☑

At ~~February 2, 2018,~~April 23, 2024, the registrant had ~~11,584,892~~13,996,503 shares of its common stock outstanding.

	March 29, 2024			June 30, 2023
ASSETS
Current assets:
Cash	$	23,843		$	13,263
Trade accounts receivable, net		40,950			54,760
Inventories		129,845			131,930
Assets held for sale		2,968			2,968
Prepaid expenses		10,471			8,459
Other		10,451			8,326
Total current assets		218,528			219,706

Property, plant and equipment, net		40,606			38,650
Right-of-use assets operating leases		14,498			13,133
Intangible assets, net		10,157			12,637
Deferred income taxes		2,210			2,244
Other assets		2,755			2,811

Total assets	$	288,754		$	289,181

LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$	2,000		$	2,010
Accounts payable		33,230			36,499
Accrued liabilities		63,406			61,586
Total current liabilities		98,636			100,095

Long-term debt		15,042			16,617
Lease obligations		12,638			10,811
Accrued retirement benefits		6,707			7,608
Deferred income taxes		2,965			3,280
Other long-term liabilities		5,822			5,253
Total liabilities		141,810			143,664

Twin Disc shareholders' equity:
Preferred shares authorized: 200,000; issued: none; no par value		-			-
Common shares authorized: 30,000,000; issued: 14,632,802; no par value		40,428			42,855
Retained earnings		122,759			120,299
Accumulated other comprehensive loss		(7,094	)		(5,570	)
		156,093			157,584
Less treasury stock, at cost (638,712 and 814,734 shares, respectively)		9,797			12,491

Total Twin Disc shareholders' equity		146,296			145,093

Noncontrolling interest		648			424
Total equity		146,944			145,517

Total liabilities and equity	$	288,754		$	289,181

The notes to condensed consolidated financial statements are an integral part of these statements.

	For the Quarter Ended						For the Three Quarters Ended
				As Adjusted						As Adjusted
	March 29, 2024			March 31, 2023			March 29, 2024			March 31, 2023

Net sales	$	74,161		$	73,772		$	210,709		$	193,036
Cost of goods sold (COGS)		53,221			54,507			149,377			143,451
COGS - Sale of boat management system product line and related inventory		-			-			3,099			-
Gross profit		20,940			19,265			58,233			49,585

Marketing, engineering and administrative expenses		17,199			14,626			51,268			45,688
Restructuring expenses		139			33			207			208
Other operating expense (income)		-			1			-			(4,149	)
Income from operations		3,602			4,605			6,758			7,838

Interest expense		263			522			1,049			1,682
Other (income) expense, net		(959	)		178			(649	)		13
		(696	)		700			400			1,695

Income before income taxes and noncontrolling interest		4,298			3,905			6,358			6,143
Income tax expense		398			548			2,606			2,350

Net income		3,900			3,357			3,752			3,793
Less: Net earnings attributable to noncontrolling interest, net of tax		(78	)		(76	)		(173	)		(188	)

Net income attributable to Twin Disc	$	3,822		$	3,281		$	3,579		$	3,605

Dividends per share	$	0.04		$	-		$	0.08		$	-

Income per share data:
Basic income per share attributable to Twin Disc common shareholders	$	0.28		$	0.24		$	0.26		$	0.27
Diluted income per share attributable to Twin Disc common shareholders	$	0.27		$	0.24		$	0.26		$	0.26

Weighted average shares outstanding data:
Basic shares outstanding		13,742			13,504			13,663			13,455
Diluted shares outstanding		13,904			13,662			13,852			13,608

Comprehensive income
Net income	$	3,900		$	3,357		$	3,752		$	3,793
Benefit plan adjustments, net of income taxes of $10, $(1), $2 and $(5), respectively		(191	)		(29	)		(470	)		(1,240	)
Foreign currency translation adjustment		(3,084	)		1,014			(930	)		3,116
Unrealized gain (loss) on hedges, net of income taxes of $0, $0, $0 and $0, respectively		196			(224	)		(73	)		(26	)
Comprehensive income		821			4,118			2,279			5,643
Less: Comprehensive income attributable to noncontrolling interest		34			67			224			277

Comprehensive income attributable to Twin Disc	$	787		$	4,051		$	2,055		$	5,366

The notes to condensed consolidated financial statements are an integral part of these statements.

	For the Three Quarters Ended
				As Adjusted
	March 29, 2024			March 31, 2023

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	3,752		$	3,793
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		7,497			6,936
Gain on sale of assets		(87	)		(4,237	)
Loss on sale of boat management product line and related inventory		3,099			-
Provision for deferred income taxes		239			(1,462	)
Stock compensation expense and other non-cash changes, net		2,242			2,355
Net change in operating assets and liabilities		5,531			(526	)

Net cash provided by operating activities		22,273			6,859

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant, and equipment		(7,598	)		(6,783	)
Proceeds from sale of fixed assets		-			7,177
Other, net		(167	)		199

Net cash (used) provided by investing activities		(7,765	)		593

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving loan arrangements		66,661			65,862
Repayments of revolving loan arrangements		(66,661	)		(69,823	)
Repayments of other long-term debt		(1,510	)		(1,534	)
Dividends paid to shareholders		(1,119	)		-
Payments of finance lease obligations		(663	)		(231	)
Payments of withholding taxes on stock compensation		(1,791	)		(463	)

Net cash used by financing activities		(5,083	)		(6,189	)

Effect of exchange rate changes on cash		1,155			240

Net change in cash		10,580			1,503

Cash:
Beginning of period		13,263			12,521

End of period	$	23,843		$	14,024

The notes to condensed consolidated financial statements are an integral part of these statements.

The unaudited condensed consolidated financial statements have been prepared by Twin Disc, Incorporated (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of the Company, include ~~all~~ adjustments, consisting ~~only~~primarily of normal recurring items, necessary for a fair statement of results for each period. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules and regulations. The Company believes that the disclosures made are adequate to make the information presented not misleading. ~~It is suggested that these~~These financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report filed on Form ~~10-K~~10-K for June 30, ~~2017.~~ 2023. The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States.

The Company's reporting period ends on the last Friday of the quarterly calendar period. The Company's fiscal year ends on June 30, regardless of the day of the week on which June 30 falls.

During the fourth quarter of fiscal year 2023, the Company changed its accounting method related to the recognition of actuarial gains and losses for the Company’s pension and postretirement benefit plans (the “Accounting change”). Prior to the Accounting change, actuarial gains and losses were recognized as a component of Accumulated other comprehensive income (loss) upon annual remeasurement and were amortized into earnings in future periods when they exceeded the accounting corridor, a defined range within which amortization of net gains and losses is not required. Under the Accounting change, the accounting corridor of 10% of the greater of the projected benefit obligation and plan assets was modified to add full, immediate recognition above a second20% threshold. Although the decision to make the Accounting change occurred in the fourth quarter of fiscal year 2023, the actual accounting method change was applied to all calculations for fiscal year end 2023, and retroactively applied to all other amounts presented in this Form 10-Q.

Under the new accounting method, actuarial gains and losses are recognized in net periodic benefit cost through a modified mark-to-market (expense) benefit upon annual remeasurement in the fourth quarter, or on an interim basis as triggering events warrant remeasurement. The method for recognizing prior service credits (charges) as a component of Accumulated other comprehensive income (loss) and amortized into earnings in future periods did not change. With respect to the recognition of actuarial gains and losses, while the historical principle was acceptable, the Company believes the Accounting change is preferable as it better aligns with fair value principles by recognizing the effects of economic and interest rate changes in plan assets and liabilities in the year in which the gains and losses are incurred to the degree such accumulated gains and losses exceed the new 20% threshold in addition to amortizing the amounts between the 10% and 20% thresholds over time. The Accounting change has been applied retrospectively to prior years and amounts presented.

See Notes G, K, M and P for further information regarding the impact of the Accounting change on the Company’s current and prior consolidated financial statements.

In ~~March 2017,~~ December 2023, the ~~Financial~~FASB issued guidance ASU 2023-09,Improvements to Income Tax Disclosures (“ASU 2023-09”), which includes requirements that an entity disclose specific categories in the rate reconciliation and provide additional information for reconciling items that are greater than five percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income rate. The standard also requires that entities disclose income (or loss) from continuing operations before income tax expense (or benefit) and income tax expense (or benefit) each disaggregated between domestic and foreign. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact of adopting this standard on its financial statement disclosures.

In June 2016, the FASB issued updated guidance (ASU ~~2017-07) intended~~2016-13) and also issued subsequent amendments to ~~improve~~ the ~~presentation~~initial guidance under ASU 2018-19, ASU 2019-04, ASU 2019-05, and ASU 2019-10 (collectively ASC 326). ASC 326 requires the measurement and recognition of ~~net periodic pension cost and net periodic postretirement~~expected credit losses for financial assets held at amortized cost. This ~~guidance~~replaces the existing incurred loss model with an expected loss model and requires ~~that an employer report~~ the ~~service costs component in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period. The other components~~use of ~~net benefit cost are required~~forward-looking information to ~~be presented in the statement of operations separately from the service cost component and outside the subtotal of income from operations.~~calculate credit loss estimates. The amendments in this guidance are effective for ~~annual periods, and interim periods within those annual periods,~~filers, excluding smaller reporting companies, for fiscal years beginning after December 15, ~~2017, (the Company~~’s2019, and for smaller reporting companies for fiscal ~~2019)~~years beginning after December 15, 2022 (the Company’s fiscal 2024), with early adoption ~~permitted. The Company is currently evaluating the potential impact of this guidance on the Company’s financial statements and disclosures.~~

In October 2016, the FASB issued updated guidance (ASU 2016-16) that changes the recognition of income tax consequences of an intra-entity transfer of an asset other than inventory. The amendments in this guidance are effectivepermitted for ~~fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 (the Company’s fiscal 2019), with early adoption permitted. The Company is currently evaluating the potential impact of this guidance on the Company’s financial statements and disclosures.~~

In August 2016, the FASB issued updated guidance (ASU 2016-15) that addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments in this guidance are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 (the Company~~’s fiscal 2019), with early adoption permitted. The Company is currently evaluating the potential impact of this guidance on the Company’s financial statements and disclosures.~~

~~In March 2016, the FASB issued updated guidance (ASU 2016-09) intended~~certain amendments. ASC 326 must be adopted by applying a cumulative effect adjustment to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company adopted this standard in the first quarter of fiscal year 2018. As a result of the adoption, excess tax benefits or deficiencies associated with stock-based compensation award activity are recognized in income tax expense in the consolidated statements of operations. In addition, excess tax benefits associated with award activity is reported as cash flows from operating activities along with all other income tax cash flows. The Company has elected to apply this classification change on a prospective basis.retained earnings. The adoption of this guidance did not have a material impact on the ~~Company's~~Company’s financial statements.

~~In February 2016, the FASB issued guidance (ASU 2016-02)~~ which replaces the existing guidance for leases. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The guidance is effective for fiscal years beginning after December 15, 2018 (the Company’s fiscal 2020), including interim periods within those fiscal years and requires retrospective application.

~~In preparation for the adoption of this guidance, the~~Special Note Regarding Smaller Reporting Company gathered all active lease contracts from all its locations to assess whether or not they meet the definition of a lease under the new guidance, specifically, whether there is an identified asset in the contract, and whether or not control thereof lies with the Company. The Company assessed the practical expedients that are allowed under the guidance, including the exclusion of lease contracts with terms of twelve months or less. It assessed each contract for the appropriate lease payment components, discount rate, lease terms (dependent on renewal options) and compiled a preliminary calculation of the right-of-use assets and operating lease liability amounts that would be recognized on the Company’s balance sheet upon adoption of the guidance.Status

Under SEC Release 33-10513;34-83550, Amendments to Smaller Reporting Company Definition, the Company qualifies as a smaller reporting company and accordingly, it has scaled some of its disclosures of financial and non-financial information in this quarterly report. The Company ~~is continuing its assessment, including the potential operational process changes as~~will continue to determine whether to provide additional scaled disclosures of financial or non-financial information in future quarterly reports, annual reports and/or proxy statements if it remains a ~~result of the new guidance. It plans to early-adopt the guidance, using the modified retrospective approach, to coincide with its adoption of the new revenue recognition guidance, which~~ ~~is the first quarter of fiscal 2019.~~

In July 2015, the FASB issued guidance (ASU 2015-11) intended to simplify the measurement of inventory and to closely align with International Financial Reporting Standards. Current guidance requires inventories to be measured at the lower of cost or market. Under this new guidance, inventories other than those measuredsmaller reporting company under last in first out (“LIFO”) are to be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Th~~e Company adopted this guidance, prospectively, in the first fiscal quarter of 2018. The adoption of this guidance did not have an impact on the Company's financial statements.~~SEC rules.

~~In May 2014, the FASB issued updated guidance (ASU 2014-09) on revenue from contracts with~~ customers. This revenue recognition guidance supersedes existing guidance, including industry-specific guidance. The core principle is that an entity should recognize revenue to depict the transfer of control over promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance identifies steps to apply in achieving this principle. This updated guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 (the Company’s first quarter of fiscal 2019).

In preparation for the adoption of this guidance, the Company gathered customer contracts and customer purchase orders of its various locations to assess whether there are separate and distinct performance obligations, as defined by ASU 2014-09, within these agreements. The assessment has included interviews with various functions, including sales, engineering, customer service, and finance, to further analyze those performance obligations, both explicit and implicit (particularly as they relate to services). Under this ASU, revenue is recognized when or as each performance obligation is satisfied. Based upon the preliminary findings, the Company has identified indicators that suggest a deferral of revenue may be required for certain agreements where the performance of services after product delivery may be required. In certain agreements where the products are built to customer specifications, revenue may need to be accelerated. The Company is continuing its assessment, including whether or not these obligations are perfunctory or material to the financial statements. It plans to adopt the guidance, using the modified retrospective approach, on the effective date applicable to the Company, which is the first quarter of fiscal 2019.

In the first quarter of fiscal year 2024, the Company entered into an agreement to sell most of its boat management system product line located at one of its subsidiaries in Italy. The sale amount was below cost and resulted in the Company recognizing an inventory write-down of $2.1 million. The Company also evaluated its other boat management system inventory, not associated with the sale. This evaluation resulted in the Company recognizing an additional inventory write-down of $1.6 million for inventory located in the U.S. These write-downs were partially offset by certain liabilities transferred to the buyer at the time of sale. The sale was completed in the second quarter of fiscal year 2024.

The Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its suppliers. However, its warranty obligation is affected by product failure rates, the number of units affected by the failure and the expense involved in satisfactorily addressing the situation. The warranty reserve is established based on our best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. When evaluating the adequacy of the reserve for warranty costs, management takes into consideration the term of the warranty coverage, historical claim rates and costs of repair, knowledge of the type and volume of new products and economic trends. While we believe the warranty reserve is adequate and that the judgment applied is appropriate, such amounts estimated to be due and payable in the future could differ materially from what actually transpires. The following is a listing of the activity in the warranty reserve for the ~~quarter and two~~ quarters ended ~~December~~March 29, ~~2017~~ 2024 and ~~December 30, 2016:~~March 31, 2023:

The current portion of the warranty accrual ($~~2,032~~4,052 and ~~$2,063~~$3,503 as of ~~December~~March 29, ~~2017~~ 2024 and ~~December 30, 2016,~~ March 31, 2023, respectively) is reflected in accrued liabilities, while the long-term portion ($~~435~~843 and ~~$479~~$515 as of ~~December~~March 29, ~~2017~~ 2024 and ~~December 30, 2016,~~ March 31, 2023, respectively) is included in other long-term liabilities on the consolidated balance sheets.

The Company is involved in litigation of which the ultimate outcome and liability to the Company, if any, is not presently determinable. Management believes that final disposition of such litigation will not have a material impact on the ~~Company~~’sCompany’s results of operations, financial position, or cash flows.

The Company and its subsidiaries are engaged in the manufacture and sale of marine and ~~heavy-duty~~heavy-duty off-highway power transmission equipment. Principal products include marine transmissions, azimuth drives, surface drives, propellers and boat management systems, as well as power-shift transmissions, hydraulic torque converters, power take-offs, industrial clutches, and controls systems. The Company sells to both domestic and foreign customers in a variety of market areas, principally pleasure craft, commercial and military marine markets, as well as in the energy and natural resources, government, and industrial markets. The Company's worldwide sales to both domestic and foreign customers are transacted through a direct sales force and a distributor network.

The Company has two reportable segments: manufacturing and distribution. ~~Its~~ These segment ~~structure reflects~~structures reflect the way management makes operating decisions and manages the growth and profitability of the business. It also corresponds with management’s approach of allocating resources and assessing the performance of its segments. The accounting practices of the segments are the same as those described in the summary of significant accounting policies. Transfers among segments are at established inter-company selling prices. Management evaluates the performance of its segments based on net ~~earnings.~~income.

Information about the ~~Company~~’sCompany’s segments is summarized as follows:

The following tables presents details deemed most relevant to the users of the financial statements for the quarters ended March 29, 2024 and March 31, 2023.

Net sales by product group for the quarter ended March 29, 2024 is summarized as follows:

Net sales by product group for the quarter ended March 31, 2023 is summarized as follows:

Net Sales by product group for the three quarters ended March 29, 2024 is summarized as follows:

Net Sales by product group for the three quarters ended March 31, 2023 is summarized as follows:

During the the first ~~half~~three quarters of fiscal ~~2018~~2024 and ~~2017,~~2023, the Company granted a target number of ~~54.9~~119.3 and ~~109.6~~118.1 PSAs, respectively, to various employees of the Company, including executive officers. The fiscal ~~2018~~2024 PSAs will vest if the Company achieves performance-based target objectives relating to average return on invested capital ~~average annual sales~~ and ~~average annual Earnings Per Share (“EPS”) (as~~cumulative earnings before interest, taxes, depreciation, and amortization ("EBITDA", as defined in the PSA Grant Agreement), in the cumulative three fiscal year period ending June 30, ~~2020.~~ 2026. These PSAs are subject to adjustment if the Company’s return on invested capital ~~net sales,~~ and ~~EPS for the period~~cumulative EBITDA falls below or exceeds the specified target objective, and the maximum number of performance shares that can be awarded if the target objective is exceeded is ~~82.3. Based upon favorable actual results to date, the Company is currently accruing compensation expense for these PSAs.~~238.7.

The fiscal ~~2017~~2023 PSAs will vest if the Company achieves performance-based target objectives relating to average return on invested capital ~~average annual sales~~ and ~~average annual EPS~~cumulative EBITDA (as defined in the PSA Grant Agreement), in the cumulative three fiscal year period ending June 30, ~~2019.~~ 2025. These PSAs are subject to adjustment if the ~~Company~~’sCompany’s return on invested capital ~~net sales,~~ and ~~EPS for the period~~cumulative EBITDA falls below or exceeds the specified target objective, and the maximum number of performance shares that can be awarded if the target objective is exceeded is ~~164.4. Based upon actual results to date and the low probability of achieving the threshold performance levels, the Company is currently not accruing compensation expense for these PSAs.~~234.2.

There were ~~224.9~~329.9 and ~~181.8~~437.9 unvested PSAs outstanding at ~~December~~March 29, ~~2017~~ 2024 and ~~December 30, 2016,~~ March 31, 2023, respectively. The fair value of the PSAs (on the date of grant) is expensed over the performance period for the shares that are expected to ultimately vest. Compensation expense of ~~$121~~$326 and ~~$15~~$307 was recognized for the quarters ended ~~December~~March 29, ~~2017~~ 2024 and ~~December 30, 2016,~~ March 31, 2023, respectively, related to PSAs. Compensation expense of ~~$136~~$704 and ~~$30~~$903 was recognized for the ~~two~~three quarters ended ~~December~~March 29, ~~2017~~ 2024 and ~~December 30, 2016,~~ March 31, 2023, respectively, related to PSAs. The weighted average grant date fair value of the unvested awards at ~~December~~March 29, ~~2017~~ 2024 was ~~$13.45.~~$11.48. At ~~December~~March 29, ~~2017,~~ 2024, the Company had ~~$2,775~~$1,652 of unrecognized compensation expense related to the unvested shares that would vest if the specified target objective was achieved for the fiscal ~~2018, 2017~~2024 and ~~2016~~2023 awards. The total fair value of PSAs vested as of ~~December~~March 29, ~~2017~~ 2024 and ~~December 30, 2016~~ March 31, 2023 was $0.

The PSUAs entitle an individual to shares of common stock of the Company or cash in lieu of shares of Company common stock if specific terms and conditions or restrictions are met through a specified date. During the firstthree quarters of fiscal 2024 and 2023 , the Company granted a target number of 10.5 and 0 PSUAs, respectively, to various individuals in the Company. The fiscal 2024 PSUAs will vest if the Company achieves performance-based target objectives relating to average return on invested capital and cumulative EBITDA (as defined in the PSUA Grant Agreement), in the cumulative three fiscal year period ending June 30, 2026. These PSUAs are subject to adjustment if the Company’s return on invested capital and cumulative EBITDA falls below or exceeds the specified target objective, and the maximum number of performance shares that can be awarded if the target objective is exceeded is 20.9.

There were 10.5 and 0 unvested PSUAs outstanding at March 29, 2024 and March 31, 2023, respectively. The fair value of the PSUAs (on the date of grant) is expensed over the performance period for the shares that are expected to ultimately vest. Compensation expense of $11 and $0 was recognized for the quarters ended March 29, 2024 and March 31, 2023, respectively, related to PSUAs. Compensation expense of $29 and $0 was recognized for the three quarters ended March 29, 2024 and March 31, 2023, respectively, related to PSUAs. The weighted average grant date fair value of the unvested awards at March 29, 2024 was $12.15. At March 29, 2024, the Company had $98 of unrecognized compensation expense related to the unvested shares that would vest if the specified target objective were achieved for the fiscal 2024 awards. The total fair value of PSUAs vested as of March 29, 2024 and March 31, 2023 was $0.

The Company has unvested RS awards outstanding that will vest if certain service conditions are fulfilled. The fair value of the RS grants is recorded as compensation expense over the vesting period, which is generally 1 to 3 years. During the first ~~half~~three quarters of fiscal ~~2018~~2024 and ~~2017,~~2023, the Company granted ~~85.3~~117.2 and ~~181.8~~180.0 service based restricted shares, respectively, to employees and non-employee directors. There were ~~272.4~~246.6 and ~~269.6~~308.6 unvested shares outstanding at ~~December~~March 29, ~~2017~~ 2024 and ~~December 30, 2016,~~ March 31, 2023, respectively. A total of 2.4 and 0 shares of restricted stock were forfeited during the three quarters ended March 29, 2024 and March 31, 2023, respectively. Compensation expense of ~~$464~~$330 and ~~$370~~$313 was recognized for the quarters ended ~~December~~March 29, ~~2017~~ 2024 and ~~December 30, 2016,~~ March 31, 2023, respectively. Compensation expense of ~~$927~~$953 and ~~$696~~$1,007 was recognized for the ~~two~~three quarters ended ~~December~~March 29, ~~2017~~ 2024 and ~~December 30, 2016,~~ March 31, 2023, respectively. The total fair value of restricted stock grants vested as of ~~December~~March 29, ~~2017~~ 2024 and ~~December 30, 2016~~ March 31, 2023 was ~~$1,758~~$2,196 and ~~$587,~~$1,699, respectively. As of ~~December~~March 29, ~~2017,~~ 2024, the Company had ~~$2,195~~$1,568 of unrecognized compensation expense related to restricted stock which will be recognized over the next three years.

The RSUs entitles an individual to shares of common stock of the Company or cash in lieu of shares of Company common stock if specific terms and conditions or restrictions are met through a specified date, generally three years from the date of grant or when performance conditions have been met. The fair value of the RSUs (on the date of grant) is recorded as compensation expense over the vesting period. During the firstthree quarters of fiscal 2024 and 2023, the Company granted 7.1 and 72.4 of employment based RSUs, respectively. There were 135.0 and 130.2 unvested RSUs outstanding at March 29, 2024 and March 31, 2023, respectively. Compensation expense of $124 and $116 was recognized for the quarters ended March 29, 2024 and March 31, 2023, respectively. Compensation expense of $372 and $340 was recognized for the three quarters ended March 29, 2024 and March 31, 2023, respectively. The total fair value of RSUs vested as of March 29, 2024 and March 31, 2023 was $25 and $40, respectively. The weighted average grant date fair value of the unvested awards at March 29, 2024 was $10.97. As of March 29, 2024, the Company had $412 of unrecognized compensation expense related to RSUs which will be recognized over the next three years.

The Company has non-contributory, qualified defined benefit plans covering substantially all domestic employees hired prior to October 1, 2003 and certain foreign employees. Additionally, the Company provides ~~health care~~healthcare and life insurance benefits for certain domestic retirees.

As discussed in Note A, during the fourth quarter of fiscal year 2023, the Company changed its accounting method related to the recognition of actuarial gains and losses for its pension and postretirement benefit plans. Under the new method, actuarial gains and losses are recognized in net periodic benefit costs upon annual remeasurement in the fourth quarter, or on an interim basis as triggering events warrant remeasurement. These changes have been applied retrospectively to prior years presented below. See Notes A, K, M, and P for further information regarding the impact of the change in accounting principle on the Company’s consolidated financial statements.

The components of the net periodic benefit cost for the defined benefit pension plans and the other postretirement benefit plan are as follows:

The service cost component is included in cost of goods sold and marketing, engineering, and administrative expenses. All other components of net periodic benefit cost are included in other (income) expense, net.

The Company ~~expect~~sexpects to contribute approximately ~~$2,265~~$662 to its pension plans in fiscal ~~2018.~~2024. As of ~~December~~March 29, ~~2017, the amount of $1,043~~2024, $634 in contributions ~~has~~to the pension plans have been made.

The Company has reclassified ~~$1,734~~($191) (net of ~~$674~~$10 in taxes) of benefit plan adjustments from accumulated other comprehensive loss during the quarter ended ~~December~~March 29, ~~2017,~~ 2024, and ~~$750~~($29) (net of ~~$399~~$1 in taxes) during the quarter ended ~~December 30, 2016.~~ March 31, 2023. The Company has reclassified ~~$2,208~~($470) (net of ~~$952~~$2 in taxes) of benefit plan adjustments from accumulated other comprehensive loss during the ~~two~~three quarters ended ~~December~~March 29, ~~2017,~~ 2024, and ~~$1,422~~$(1,240) (net of ~~$798~~$5 in taxes) during the ~~two~~three quarters ended ~~December 30, 2016.~~ March 31, 2023. These reclassifications are included in the computation of net periodic benefit cost.

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law in the United States. The Tax Act, among other provisions, introduces changes in the U.S. corporate tax rate, business related exclusions and deductions and credits, and has tax consequences for companies that operate internationally. Most of the changes introduced in the Tax Act are effective beginning on January 1, 2018; however, as the Company ~~has a fiscal year end of June 30, the effective dates for the Company are various and different.~~

~~For the~~ two quarters ended December 29, 2017 and December 30, 2016, the Company’s effective income tax rate was 204.0% and 28.8%, respectively. During the current fiscal quarter, in compliance with the new Tax Act, the Company recorded a tax expense of $4,565, primarily due to a remeasurement of deferred tax assets and liabilities; this increased the effective tax rate by 735.1%. The Company has determined that the impact of the U.S. federal corporate income tax rate change on the U.S. deferred tax assets and liabilities is provisional because the number cannot be calculated until the actual timing differences are known at year end rather than estimated this quarter. The first quarter release of a valuation allowance in a certain foreign jurisdiction of $3,803 reduced the effective tax rate by 612.4%. The mix of earnings by jurisdiction and continued operational improvement coupled with increased tax preference items resulted in a minimal impact to the overall effective tax rate.

~~Within the calculation of~~ the Company’s annual effective tax rate the Company has used assumptions and estimates that may change as a result of future guidance, interpretation, and rule-making from the Internal Revenue Service, the SEC, and the FASB and/or various other taxing jurisdictions. For example, the Company anticipates that the state jurisdictions will continue to determine and announce their conformity to the Tax Act which could have an impact on the annual effective tax rate.

~~The following table sets forth the tax expense and the effective tax rate for~~ ~~the Company’s earnings before income taxes:~~

~~The permanent reduction to the U.S. federal corporate income tax rate from 35% to 21% is effective January 1, 2018 (the “Effective Date”).~~ When a U.S. federal tax rate change occurs during a fiscal year, taxpayers are required to compute a weighted daily average rate for the fiscal year of enactment. As a result of the Tax Act, the Company has calculated a U.S. federal statutory corporate income tax rate of 27.6% for the fiscal year ending June 30, 2018 and applied this rate in computing the first half of fiscal year 2018 income tax provision. The U.S. federal statutory corporate income tax rate of 27.6% is the weighted daily average rate between the pre-enactment U.S. federal statutory tax rate of 34% applicable to the Company’s 2018 fiscal year prior to the Effective Date and the post-enactment U.S. federal statutory tax rate of 21% applicable to the 2018 fiscal year thereafter. The Company expects the U.S. federal statutory rate to be 21% for fiscal years beginning after June 30, 2018.

The Company ~~completed a provisional calculation to determine the impact of~~ a one-time repatriation tax on deferred foreign income (“Transition Tax”), as required by the Tax Act. The Company determined that the calculation is provisional because various components of the computation are unknown as of December 29, 2017, including the following significant items: exchange rates for fiscal year 2018, the actual aggregate foreign cash position and the earnings and profits of the foreign entities as of the two measurement dates. This provisional calculation resulted in a zero tax liability, therefore no tax accrual was necessary. The Company has not provided for additional U.S. income taxes on cumulative earnings of consolidated foreign subsidiaries. With the enactment of the Transition Tax, any future dividends repatriated would benefit from the 100% Dividends Received Deduction. The company reaffirms its position that the earnings of certain foreign subsidiaries remain permanently reinvested. An analysis was also completed to verify the future utilization of tax attributes and it was determined that full utilization would be realized and no valuation allowance was required.

The Company continues to review the anticipated impacts of the global intangible low taxed income (“GILTI”), a deduction for foreign-derived intangible income ("FDII") and base erosion anti-abuse tax (“BEAT”) on the Company, which are not effective until fiscal 2019. The Company has not recorded any impact associated with GILTI, FDII or BEAT in the tax rate for the first half of fiscal 2018. A provisional analysis of the new BEAT rules has been completed and it is not anticipated that the Company will meet the minimum thresholds, nor is it anticipated that it will for the foreseeable future and is therefore not subject to this tax. Initial provisional estimates of the impact of GILTI and FDII have also been completed and minimal impact is anticipated. These estimates may be impacted by actual future data, additional guidance or other unforeseen circumstances.

~~On December 22, 2017, the SEC issued Staff Accounting Bulletin 118 (“SAB 118”).~~ SAB 118 expresses views of the SEC regarding ASC Topic 740, Income Taxes (“ASC 740”) in the reporting period that includes the enactment date of the Tax Act. The SEC staff issuing SAB 118 (the “Staff”) recognized that a registrant’s review of certain income tax effects of the Tax Act may be incomplete at the time financial statements are issued for the reporting period that includes the enactment date, including interim periods therein. The Staff’s view of the enactment of the Tax Act has been developed considering the principles of ASC Topic 805,~~Business Combinations~~, which addresses the accounting for certain items in a business combination for which the accounting is incomplete upon issuance of the financial statements that include the reporting period in which the business combination occurs. Specifically, the Staff provides that the accounting guidance in ASC Topic 805 may be analogized to the accounting for impacts of the Tax Act. If a company does not have the necessary information available, prepared or analyzed for certain income tax effects of the Tax Act, SAB 118 allows a company to report provisional numbers and adjust those amounts during the measurement period not to extend beyond one year. For the two quarters ended December 29, 2017, the Company has recorded all known and estimable impacts of the Tax Act that are effective for fiscal year 2018. Future adjustments to the provisional numbers will be recorded as discrete adjustments to income tax expense in the period in which those adjustments become estimable and/or are finalized.

~~Accordingly, the Company~~’s income tax provision as of December 29, 2017 reflects (i) the current year impacts of the Tax Act on the estimated annual effective tax rate and (ii) the following discrete items resulting directly from the enactment of the Tax Act based on the information available, prepared, or analyzed (including computations) in reasonable detail.

~~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. Due to operational changes, the Company has evaluated the realizability of the net deferred tax assets related to a certain foreign jurisdiction. Based on this evaluation, along with expected future earnings, management has concluded that the valuation allowance is no longer appropriate and it was released during the first quarter of fiscal 2018.

~~Accounting policies for interim reporting require the Company to adjust~~computes its effective tax rate each quarter ~~to be~~ consistent with the ~~estimated annual effective tax rate. Under this effective tax rate methodology,~~requirements of ASC 740-270-25. However, due to historic domestic losses and the full domestic valuation allowance, the Company ~~applies an estimated annual income~~has removed the loss jurisdiction for which no tax ~~rate to its year-to-date ordinary earnings to derive its income tax provision each quarter.~~benefit may be recorded from the Annual Effective Tax Rate ("AETR") calculations consistent with ASC 740-270-30-30.

The Company ~~has approximately $856 of unrecognized tax benefits, including related interest and penalties, as of December 29, 2017 which, if recognized, would favorably impact the~~recorded an overall effective tax ~~rate. There was no significant change~~rate of 9.3% and 14.0% for the quarters ended March 29, 2024 and March 31, 2023, respectively and an overall effective tax rate of 41.0% and 38.2% for the three quarters ended March 29, 2024 and March 31, 2023. Year-to-date foreign earnings were $14,916 and $8,207, with corresponding income tax expense of $2,599 and $2,303 for the period ended March 29, 2024 and March 31, 2023. The foreign effective tax rate for the period ended March 29, 2024 incudes a total discrete benefit of ($834), of which ($786) related to a favorable tax ruling related to operations in the total unrecognized tax benefits due to the settlement of audits, the expiration of statutes of limitations or for other items during the quarter ended December 29, 2017. It appears possible that the amount of unrecognized tax benefits could change in the next twelve months due to on-going audit activity.Netherlands.

~~Annually, the Company files~~Year-to-date domestic earnings were ($8,557) and ($2,063), with corresponding income tax ~~returns in various taxing jurisdictions inside~~expense of $7 and ~~outside the United States.~~ ~~In general, the tax years that remain subject to examination are 2011 through 2017~~$47 for the ~~major operations in Italy, Canada, Belgium,~~ three quarters ended March 29, 2024 and Japan. The tax years open to examination in the U.S. are for years subsequent to fiscal 2015. The state of Wisconsin income tax audit remains ongoing for the fiscal years 2010 through 2013. During the quarter the company finalized a US Federal Income tax audit for the fiscal year 2015 with no adjustment. It is reasonably possible that other audit cycles will be completed during fiscal 2018.March 31, 2023.

The Company reviews goodwill for impairment on a reporting unit basis annually as of the end of the fiscal year, and whenever events or circumstances (“triggering events”) indicate that the carrying value of goodwill may not be recoverable. The Company monitors for interim triggering events on an ongoing basis. Such triggering events include unfavorable operating results and macroeconomic trends.

The fair value of reporting units is primarily driven by projected growth rates and operating results under the income approach using a discounted cash flow model, which applies an appropriate market-participant discount rate, and consideration of other market approach data from guideline public companies. If declining actual operating results or future operating results become indicative that the fair value of the Company~~’s reporting units has declined below their carrying values, an interim goodwill impairment test may need to be performed and may result in a non-cash goodwill impairment charge.~~

As of ~~December~~March 29, ~~2017 and June 30, 2017, goodwill pertains solely to the European Industrial reporting unit.~~

~~For the quarter ended~~ December 29, 2017, the Company performed a review of potential triggering events, and concluded there were no triggering events that indicated that the fair value of its European Industrial reporting unit had not more likely than not declined to below its carrying value at December 29, 2017. The Company will perform its annual impairment test for this reporting unit as of June 30, 2018.

At ~~December 29, 2017,~~ 2024, the following acquired intangible assets have definite useful lives and are subject to amortization:

Other intangibles consist mainly of computer software. Amortization is recorded on the basis of straight-line or accelerated, as appropriate, over the estimated useful lives of the assets.

The weighted average remaining useful life of the intangible assets included in the table above is approximately 135 years.

Intangible amortization expense was ~~$45~~$822 and ~~$42~~$738 for the quarters ended ~~December~~March 29, ~~2017,~~ 2024, and ~~December 30, 2016,~~ March 31, 2023, respectively. Intangible amortization expense was ~~$89~~$2,458 and ~~$85~~$2,140 for the ~~two~~three quarters ended ~~December~~March 29, ~~2017,~~ 2024, and ~~December 30, 2016,~~ March 31, 2023, respectively. Estimated intangible amortization expense for the remainder of fiscal ~~2018~~2024 and each of the next five fiscal years is as follows:

~~The gross carrying amount of the Company~~’s intangible assets that have indefinite lives and are not subject to amortization as of December 29, 2017 and June 30, 2017 was $204 and $205, respectively. These assets are comprised of acquired trade names.

Long-term debt at ~~December~~March 29, ~~2017~~ 2024 and June 30, ~~2017~~ 2023 consisted of the following:

~~The revolving loan agreement pertains to the revolving loan facility which~~ Credit Agreement Debt: On June 29, 2018, the Company entered into ~~on April 22, 2016~~a Credit Agreement (the “Credit Agreement”) with BMO Harris Bank N.A. (“BMO”) that provided for the assignment and assumption of the previously existing loans between the Company and Bank of Montreal (the ~~“BMO~~“2016 Credit Agreement”) and subsequent amendments into a term loan (the “Term Loan”) and revolving credit loans (each a “Revolving Loan” and, collectively, the “Revolving Loans,” and, together with the Term Loan, the “Loans”). Pursuant to the Credit Agreement, BMO agreed to make the Term Loan to the Company in a principal amount not to exceed $35.0 million and the Company may, from time to time prior to the maturity date, enter into Revolving Loans in amounts not to exceed, in the aggregate, $50.0 million (the “Revolving Credit Commitment”), subject to a Borrowing Base based on Eligible Inventory and Eligible Receivables. Subsequent amendments to the Credit Agreement reduced the Term Loan to $20.0 million, extended the maturity date of the Term Loan to April 1, 2027, and require the Company to make principal installment payments on the Term Loan of $0.5 million per quarter. In addition, under subsequent amendments to the Credit Agreement, BMO’s Revolving Credit Commitment is currently $45.0 million. The Credit Agreement also allows the Company to obtain Letters of Credit from BMO, which if drawn upon by the beneficiary thereof and paid by BMO, would become Revolving Loans. Under the Credit Agreement, the Company may not pay cash dividends on its common stock in excess of $5.0 million in any fiscal year. The term of the Revolving Loans under the Credit Agreement currently runs through April 1, 2027.

Under the Credit Agreement as amended, interest rates are based on either the secured overnight financing rate (“SOFR”) or the euro interbank offered rate (the “EURIBO Rate”). Loans are designated either as “SOFR Loans,” which accrue interest at an Adjusted Term SOFR plus an Applicable Margin, or “Eurodollar Loans,” which accrue interest at the EURIBO Rate plus an Applicable Margin. Amounts drawn on a Letter of Credit that are not timely reimbursed to the Bank bear interest at a Base Rate plus an Applicable Margin. The Company also pays a commitment fee on the average daily Unused Revolving Credit Commitment equal to an Applicable Margin. Currently, the Applicable Margins are between 2.00% and 3.50% for Revolving Loans and Letters of Credit; 2.125% and 3.625% for Term Loans; and 0.15% and 0.30% for the Unused Revolving Credit Commitment (each depending on the Company’s Total Funded Debt to EBITDA ratio).

The Credit Agreement, as amended, requires the Company to meet certain financial covenants. Specifically, the Company’s Total Funded Debt to EBITDA ratio may not exceed 3.50 to 1.00, and the Company’s Fixed Charge Coverage Ratio may not be less than 1.10 to 1.00. In determining whether the Company is in compliance with its Total Funded Debt/EBITDA Ratio, the Company’s EBITDA will include transaction expenses of up to $0.6 million for the Katsa Oy acquisition, as well as pro-forma EBITDA of Katsa Oy as permitted by the Bank. The Company’s Tangible Net Worth may not be less than $100.0 million plus 50% of positive Net Income for each fiscal year ending on or after June 30, 2023.

Borrowings under the Credit Agreement are secured by substantially all of the Company’s personal property, including accounts receivable, inventory, ~~and certain~~ machinery and equipment, and intellectual property. The Company has also pledged 100% of its ~~primary manufacturing facility~~equity interests in ~~Racine, Wisconsin,~~certain domestic subsidiaries and 65% of its equity interests in certain foreign subsidiaries. The Company also entered into a Collateral Assignment of Rights under Purchase Agreement for its acquisition of Veth Propulsion. To effect these security interests, the Company entered into various amendment and assignment agreements that consent to the assignment of certain agreements previously entered into between the Company and the ~~personal property~~Bank of ~~Mill-Log Equipment Co., Inc.,~~Montreal in connection with the 2016 Credit Agreement. The Company also amended and assigned to BMO a Negative Pledge Agreement that it has previously entered into with Bank of Montreal, pursuant to which it agreed not to sell, lease or otherwise encumber real estate that it owns except as permitted by the Credit Agreement and the Negative Pledge Agreement.

The Company has also entered into a Deposit Account Control Agreement with the Bank, reflecting the Bank’s security interest in deposit accounts the Company maintains with the Bank. The Bank may not provide a notice of exclusive control of a deposit account (thereby obtaining exclusive control of the account) prior to the occurrence or existence of a Default or an Event of Default under the Credit Agreement or otherwise upon the occurrence or existence of an event or condition that would, but for the passage of time or the giving of notice, constitute a Default or an Event of Default under the Credit Agreement.

Upon the occurrence of an Event of Default, BMO may take the following actions upon written notice to the Company: (1) terminate its remaining obligations under the Credit Agreement; (2) declare all amounts outstanding under the Credit Agreement to be immediately due and payable; and (3) demand the Company to immediately Cash Collateralize L/C Obligations in an amount equal to 105% of the aggregate L/C Obligations or a greater amount if BMO determines a greater amount is necessary. If such Event of Default is due to the Company’s bankruptcy, BMO may take the three actions listed above without notice to the Company.

On April 1, 2024, the Company entered into Amendment No.10 to Credit Agreement (the “Tenth Amendment”) that amended and extended the Credit Agreement. The Tenth Amendment increased the Revolving Credit Commitment from $40.0 million to $45.0 million, and also increased the Borrowing Base for Revolving Loans from the sum of (a) 85% of outstanding unpaid Eligible Receivable and (b) the lesser of $30.0 million and 50% of Eligible Inventory to the sum of (a) 85% of outstanding unpaid Eligible Receivables and (b) the lesser of $35.0 million (reduced to $32.5 million beginning with the first quarter of the 2026 fiscal year) and 60% of Eligible Inventory (reduced to 55% of Eligible Inventory beginning with the third quarter of the 2025 fiscal year, and 50% of Eligible Inventory beginning with the first quarter of the 2026 fiscal year).

The Company intends to use the increased borrowing capacity under the Credit Agreement to help finance its previously announced proposed acquisition of Katsa Oy by TD Finland Holding Oy, a wholly-owned ~~domestic~~ subsidiary of the Company. The ~~BMO~~Tenth Amendment specifically permits the Company to use Revolving Loans for the Katsa Oy acquisition. In addition, in determining whether the Company is in compliance with its Total Funded Debt/EBITDA Ratio, the Company’s EBITDA will include transaction expenses of up to $0.6 million for the Katsa Oy acquisition, as well as pro-forma EBITDA of Katsa Oy as permitted by the Bank.

The Tenth Amendment also extended the Credit Agreement ~~provides~~through April 1, 2027 and extended the maturity date of the Term Loan and the Term Loan Commitment Date to April 1, 2027. Prior to the Tenth Amendment, the Credit Agreement was scheduled to terminate as of June 30, 2025, and the Term Loan and Term Loan Commitment Date were scheduled to mature/terminate on March 4, 2026.

The Tenth Amendment also increased the Applicable Margins under the Credit Agreement for ~~a borrowing base calculation~~purposes of determining interest rates on Revolving Loans, Letters of Credit, Term Loans, and the Unused Revolving Credit Commitment. Prior to ~~determine borrowing capacity. This capacity will be based upon eligible domestic inventory, eligible accounts receivable~~the Tenth Amendment, the Applicable Margins were between 1.25% and ~~machinery~~2.75% for Revolving Loans and ~~equipment, subject~~Letters of Credit; 1.375% and 2.875% for Term Loans; and .10% and .15% for the Unused Revolving Credit Commitment (each depending on the Company’s Total Funded Debt to ~~certain adjustments.~~ EBITDA ratio). Under the Tenth Amendment, the Applicable Margins are between 2% and 3.5% for Revolving Loans and Letters of Credit; 2.125% and 3.625% for Term Loans; and .15% and .3% for the Unused Revolving Credit Commitment (each depending on the Company’s Total Funded Debt to EBITDA ratio).

The Tenth Amendment also increased the amount of Restricted Payments that the Company may make in the form of cash dividends, distributions, purchases, redemptions, or other acquisitions of its common stock from $3.0 million to $5.0 million in any fiscal year.

As of ~~December~~March 29, ~~2017,~~ 2024, current maturities include $2.0 million of term loan payments due within the coming year.

As of March 29, 2024, the Company’s borrowing capacity on the Revolving Loans under the terms of the ~~BMO~~Credit Agreement was ~~approximately $28,588,~~$37,016, and the Company had approximately ~~$23,128~~$29,694 of available borrowings. AsIn addition to the Credit Agreement, the Company has established unsecured lines of ~~December 29, 2017,~~credit that are used from time to time to secure certain performance obligations by the ~~interest rate under this agreement was 3.11%.~~ Company.

The ~~Company’s revolving loan agreement approximates~~Company’s borrowings described above approximate fair value at ~~December~~March 29, ~~2017~~ 2024 and June 30, ~~2017.~~ 2023. If measured at fair value in the financial statements, long-term debt (including the current portion) would be classified as Level 2 in the fair value hierarchy.

The Company is party to an interest rate swap arrangement with Bank of Montreal, with an initial notional amount of $20,000 and a maturity date of March 4, 2026 to hedge the Term Loan. As of March 29, 2024, the notional amount was $10,000. This swap has been designated as a cash flow hedge under ASC 815, Derivatives and Hedging. This swap is included in the disclosures in Note O, Derivative Financial Instruments.

During the fourth quarter of fiscal 2021, the Company designated its euro denominated Revolving Loan as a net investment hedge to mitigate the risk of variability in its euro denominated net investments in wholly-owned foreign companies. Effective upon the designation, all changes in the fair value of the euro revolver are reported in accumulated other comprehensive loss along with the foreign currency translation adjustments on those foreign investments. This net investment hedge is included in the disclosures in Note O, Derivative Financial Instruments.

The Company, from time to time, makes open market purchases of its common stock under authorizations given to it by the Board of Directors, of which ~~315~~315.0 shares as of ~~December~~March 29, ~~2017~~ 2024 remain authorized for purchase. The Company did not make any open market purchases of its shares during the ~~quarter and two~~ quarters ended ~~December~~March 29, ~~2017~~ 2024 and ~~December 30, 2016.~~March 31, 2023.

As of July 1, 2022, the cumulative effect of the Accounting change resulted in $25.1 million decrease to retained earnings and a corresponding $25.1 million increase to accumulated other comprehensive loss, both net of tax of $0 ($7.9 million in deferred tax asset offset by $7.9 million valuation allowance).

See Notes A, G, M, and P for further information regarding the impact of the Accounting change on the Company’s prior year consolidated financial statements.

The following is a reconciliation of the ~~Company~~’sCompany’s equity balances for the ~~first two~~three fiscal quarters of ~~2018~~2024 and ~~2017:~~2023:

	Twin Disc, Inc. Shareholders’ Equity																		Twin Disc, Inc. Shareholders’ Equity
							Accumulated																		Accumulated
							Other						Non-												Other						Non-
	Common			Retained			Comprehensive			Treasury			Controlling			Total			Common			Retained			Comprehensive			Treasury			Controlling			Total
	Stock			Earnings			Income (Loss)			Stock			Interest			Equity			Stock			Earnings			Loss			Stock			Interest			Equity
Balance, June 30, 2017	$	10,429		$	169,368		$	(32,671	)	$	(24,205	)	$	646		$	123,567
Balance, June 30, 2023																			$	42,855		$	120,299		$	(5,570	)	$	(12,491	)	$	424		$	145,517
Net (loss) income					(722	)								76			(646	)					(1,173	)								90			(1,083	)
Translation adjustments								3,036						(7	)		3,029									(3,096	)					60			(3,036	)
Benefit plan adjustments, net of tax								2,208									2,208									(171	)								(171	)
Cash dividends														(172	)		(172	)
Unrealized gain on hedges, net of tax																										216									216
Compensation expense		1,063															1,063			495															495
Shares (acquired) issued, net		(1,406	)								1,006						(400	)		(3,911	)								2,148						(1,763	)
Balance, December 29, 2017	$	10,086		$	168,646		$	(27,427	)	$	(23,199	)	$	543		$	128,649
Balance, September 29, 2023																				39,439			119,126			(8,621	)		(10,343	)		574			140,175
Net income																							930									5			935
Dividends paid to shareholders																							(560	)											(560	)
Translation adjustments																										5,155						35			5,190
Benefit plan adjustments, net of tax																										(108	)								(108	)
Unrealized loss on hedges, net of tax																										(485	)								(485	)
Compensation expense																				772															772
Shares (acquired) issued, net																				(550	)								541						(9	)
Balance, December 29, 2023																				39,661			119,496			(4,059	)		(9,802	)		614			145,910
Net income																							3,822									78			3,900
Dividends paid to shareholders																							(559	)											(559	)
Translation adjustments																										(3,040	)					(44	)		(3,084	)
Benefit plan adjustments, net of tax																										(191	)								(191	)
Unrealized gain on cash flow hedge, net of tax																										196									196
Compensation expense																				791															791
Shares (acquired) issued, net																				(24	)								5						(19	)
Balance, March 29, 2024																			$	40,428		$	122,759		$	(7,094	)	$	(9,797	)	$	648		$	146,944

R~~econciliations~~Reconciliations for the changes in accumulated other comprehensive ~~income (loss),~~loss, net of tax, by component for the quarters ended ~~September~~March 29, 2024 and ~~December 29, 2017, and September 30, and December 30, 2016~~ March 31, 2023 are as follows:

Reconciliation for the changes in benefit plan adjustments, net of tax for the quarter ~~and two quarters~~ ended ~~December~~March 29, ~~2017~~ 2024 are as follows:

Reconciliation for the changes in benefit plan adjustments, net of tax for the quarter ended March 31, 2023 is as follows:

~~Reconciliation for the changes in benefit plan adjustments, net of tax for the quarter and two quarters ended December 30, 2016 is as follows:~~

~~The~~To improve its fixed cost structure and monetize some of its under-utilized assets, the Company ~~has implemented various restructuring programs~~commenced the active marketing of several of its real estate properties. Such actions required the Company to reclassify these assets from Property, Plant and Equipment to Assets Held for Sale, at fair value less costs to sell, or net book value, whichever is lower. Fair value was determined using real estate broker estimates and would be classified as Level 3 in ~~response to unfavorable macroeconomic trends~~the fair value hierarchy. This assessment of fair value resulted in ~~certain~~the Company recognizing a write-down of the ~~Company’s markets since~~carrying value of its former corporate headquarters by $4,267 in the fourth quarter of fiscal ~~2015. These programs primarily involved~~2021.

In the ~~reduction~~first quarter of ~~workforce~~fiscal 2023, the Company commenced the active marketing of an additional real estate property located in ~~several~~Nivelles, Belgium. This action required the Company to reclassify these assets from Property, Plant, and Equipment to Assets Held for Sale, at fair value less costs to sell or net book value, whichever is lower. Fair value was determined using real estate broker estimates and would be classified as Level 3 in the fair value hierarchy. The real estate property's fair value less costs to sell exceeded its net book value. The Company reclassified the property's net book value of $2,801 from Property, Plant, and Equipment to Assets Held for Sale.

In the second quarter of fiscal 2023, the Company completed the sale of the ~~Company’s manufacturing locations, under~~real estate property located in Belgium and received $7,150 in proceeds, net of fees and recorded a ~~combination~~gain of ~~voluntary and involuntary programs.~~$4,161 in other operating income.

~~During~~In the ~~current~~ ~~year,~~first quarter of fiscal 2024, the Company ~~implemented additional actions~~entered into an agreement to ~~reduce personnel~~sell certain machinery assets, inventory, and legal relationships of its boat management systems product line. This action required the Company to reclassify these assets from Property, Plant and Equipment and Inventory to Assets Held for Sale, at fair value less costs into sell, or net book value, whichever is lower. The fair value of the machinery assets was determined using local internal specialists. The machinery assets’ fair value less costs to sell exceeded its ~~Belgian operations and reorganize for productivity in its European operations. These actions, together with~~net book value. The boat management systems inventory was valued at the lower of cost or net realizable value. Net realizable value was determined using the offer amount from the buyer less costs associated with the India manufacturing operations exit, resulted in a restructuring charge of $831 and $2,049 in the quarter and two quarters ended December 29, 2017, respectively. For the quarter and two quarters ended December 30, 2016, restructuring charges of $816 and $1,074, respectively, pertained to ~~the elimination of full-time positions in the Company’s U.S., Belgian and Italian manufacturing operations.~~

~~Restructuring activities since June 2015 have~~sell. This assessment resulted in the ~~elimination~~Company recognizing a write-down of ~~163 full-time employees~~the carrying value of its boat management systems inventory of $2.1 million. The write-down was classified in the ~~manufacturing segment. Accumulated costs to date under these programs within the manufacturing segment through December 29, 2017 were $7,924.~~income statement as a component of cost of goods sold. The agreement closed October 30, 2023.

The Company calculates basic earnings per share based upon the weighted average number of common shares outstanding during the period, while the calculation of diluted earnings per share includes the dilutive effect of potential common shares outstanding during the period. The calculation of diluted earnings per share excludes all potential common shares if their inclusion would have an anti-dilutive effect. ~~Restricted~~Certain restricted stock award recipients have a non-forfeitable right to receive dividends declared by the Company and are therefore included in computing earnings per share pursuant to the ~~two-class~~two-class method.

As discussed in Note A, during the fourth quarter of 2023, the Company changed its Accounting method related to the recognition of actuarial gains and losses for its pension plans. Under the new method, actuarial gains and losses are recognized in net periodic benefit costs upon annual remeasurement in the fourth quarter, or on an interim basis as triggering events warrant remeasurement. These changes have been applied retrospectively to prior years. See Notes A, G, K, and P for further information regarding the impact of the change in accounting principle on the Company’s consolidated financial statements.

The following potential common shares were excluded from diluted EPS for the three quarters ended March 29, 2024 because they were anti-dilutive: 224.6 related to the Company’s unvested PSAs, 10.5 related to the Company’s unvested PSAUs, 153.9 related to the Company’s unvested RS awards, and 51.0 related to the Company’s unvested RSUs.

The following potential common shares were excluded from diluted EPS for the ~~quarter and two~~three quarters ended ~~December 29, 2017 as the Company reported a net loss: 224.9~~March 31, 2023 because they were anti-dilutive: 355.5 related to the ~~Company~~’sCompany’s unvested PSAs, ~~272.4~~191.6 related to the Company’s unvested RS awards, and ~~9.6 related to outstanding stock options.~~

~~The following potential common shares were excluded from diluted EPS for the quarter and two quarters ended December 30, 2016 as the Company reported a net loss: 181.8 related to the Company’s unvested PSAs, 269.6~~59.5 related to the Company’s unvested ~~RS awards,~~RSUs.

The Company leases certain office and ~~13.2 related~~warehouse space, as well as production and office equipment.

The Company determines if an arrangement is a lease at contract inception. The lease term begins upon lease commencement, which is when the Company takes possession of the asset, and may include options to ~~outstanding stock options.~~extend or terminate the lease when it is reasonably certain that such options will be exercised. As its lease agreements typically do not provide an implicit rate, the Company primarily uses an incremental borrowing rate based upon the information available at lease commencement. In determining the incremental borrowing rate, the Company considers its current borrowing rate, the term of the lease, and the economic environments where the lease activity is concentrated. Some of the Company’s leases contain non-lease components (e.g., common area, other maintenance costs, etc.) that relate to the lease components of the agreement. Non-lease components and the lease components to which they relate are accounted for as a single lease component.

The following table provides a summary of leases recorded on the condensed consolidated balance sheet.

Approximate future minimum rental commitments under non-cancellable leases as of March 29, 2024 were as follows:

From time to time, the Company enters into derivative instruments to manage volatility arising from risks relating to interest rates and foreign currency exchange rates. The Company does not purchase, hold, or sell derivative financial instruments for trading purposes. The Company’s practice is to terminate derivative transactions if the underlying asset or liability matures or is sold or terminated, or if it determines the underlying forecasted transaction is no longer probable of occurring.

The Company reports all derivative instruments on its condensed consolidated balance sheets at fair value and establishes criteria for designation and effectiveness of transactions entered into for hedging purposes.

The Company has one outstanding interest rate swap contract as of March 29, 2024, with a notional amount of $10,000. It has been designated as a cash flow hedge in accordance with ASC 815, Derivatives and Hedging.

The primary purpose of the Company’s cash flow hedging activities is to manage the potential changes in value associated with interest payments on the Company’s SOFR-based indebtedness. The Company records gains and losses on interest rate swap contracts qualifying as cash flow hedges in accumulated other comprehensive loss to the extent that these hedges are effective and until the Company recognizes the underlying transactions in net earnings, at which time these gains and losses are recognized in interest expense on its condensed consolidated statements of operations and comprehensive income. Cash flows from derivative financial instruments are classified as cash flows from financing activities on the consolidated statements of cash flows. These contracts generally have original maturities of greater than twelve months.

Net unrealized after-tax gains related to cash flow hedging activities that were included in accumulated other comprehensive loss were $539 and $688 as of March 29, 2024, and June 30, 2023, respectively. The unrealized amounts in accumulated other comprehensive loss will fluctuate based on changes in the fair value of open contracts during each reporting period.

The Company estimates that $230 of net unrealized losses related to cash flow hedging activities included in accumulated other comprehensive loss will be reclassified into earnings within the next twelve months.

The Company is exposed to foreign currency exchange rate risk related to its investment in net assets in foreign countries. During the fourth quarter of fiscal 2021, the Company designated its euro denominated Revolving Loan, with a notional amount of €13,000, as a net investment hedge to mitigate the risk of variability in its euro denominated net investments in wholly-owned foreign subsidiaries. All changes in the fair value of the euro revolver were then recorded in accumulated other comprehensive loss along with the foreign currency translation adjustments on those foreign investments. Net unrealized after-tax income related to net investment hedging activities that were included in accumulated other comprehensive loss were ($1,348) and ($1,272) as of March 29, 2024 and June 30, 2023, respectively.

The fair value of derivative instruments included in the condensed consolidated balance sheets were as follows:

The impact of the Company’s derivative instruments on the condensed consolidated statements of operations and comprehensive income for the quarters ended March 29, 2024 and March 31, 2023, respectively, was as follows:

The following tables summarize the effects of the Accounting change described in Note A on the Company’s condensed consolidated statement of operations and comprehensive income, statement of cash flows and statement of changes in equity for the quarter ended and the three quarters ended March 31, 2023 and condensed consolidated balance sheet as of March 31, 2023.

In the financial review that follows, we discuss our results of operations, financial condition, and certain other information. This discussion should be read in conjunction with our consolidated financial statements as of ~~December~~March 29, ~~2017,~~2024, and related notes, as reported in Item 1 of this Quarterly Report.

Some of the statements in this Quarterly Report on Form 10-Q are ~~“forward-looking~~“forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include the Company’s description of plans and objectives for future operations and assumptions behind those plans. The words “anticipates,” “believes,” “intends,” “estimates,” and “expects,” or similar anticipatory expressions, usually identify forward-looking statements. In addition, goals established by ~~Twin Disc, Incorporated~~the Company should not be viewed as guarantees or promises of future performance. There can be no assurance the Company will be successful in achieving its goals.

In addition to the assumptions and information referred to specifically in the forward-looking statements, other factors, including but not limited to those factors discussed under Item 1A, Risk Factors, of the ~~Company~~’sCompany’s Annual Report filed on Form 10-K for June 30, ~~2017~~2023, as supplemented in this Quarterly Report, could cause actual results to be materially different from what is expressed or implied in any forward-looking statement.

Comparison of the ~~Second~~Third Quarter of F~~iscal~~ ~~2018~~Fiscal 2024 with the ~~Second~~Third Quarter of F~~iscal~~ ~~2017~~Fiscal 2023

NetNet sales for the ~~second~~third quarter increased ~~67.9%~~0.5%, or ~~$22.9~~$0.4 million, to ~~$56.5~~$74.2 million from ~~$33.7~~$73.8 million in the same ~~period~~quarter a year ago. The Company has benefited from favorable market conditions across most geographies and product groups through fiscal 2023 and into fiscal 2024. With the some stabilization in the global supply chain, along with improving operational performance, the Company has been able to improve overall delivery results. Global sales of marine and propulsion products improved 3.2% from the prior year, while shipments of off-highway transmission products declined slightly (2.5%). Shipments of industrial products declined by 14.7%, with a slow-down in the domestic housing and construction markets, as well as weakness in European market demand. The European region enjoyed the most significant sales improvement ($2.1 million or 8.9%) due to improved shipments Veth propulsion products for European applications. The Asia Pacific region also saw a slight increase ~~is primarily the result of increasing~~($0.1 million or 0.4%), with improved demand in ~~North America for~~ the ~~Company’s~~commercial marine market, partially offset by timing of oil and gas ~~related transmission products. This market recovery began~~shipments into China. Sales into North America decreased 19.3%, or $5.2 million, primarily due to some softening in ~~the Company’s third fiscal quarter of fiscal 2017 and has continued through the current quarter. The increased~~aftermarket demand reflects positive movements in both forward market and after market activity, and represents a broadening customer base compared to the early stages of market recovery seen in fiscal 2017. Global demand for industrial products improved significantly in the ~~second quarter, with contributions from the North American~~ oil and gas market ~~an improved global economy~~ and ~~new product introductions. Demand~~weaker demand for the Company’s marine and propulsion systems also saw strong growth compared to the prior year second fiscal quarter thanks to improved activity in the global commercial marine, patrol craft and pleasure craft markets, following a very difficult market environment in fiscal 2017. The sales increases noted were seen most heavily in North America, as the percentage of sales to this region increased to 66% of total consolidated net sales in the second quarter of fiscal 2018 compared to 52% for the second quarter of fiscal 2017.industrial products. Currency translation had a slightly favorable impact on third quarter fiscal ~~2018~~2024 sales compared to the third quarter of the prior year totaling ~~$1.0 million primarily due to the strengthening of the euro and Asian currencies against the U.S. dollar.~~$0.1 million.

Sales at our manufacturing segment ~~increased 64.8%~~decreased 1.9%, or ~~$19.1~~$1.2 million, versus the same ~~period~~quarter last year. ~~In the current fiscal quarter, our~~The U.S. manufacturing ~~operation, the largest,~~operations experienced a ~~98.3%~~9.4%, or ~~$17.0~~$3.1 million, ~~increase~~decrease in sales versus the ~~second~~third fiscal quarter of ~~2017.~~2023, with some softening aftermarket demand in the North American energy market and weaker industrial demand related to the North American housing and construction markets. The ~~primary driver for this increase was continued acceleration~~Company’s operation in the Netherlands saw dramatically increased revenue of ~~demand for~~$4.9 million (32.8%) compared to the ~~Company’s oil and gas related products. The~~third fiscal quarter of 2023, primarily due to improving operation performance in support of a record level of incoming orders over the past few quarters, along with improved supply chain performance. Similarly, the Company’s Belgian operation ~~also~~ saw ~~a moderate~~an increase ~~over~~compared to the prior year ~~(11.5%~~third quarter (12.9% or ~~$0.7~~$0.9 million), ~~largely due to improving North American demand for its marine transmissions.~~with improved delivery performance driven by operational and supply chain execution. The Company’s Italian manufacturing operations ~~enjoyed a significant recovery in their markets, primarily the European mega yacht and industrial markets,~~were down $4.1 million (51.9%) compared to the ~~prior year second~~third quarter ~~reporting a 40.3% ($1.7 million) increase compared~~of fiscal 2023, primarily due to the ~~comparable period.~~sale of the BCS business during the current fiscal year. The Company’s Swiss manufacturing operation, which supplies customized propellers for the global mega yacht and patrol boat markets, ~~also experienced a solid increase (88.0% or $0.8 million), primarily due~~was up $0.2 million (13.9%) compared to the ~~timing of projects for the global pleasure craft and patrol boat markets.~~prior year third quarter.

Our distribution segment experienced ~~a 49.3%, or $7.0 million,~~an increase in sales of $3.1 million (9.2%) in the third quarter of fiscal 2024 compared to the ~~second~~third quarter of fiscal ~~2017.~~2023. The ~~Company~~’sCompany’s Asian distribution operations in Singapore, China and Japan were up 1.2% or $0.2 million from the prior year on improved commercial marine demand, partially offset by reduced deliveries for energy related products in China. The Company’s North America distribution operation saw a ~~combined 49.7%~~7.9% ($0.7 million) increase ~~in sales compared to~~on strong demand for marine products manufactured by the ~~prior fiscal year’s second quarter. This increase reflects improving commercial and patrol craft activity in the region following many quarters of declining volume.~~European operations. The Company’s European distribution operation ~~in the Northwest~~saw a significant increase ($1.5 million or 29.1%) on strong demand and improved supply of the United States and Southwest of Canada experienced an increase in sales of 88.5% ($3.1 million). The year over year increase was driven by improved sales of aftermarket service and components for the Canadian oil and gas markets.product. The Company’s distribution operation in Australia, which provides boat accessories, propulsion and marine transmission systems for the pleasure craft market, ~~experienced flat demand compared to~~saw a decrease in revenue (9.7% or $0.7 million) from the prior year ~~second~~third fiscal ~~quarter.~~quarter, primarily due to softer demand for pleasure craft products in the region following record levels in the prior year.

Gross profit as a percentage of sales ~~increased 550 basis points~~for the third quarter of fiscal 2024 improved to ~~32.1% of sales,~~28.2%, compared to ~~26.6% of sales~~26.1% for the same period last year. ~~This favorable movement is~~The improvement in the current year third quarter compared to the prior year result was primarily ~~due to~~driven by price realization and cost reductions, with a slightly positive ~~volume~~mix impact. The mix impact ~~($10.1 million). The favorable trend in gross profit performance reflects a combination of successful cost reduction actions over~~for the ~~past several quarters, improving manufacturing efficiencies and a positive product mix profile.~~quarter was essentially neutral.

For the fiscal ~~2018 second~~2024 third quarter, marketing, engineering and administrative ~~(ME&A)~~(“ME&A”) expenses, as a percentage of sales, were ~~27.0%~~23.2%, compared to ~~37.3%~~19.8% for the fiscal ~~2017 second~~2023 third quarter. ME&A expenses increased ~~$2.7~~$2.6 million (17.6%) versus the same period last fiscal year. The increase in ME&A ~~expenses~~spending for the quarter ~~is the result~~was comprised of ~~increases to~~higher wages and benefits ($0.5 million), increased global bonus expense ($~~1.6~~0.4 million), ~~stock based compensation~~travel costs ($0.3 million), lease expense ($0.2 million), ~~salary expense~~higher professional fees ($~~0.3 million)~~0.5 million, driven by acquisition activities), ~~a currency exchange impact ($0.3 million)~~along with other inflationary increases. The increases were driven by investments to drive growth (resources to support our hybrid electric strategy), corporate development and other ~~volume related spending ($0.5 million). These increases were partially offset by a reduction to global audit fees ($0.1 million) and lower pension expense ($0.1 million).~~inflationary impacts.

The Company incurred ~~$0.8 million in~~minor restructuring charges during the ~~second~~third quarter of fiscal ~~2018,~~2024 and fiscal 2023, primarily associated with ongoing cost reduction actions at its European ~~operations.~~operations and actions to adjust the cost structure at the Company’s domestic operation. The Company continues to focus on actively managing its cost structure and reducing fixed costs in light of the ~~recent~~ongoing market challenges.

Interest expense ~~remains relatively immaterial at approximately $0.1~~was down slightly to $0.3 million in the third quarter of fiscal 2024, with a lower average outstanding revolver balance partially offset by a higher interest rate.

Other income, net of $1.0 million for the ~~second~~third fiscal quarter ~~of both the current~~was primarily attributable to a currency gains and ~~prior fiscal year. The Company has focused on controlling debt and managing cash flow through the~~ ~~recent down cycle and ongoing recovery in many of its markets.~~

~~The unfavorable movement in other expense (income) compared to the prior year is primarily due to the impact of currency movements related to the euro.~~

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law in the United States. The Tax Act, among other provisions, introduces changes in the U.S. corporate tax rate, business related exclusions and deductions and credits, and has tax consequences for companies that operate internationally. Most of the changes introduced in the Tax Act are effective beginning on January 1, 2018; however, as the Company ~~has~~ a ~~fiscal year end of June 30, the effective dates for the Company are various and different.~~pension benefit.

The fiscal ~~2018 second~~2024 third quarter ~~tax expense primarily reflects the impact of the new~~ Tax Act. As a result, the Company recorded a non-cash tax expense of $4.6 million in the second fiscal quarter, primarily due to a remeasurement of deferred tax assets and liabilities driven by the revised rate structure. Similarly, a rate change in Belgium resulted in a $0.4 million non-cash tax expense due to remeasurement of deferred tax assets and liabilities. Excluding the impact of the U.S. and Belgian deferred tax remeasurements, the Company’s effective tax rate was ~~49.3%. This is higher than~~10.6% compared to 14.0% in the prior fiscal year ~~second quarter~~third quarter. The full domestic valuation allowance, along with the mix of foreign earnings by jurisdiction, resulted in the reduced effective tax rate ~~of 29.3%. The increase from the prior year is primarily due to the mix of earnings by jurisdiction and the impact of improved operating results on full year projections.~~for both periods.

Within the calculation of our annual effective tax rate we have used assumptions and estimates that may change as a result of future guidance, interpretation, and rule-making from the Internal Revenue Service, the SEC, the Financial Accounting Standards Board (“FASB”) and/or various other taxing jurisdictions. The Tax Act contains many significant changes to the U.S. tax laws, the consequences of which have not yet been fully determined. Changes in corporate tax rates, the net deferred tax assets and/or liabilities relating to our U.S. operations, the taxation of foreign earnings, and the deductibility of expenses contained in the Tax Act or other future tax reform legislation could have a material impact on our future U.S. tax expense.

Comparison of the First ~~Two~~Three Quarters of Fiscal ~~2018~~2024 with the First ~~Two~~Three Quarters of Fiscal ~~2017~~2023

Net sales for the first ~~two~~three quarters increased ~~46.~~2%9.2%, or ~~$32.1~~$17.7 million, to ~~$101.6~~$210.7 million from ~~$69.5~~$193.0 million in the same period a year ago. The ~~increase is primarily~~Company has continued to benefit from favorable market conditions across most geographies and product groups through fiscal 2023 and into fiscal 2024. With the ~~result~~easing of ~~increasing demand in North America for~~global supply chain disruptions, along with improving operational performance, the Company’s oil and gas related transmission products, driven by the ongoing market recovery which began in the Company’s third fiscal quarter of fiscal 2017. The increased demand reflects positive movements in both forward market and after market activity, and represents a broadening customer base comparedCompany has been able to the early stages of market recovery seen in fiscal 2017. Global demand for industrial products also improved significantly, primarily in the second quarter, with contributions from the North American oil and gas market, an improved global economy and new product introductions. Demand for the Company’s marine and propulsion systems also saw strong growthimprove delivery results compared to the prior year. Global sales of marine and propulsion products improved 17.3% from the prior year, ~~first half~~while shipments of off-highway transmission products improved by 6.7%. Shipments of industrial products declined by 15.5%, with a slow-down in the domestic housing and construction markets. The Asia Pacific region enjoyed the most significant sales improvement ($14.5 million or 34.1%) due to improved ~~activity~~shipments of oil and gas transmissions into China, an improved demand for commercial marine products and continued strength in pleasure craft demand in Australia. The European region also saw a significant increase ($13.5 million or 23.0%), with improved operational performance at our facilities in Belgium and the Netherlands, coupled with continued strong demand. Sales into North America decreased 19.1%, or $14.4 million, primarily due to some softening in aftermarket demand in the ~~global commercial marine, patrol craft~~oil and pleasure craft markets, following a very difficult market environment in fiscal 2017. These market improvements accelerated in the second quarter, showing a positive trend through the first half. The sales increases noted were seen most heavily in North America, as the percentage of sales to this region increased to 63% of total consolidated net sales in the first half of fiscal 2018 compared to 53% for the first half of fiscal 2017.gas market. Currency translation had a favorable impact on first three quarters of fiscal ~~2018 first half~~2024 sales compared to the same period in the prior year totaling ~~$1.5~~$4.5 million primarily due to the strengthening of the euro ~~and the Australian and Canadian dollar~~ against the U.S. dollar.

Sales at our manufacturing segment increased ~~47.5%~~3.5%, or ~~$28.5~~$5.9 million, versus the same period last year. ~~In the first half of fiscal 2018, our~~The U.S. manufacturing ~~operation, the largest operation of the Company,~~operations experienced a ~~70.6%~~7.8%, or ~~$25.8~~$7.2 million, ~~increase~~decrease in sales versus the first three quarters of fiscal ~~half~~2023, with some softening aftermarket demand in the North American energy market and weaker industrial demand related to the North American housing and construction markets. The Company’s operation in the Netherlands saw increased revenue of ~~2017. The primary driver for this increase was continuing strength~~$16.1 million (45.2%) compared to the first three quarters of fiscal 2023, primarily due to improving operation performance in ~~demand for~~support of a record level of incoming orders over the ~~Company’s oil~~past several quarters, along with a favorable currency impact and ~~gas related products. The~~improved supply chain performance. Similarly, the Company’s Belgian operation ~~also~~ saw ~~a significant~~an increase ~~over~~compared to the prior fiscal year first ~~half (30.8%~~three quarters (21.5% or ~~$3.0~~$3.6 million), ~~largely due to improving North American demand for its marine transmissions.~~with a favorable translation effect and improved delivery performance driven by operational and supply chain execution. The Company’s Italian manufacturing operations ~~which continued to be hampered by the softness in the European mega yacht and industrial markets, saw marginal improvement over the prior year first half with a 16.2% ($1.4 million) increase~~were down $6.9 million (33.2%) compared to the first three quarters of fiscal ~~2017.~~2023, primarily due to the sale of the BCS business during the current fiscal year. The Company’s Swiss manufacturing operation, which supplies customized propellers for the global mega yacht and patrol boat markets, ~~experienced a solid 28.9% improvement ($0.8 million), primarily due~~was up $0.3 million (7.3%) compared to the ~~timing of projects for the global pleasure craft and patrol boat markets.~~prior fiscal year first three quarters.

Our distribution segment experienced a ~~31.4%, or $9.3 million,~~an increase in sales of $23.4 million (27.95%) in the first three quarters of fiscal 2024 compared to the first ~~half~~three quarters of fiscal ~~2017.~~2023. The Company’s Asian distribution operations in Singapore, China and Japan were up 48.6% or $14.1 million from the prior year on improving deliveries for energy related products in China and strong commercial marine demand in the region. The Company’s North America distribution operation saw a ~~combined 32.3%~~9.3% ($1.9 million) increase ~~in sales compared to~~on strong domestic demand for marine products from the prior fiscal year’s first half. This increase reflects improving commercial and patrol craft activity in the region, after several quarters of declining demand as a result of the struggling Asian economy.European operations. The Company’s European distribution operation ~~in the Northwest United States~~saw a significant increase ($3.8 million or 27.9%) on strong demand, a favorable currency impact and ~~Southwest Canada experienced an increase in sales~~improved supply of ~~65.0% ($4.3 million). The year over year increase was driven by improved sales of aftermarket service and components for the Canadian oil and gas markets.~~product. The Company’s distribution operation in Australia, which provides boat accessories, propulsion and marine transmission systems for the pleasure craft market, ~~also~~ saw ~~a solid~~an increase in ~~sales (12.5%)~~revenue (1.2% or $0.3 million) from the prior year first three quarters, primarily due to ~~a favorable trend~~continued strong demand for pleasure craft products in the ~~Australian pleasure craft market.~~region.

Gross profit as a percentage of sales ~~increased 540 basis points~~for the first three quarters of fiscal 2024 improved to ~~31.5% of sales,~~27.6%, compared to ~~26.1% of sales~~25.7% for the same period last year. ~~This~~ The improvement isin the first three quarters of the current year compared to the prior year result was primarily volume related, along with a positive mix impact due to ~~a positive volume~~additional oil and gas units shipped in the current year. These favorable movements were partially offset by the negative impact ~~($14.2 million) associated with~~of the ~~strong revenue growth through~~sale of the BCS business that was recorded in the first ~~half~~quarter of fiscal 2018. The strong gross profit performance reflects a combination of successful cost reduction actions over the past several quarters, improving manufacturing efficiencies and a positive product mix profile.2024.

For the fiscal ~~2018~~2024 first ~~two~~three quarters, marketing, engineering and administrative ~~(ME&A)~~(“ME&A”) expenses, as a percentage of sales, were ~~28.5%~~24.3%, compared to ~~36.0%~~23.7% for the fiscal ~~2017~~2023 first ~~two~~three quarters. ME&A expenses increased ~~$3.9~~$5.6 million (12.2%) versus the same period last fiscal year. The increase in ME&A ~~expenses~~spending for the ~~period is~~ ~~primarily the result~~first three quarters was comprised of ~~increases to~~higher wages and benefits ($1.4 million), travel costs ($0.7 million), software maintenance ($0.3 million), product development ($0.3 million), global bonus expense ($~~2.4~~0.9 million), ~~stock based compensation~~professional fees ($0.4 million), lease expense ($0.3 million), depreciation and amortization ($0.6 million) and a positive currency translation impact ($0.5 million)~~, salary expense ($0.7 million) a currency exchange impact ($0.4 million) and volume based spending ($0.3 million)~~. ~~These~~The increases were ~~partially offset~~driven by ~~a reduction~~inflationary impacts and investment in resources to ~~global audit fees ($0.3 million) and lower pension expense ($0.2 million).~~support our hybrid electric strategy.

The Company incurred $~~2.0 million in~~minor restructuring charges during the first ~~half~~three quarters of fiscal ~~2018,~~2024 and fiscal 2023, primarily associated with ongoing cost reduction actions at its European ~~operations.~~operations and actions to adjust the cost structure at the Company’s domestic operation. The Company continues to focus on actively managing its cost structure and reducing fixed costs in light of the ~~recent~~ongoing market challenges.

Interest expense ~~remains relatively immaterial at less than $0.2~~was down 37.6% to $1.0 million in the first three quarters of fiscal 2024, with a lower average outstanding revolver balance partially offset by a higher interest rate.

Other income of $0.6 million for the first ~~two~~three quarters of ~~both the current and prior~~ fiscal ~~year. The Company has focused on controlling debt and managing cash flow through the down cycle and ongoing recovery in many of its markets.~~

~~The~~ ~~unfavorable movement in other expense (income) compared~~2024 was primarily attributable to ~~the prior year is primarily due to the impact of~~a pension benefit, partially offset by a currency ~~movements related to the euro and Singapore dollar.~~loss.

The fiscal ~~2018~~2024 first ~~half~~three quarters effective tax rate was ~~204.0~~%,41.9% compared to 38.2% in the prior fiscal ~~2017 first half rate of 28.8%.~~year comparable period. The ~~fiscal 2018 rate was impacted by two significant discrete adjustments. During the first quarter of fiscal 2018, the Company recorded a tax benefit of $3.8 million related to the reversal of a~~full domestic valuation allowance, ~~in a certain foreign jurisdiction that had been subject to a full valuation allowance. Improvement in operating results,~~ along with ~~a business reorganization which provided favorable tax planning opportunities, allowed for~~ the reversal of this valuation allowance. During the second quarter of the current fiscal year, in compliance with the new Tax Act, the Company recorded a non-cash tax expense of $4.6 million, primarily due to a remeasurement of deferred tax assets and liabilities. In addition, a rate change in Belgium resulted in a $0.4 million non-cash tax expense due to remeasurement of deferred tax assets and liabilities. The mix of foreign earnings by jurisdiction, ~~smaller discrete adjustments and continued operational improvement explain the remaining movement~~resulted in the ~~Company’s~~increase to the effective tax rate.

Comparison between ~~December~~March 29,~~, 201~~7 2024 and June 30, ~~201~~72023

As of ~~December~~March 29, ~~2017,~~2024, the Company had net working capital of ~~$87.9~~$119.9 million, which represents an increase of ~~$3.0~~$0.3 million, or ~~3.6%~~0.2%, from the net working capital of ~~$84.9~~$119.6 million as of June 30, ~~2017.~~2023.

Cash ~~decreased $0.6~~increased by $10.6 million to ~~$15.8~~$23.8 million as of ~~December~~March 29, ~~2017,~~2024, versus ~~$16.4~~$13.3 million as of June 30, ~~2017. The~~2023. As of March 29, 2024, the majority of the cash ~~as of December 29, 2017~~ is at the Company’s overseas operations in Europe ($~~7.5~~5.6 million) and Asia-Pacific ($~~7.1~~10.4 million). The Company had $7.9 million of domestic cash available at March 29, 2024 in anticipation of the closing of the Katsa Oy acquisition announced in March.

Trade receivables of ~~$29.2~~$41.0 million were down ~~$2.2~~$13.8 million, or ~~approximately 6.9%~~25.2%, when compared to last fiscal year-end. ~~Foreign~~The impact of foreign currency translation ~~increased~~was to decrease accounts receivable by ~~$0.6~~$0.2 million versus June 30, ~~2017. The net remaining decrease is driven by strong collection results and the timing of sales within the quarter, as sales for the second fiscal quarter slow through the year-end holiday season.~~2023. As a percent of sales, trade receivables finished at ~~51.7%~~55.2% in the ~~second~~third quarter of fiscal ~~2018~~2024 compared to ~~67.5%~~60.2% for the comparable period in fiscal ~~2017~~2023 and ~~58.6%~~65.2% for the fourth quarter of fiscal ~~2017.~~2023.

Inventories ~~increased~~were reduced by ~~$7.8~~$2.1 million ~~or 11.9%,~~(1.6%) versus June 30, ~~2017 to $74.0 million.~~ ~~Foreign~~2023. The impact of foreign currency translation ~~increased~~was to decrease inventories by ~~$1.9~~$0.9 million versus June 30, ~~2017.~~2023. The remaining decrease was essentially the result of the sale of the BCS business, reducing inventory by $3.8 million. The operation in the Netherlands reported an offsetting increase driven by continued growth in backlog and the need for inventory to support growth. Much of this inventory, however, is ~~volume driven, as~~funded through customer advance payments upon receipt of the ~~Company experiences recovery primarily in its products serving the North American oil and gas market.~~order. On a consolidated basis, as of ~~December~~March 29, ~~2017,~~2024, the Company’s backlog of orders to be shipped over the next six months approximates ~~$85.1~~$130.5 million, compared to ~~$46.4~~$119.2 million at June 30, ~~2017~~2023 and ~~$38.0~~$127.7 million at ~~December 30, 2016. The increase versus the end of the prior fiscal year is primarily being experienced at the Company’s domestic manufacturing location.~~March 31, 2023. As a percentage of six-month backlog, inventory has ~~reduced~~decreased from ~~143%~~111% at June 30, ~~2017~~2023 to ~~87%~~100% at ~~December~~March 29, ~~2017.~~2024.

Net property, plant and equipment ~~(PP&E~~increased $2.0 million (5.1%) ~~increased $0.4~~to $40.6 million versus $38.7 million at June 30, ~~2017. This includes the addition~~2023. The Company had capital spending of ~~$3.0~~$7.6 million in ~~capital expenditures, primarily at~~ the ~~Company’s U.S. and Belgian-based manufacturing operations, which~~first three quarters. This increase was ~~essentially~~partially offset by depreciation ($5.0 million) and the impact of ~~$3.2 million. The net remaining increase is due~~the sale of the BCS business. Capital spending occurring in the first three quarters was primarily related to ~~foreign currency translation effects.~~replacement capital. In total, the Company expects to invest between $7$9 and $9$11 million in capital assets in fiscal ~~2018.~~2024. 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.

~~Accounts~~Accounts payable as of ~~December~~March 29, ~~2017~~2024 of ~~$23.4~~$33.2 million ~~were up $2.1~~was down $3.3 million, or ~~9.9%~~9.0%, from June 30, ~~2017.~~2023. The impact of foreign currency translation was to ~~increase~~decrease accounts payable by ~~$0.5~~$0.3 million versus June 30, ~~2017.~~2023. The remaining ~~increase~~decrease is ~~consistent with increased sales volumes~~primarily related to the reduced purchasing activities in light of stable demand and inventory ~~levels in comparison to the fiscal 2017 fourth quarter, along with the Company’s focus on effective working capital management.~~reduction efforts.

Total b~~orrowings~~borrowings and long-term debt as of ~~December~~March 29, ~~2017~~2024 decreased by $1.6 million ~~or 25.9%,~~ to ~~$4.7~~$17.0 million versus $18.6 million at June 30, ~~2017. Cash needs were driven primarily by volume related working capital requirements and were offset by favorable collection results and a $1.0 million tax refund.~~2023. During the first ~~half of fiscal 2018,~~three quarters, the Company ~~generated~~reported positive free cash flow of $14.7 million (defined as operating cash flow less acquisitions of fixed assets), driven by positive operating results and working capital performance, partially offset by the payment of ~~$0.8 million~~a bonus accrual and capital spending. The Company ended the ~~second fiscal~~ quarter with total debt, net of cash, of ($~~11.1)~~6.8) million, compared to ~~($10.0)~~$5.4 million at June 30, ~~2017,~~2023, for a net ~~favorable change~~improvement of ~~$1.1~~$12.2 million.

Total equity increased ~~$5.1~~$1.4 million, or ~~4.1%~~0.1%, to ~~$128.6~~$146.9 million as of ~~December~~March 29, ~~2017. Retained earnings decreased by $0.7 million, reflecting the~~2024. The net ~~loss for~~income during the first ~~fiscal half. Net favorable~~three quarters increased equity by $3.6 million, offset by an unfavorable foreign currency translation of ~~$3.0~~$0.9 million ~~was reported.~~and the payment of a dividend ($1.2 million). The ~~reduction~~net change in common stock and treasury stock resulting from the accounting for ~~stock based~~stock-based compensation ~~increase~~ddecreased equity by ~~$0.7~~$0.5 million. The net remaining ~~increase~~decrease in equity ~~of $2.1 million~~ primarily represents the ~~impact of a plan change to the Company’s U.S. postretirement benefit plan and~~ amortization of net actuarial loss and prior service cost on the Company’s defined benefit pension ~~plans.~~plans, along with the unrealized gain on cash flow hedges.

On ~~April 22, 2016,~~June 29, 2018, the Company entered into a ~~revolving~~ Credit Agreement (the ~~“BMO~~“Credit Agreement”) with BMO Harris Bank N.A. (“BMO”) that provided for the assignment and assumption of the previously existing loans between the Company and Bank of Montreal (~~“BMO”~~(the “2016 Credit Agreement”) and subsequent amendments into a term loan (the “Term Loan”) and revolving credit loans (each a “Revolving Loan” and, collectively, the “Revolving Loans,” and, together with the Term Loan, the “Loans”). ~~This agreement permits~~Pursuant to the Credit Agreement, BMO agreed to make the Term Loan to the Company in a principal amount not to exceed $35.0 million and the Company may, from time to time prior to the maturity date, enter into Revolving Loans in amounts not to exceed, in the aggregate, $50.0 million (the “Revolving Credit Commitment”), subject to a Borrowing Base based on Eligible Inventory and Eligible Receivables. Subsequent amendments to the Credit Agreement reduced the Term Loan to $20.0 million, extended the maturity date of the Term Loan to April 1, 2027, and require the Company to ~~enter into loans up~~make principal installment payments on the Term Loan of $0.5 million per quarter. In addition, under subsequent amendments to ~~$40~~the Credit Agreement, BMO’s Revolving Credit Commitment is currently $45.0 million. ~~This maximum~~The Credit Agreement also allows the Company to obtain Letters of Credit from BMO, which if drawn upon by the beneficiary thereof and paid by BMO, would become Revolving Loans. Under the Credit Agreement, the Company may ~~be increased~~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 ~~BMO~~Credit Agreement ~~by an additional $10 million so long as there exists no default and certain other conditions specified in the BMO Agreement are satisfied.~~currently runs through April 1, 2027.

~~In general, each revolving loan under~~Under the ~~BMO~~Credit Agreement ~~will~~as amended, interest rates are based on either the secured overnight financing rate (“SOFR”) or the euro interbank offered rate (the “EURIBO Rate”). Loans are designated either as “SOFR Loans,” which accrue interest at an Adjusted Term SOFR plus an Applicable Margin, or “Eurodollar Loans,” which accrue interest at the EURIBO Rate plus an Applicable Margin. Amounts drawn on a Letter of Credit that are not timely reimbursed to the Bank bear interest at a ~~Eurodollar~~Base Rate ~~as defined. This rate as of~~ ~~December 29, 2017 was 3.11%. In addition to monthly interest payments, the~~plus an Applicable Margin. The Company ~~will be responsible for paying~~also pays a ~~quarterly unused~~commitment fee ~~equal to 0.15% of~~on the average daily ~~unused portion~~Unused Revolving Credit Commitment equal to an Applicable Margin. Currently, the Applicable Margins are between 2.00% and 3.50% for Revolving Loans and Letters of Credit; 2.125% and 3.625% for Term Loans; and 0.15% and 0.30% for the ~~revolving credit commitment.~~ Unused Revolving Credit Commitment (each depending on the Company’s Total Funded Debt to EBITDA ratio).

The Credit Agreement, as amended, requires the Company to meet certain financial covenants. Specifically, the Company’s Total Funded Debt to EBITDA ratio may ~~prepay loans subject~~not exceed 3.50 to ~~certain limitations.~~ 1.00, and the Company’s Fixed Charge Coverage Ratio may not be less than 1.10 to 1.00. In determining whether the Company is in compliance with its Total Funded Debt/EBITDA Ratio, the Company’s EBITDA will include transaction expenses of up to $0.6 million for the Katsa Oy acquisition, as well as pro-forma EBITDA of Katsa Oy as permitted by the Bank. The Company’s Tangible Net Worth may not be less than $100.0 million plus 50% of positive Net Income for each fiscal year ending on or after June 30, 2023.

Borrowings under the ~~BMO~~Credit Agreement are secured by substantially all of the Company’s personal property, including accounts receivable, inventory, ~~certain~~ machinery and equipment, and intellectual ~~property, and the personal property of Mill-Log Equipment Co., Inc. (“Mill-Log”), a wholly-owned domestic subsidiary of the Company.~~property. The Company has also pledged 100% of its equity interests in certain domestic subsidiaries and 65% of its equity interests in certain foreign subsidiaries. The Company has entered into a security agreement, IP security agreement and pledge agreement with BMO, and Mill-Log has entered into a guaranty agreement, guarantor security agreement and pledge agreement with BMO, which collectively grant BMO a security interest in these assets and holdings as administrative agent for itself and other lenders that may enter into the BMO Agreement. The Company has also entered into a ~~negative pledge agreement~~Collateral Assignment of Rights under Purchase Agreement for its acquisition of Veth Propulsion. To effect these security interests, the Company entered into various amendment and assignment agreements that consent to the assignment of certain agreements previously entered into between the Company and the Bank of Montreal in connection with the 2016 Credit Agreement. The Company also amended and assigned to BMO a Negative Pledge Agreement that it has previously entered into with Bank of Montreal, pursuant to which it ~~has~~ agreed not to sell, lease or otherwise encumber real estate that it owns except as permitted by the ~~BMO~~Credit Agreement and the ~~negative pledge agreement. Within thirty days~~Negative Pledge Agreement.

The Company has also entered into a Deposit Account Control Agreement with the Bank, reflecting the Bank’s security interest in deposit accounts the Company maintains with the Bank. The Bank may not provide a notice of exclusive control of a deposit account (thereby obtaining exclusive control of the account) prior to the occurrence or existence of a Default or an Event of Default under the Credit Agreement or otherwise upon the occurrence or existence of an event or condition that would, but for the passage of time or the giving of notice, constitute a Default or an Event of Default under the Credit Agreement.

Upon the occurrence of an ~~event~~Event of ~~default (as defined) that is not cured within~~Default, BMO may take the ~~prescribed cure period, or if availability~~following actions upon written notice to the Company: (1) terminate its remaining obligations under the ~~BMO~~Credit Agreement; (2) declare all amounts outstanding under the Credit Agreement ~~is less than~~to be immediately due and payable; and (3) demand the ~~greater of 15%~~Company to immediately Cash Collateralize L/C Obligations in an amount equal to 105% of the aggregate ~~revolving credit commitments and $6.0 million,~~L/C Obligations or a greater amount if BMO determines a greater amount is necessary. If such Event of Default is due to the Company’s bankruptcy, BMO may take the three actions listed above without notice to the Company.

On April 1, 2024, the Company entered into Amendment No. 10 to Credit Agreement (the “Tenth Amendment”) that amended and ~~Mill-Log will execute~~extended the Credit Agreement. The Tenth Amendment increased the Revolving Credit Commitment from $40.0 million to $45.0 million, and ~~deliver mortgages~~also increased the Borrowing Base for Revolving Loans from the sum of (a) 85% of outstanding unpaid Eligible Receivable and (b) the lesser of $30.0 million and 50% of Eligible Inventory to ~~BMO on all real estate owned by them at such time~~the sum of (a) 85% of outstanding unpaid Eligible Receivables and (b) the lesser of $35.0 million (reduced to ~~further secure borrowings under~~$32.5 million beginning with the ~~BMO Agreement.~~first quarter of the 2026 fiscal year) and 60% of Eligible Inventory (reduced to 55% of Eligible Inventory beginning with the third quarter of the 2025 fiscal year, and 50% of Eligible Inventory beginning with the first quarter of the 2026 fiscal year).

The Company~~’s balance sheet~~ intends to use the increased borrowing capacity under the Credit Agreement to help finance its previously announced proposed acquisition of Katsa Oy by TD Finland Holding Oy, a wholly-owned subsidiary of the Company. The Tenth Amendment specifically permits the Company to use Revolving Loans for the Katsa Oy acquisition. In addition, in determining whether the Company is in compliance with its Total Funded Debt/EBITDA Ratio, the Company’s EBITDA will include transaction expenses of up to $0.6 million for the Katsa Oy acquisition, as well as pro-forma EBITDA of Katsa Oy as permitted by the Bank.

The Tenth Amendment also extended the Credit Agreement through April 1, 2027 and extended the maturity date of the Term Loan and the Term Loan Commitment Date to April 1, 2027. Prior to the Tenth Amendment, the Credit Agreement was scheduled to terminate as of June 30, 2025, and the Term Loan and Term Loan Commitment Date were scheduled to mature/terminate on March 4, 2026.

The Tenth Amendment also increased the Applicable Margins under the Credit Agreement for purposes of determining interest rates on Revolving Loans, Letters of Credit, Term Loans, and the Unused Revolving Credit Commitment. Prior to the Tenth Amendment, the Applicable Margins were between 1.25% and 2.75% for Revolving Loans and Letters of Credit; 1.375% and 2.875% for Term Loans; and .10% and .15% for the Unused Revolving Credit Commitment (each depending on the Company’s Total Funded Debt to EBITDA ratio). Under the Tenth Amendment, the Applicable Margins are between 2% and 3.5% for Revolving Loans and Letters of Credit; 2.125% and 3.625% for Term Loans; and .15% and .3% for the Unused Revolving Credit Commitment (each depending on the Company’s Total Funded Debt to EBITDA ratio).

The Tenth Amendment also increased the amount of Restricted Payments that the Company may make in the form of cash dividends, distributions, purchases, redemptions, or other acquisitions of its common stock from $3.0 million to $5.0 million in any fiscal year.

The Company remains ~~very strong, there~~in compliance with its liquidity and other covenants.

As of March 29, 2024, current maturities include $2.0 million of term loan payments due within the coming year.

Other significant contractual obligations as of March 29, 2024 are disclosed in Note N "Lease Liabilities" in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. There are no material ~~off-balance-sheet arrangements, and~~undisclosed guarantees. As of March 29, 2024, the Company ~~continues~~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 ~~sufficient liquidity for near-term needs.~~terms of less than 90 days. The Company ~~had approximately $23.1 million of available borrowings under~~has long-term obligations related to its postretirement plans which are discussed in detail in Note G "Pension and Other Postretirement Benefit Plans” in the ~~BMO Agreement as of December 29, 2017. The Company expects~~Notes to ~~continue to generate enough cash from operations, as well as borrowing capacity from credit facilities, to meet its operating and investing needs. As of December 29, 2017,~~Condensed Consolidated Financial Statements in Part I, Item 1of this Quarterly Report on Form 10-Q. Postretirement medical claims are paid by the Company ~~also had cash of $15.8 million, primarily at its overseas operations. These funds, with some restrictions and tax implications,~~as they are ~~available for repatriation as deemed necessary by the Company.~~submitted. In fiscal ~~2018,~~2024, the Company expects to contribute ~~$2.3~~$0.7 million to postretirement benefits based on actuarial estimates; however, these amounts can vary significantly from year to year because the Company is self-insured. In fiscal 2024, the Company expects to contribute $0.7 million to its defined benefit pension ~~plans, the minimum contribution required.~~

~~Net working capital~~ increased $3.0 million, or 3.6%, during the first half of fiscal 2018, and the current ratio remained level at 2.9 for both December 29, 2017 and June 30, 2017. The increase in net working capital was primarily driven by a volume related increase to inventory during the first half of fiscal 2018.

plans. The Company ~~expects capital expenditures to be approximately $7 million to $9 million in fiscal 2018. These anticipated expenditures reflect the Company’s plans to invest in modern equipment and facilities, its global sourcing program and new products.~~does not have any material off-balance sheet arrangements.

Management believes that available cash, the ~~BMO~~Credit Agreement, the unsecured lines of credit, ~~facility,~~cash generated from future operations, and potential access to debt markets will be adequate to fund the ~~Company~~’sCompany's cash and capital requirements for the foreseeable future.

~~As of~~ ~~December 29, 2017, the Company has obligations under non-cancelable operating lease contracts and loan agreements for certain future payments.~~

~~The Company has~~ approximately $0.9 million of unrecognized tax benefits, including related interest and penalties, as of December 29, 2017, which, if recognized, would favorably impact the effective tax rate. See Note H of the Condensed Consolidated Financial Statements for disclosures surrounding uncertain income tax positions.

The Company maintains defined benefit pension plans for some of its operations in the United States and Europe. The Company has established the Benefits Committee (a non-Board management committee) to oversee the operations and administration of the defined benefit plans. The Company estimates that fiscal 201~~8 contributions to all defined benefit plans will total $2.3 million. As of December 29, 2017, $1.0 million in contributions have been made.~~

See Note A,, Basis of Presentation, to the condensed consolidated financial statements for a discussion of recently issued accounting standards.

The preparation of this Quarterly Report requires ~~management~~’smanagement’s judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.

The ~~Company~~’sCompany’s critical accounting policies are described in Item 7 of the Company’s Annual Report filed on Form 10-K for June 30, ~~2017.~~2023. There have been no significant changes to those accounting policies subsequent to June 30, ~~2017.~~2023.

The Company is ~~exposed~~electing not to market risks from changes in interest rates, commodities and foreign exchange. To reduce such risks, the Company selectively uses financial instruments and other pro-active management techniques. All hedging transactions are authorized and executed pursuantprovide this disclosure due to ~~clearly defined policies and procedures, which prohibit the use of financial instruments for trading or speculative purposes.~~its status as a Smaller Reporting Company.

~~Interest rate risk - The Company~~’s earnings exposure related to adverse movements of interest rates is primarily derived from outstanding floating rate debt instruments that are indexed to a Eurodollar Rate. In accordance with BMO Agreement expiring April 22, 2021, the Company has the option of borrowing at a Eurodollar Rate plus an additional “Add-On” of 1.75%. Due to the relative stability of interest rates, the Company did not utilize any financial instruments at December 29, 2017 to manage interest rate risk exposure. A 10 percent increase or decrease in the applicable interest rate would result in a change in annual pretax interest expense of approximately $14,000.

Commodity price risk - The Company is exposed to fluctuation in market prices for such commodities as steel and aluminum. The Company does not utilize commodity price hedges to manage commodity price risk exposure.

~~Currency risk - The Company has exposure to foreign currency exchange fluctuations.~~ Approximately 26% of the Company’s revenues in the two quarters ended December 29, 2017 were denominated in currencies other than the U.S. dollar. Of that total, approximately 56% was denominated in euros with the balance composed of Japanese yen, the Swiss franc, Indian rupee and the Australian and Singapore dollars. The Company does not hedge the translation exposure represented by the net assets of its foreign subsidiaries. Foreign currency translation adjustments are recorded as a component of shareholders’ equity. Forward foreign exchange contracts are occasionally used to hedge the currency fluctuations on significant transactions denominated in foreign currencies.

~~Derivative financial instruments - The Company has written policies and procedures that place all financial instruments under the direction of the~~ Company’s corporate treasury group and restrict derivative transactions to those intended for hedging purposes. The use of financial instruments for trading or speculative purposes is prohibited. The Company occasionally uses financial instruments to manage the market risk from changes in foreign exchange rates.

The Company primarily enters into forward exchange contracts to reduce the earnings and cash flow impact of non-functional currency denominated receivables and payables. These contracts are highly effective in hedging the cash flows attributable to changes in currency exchange rates. Gains and losses resulting from these contracts offset the foreign exchange gains or losses on the underlying assets and liabilities being hedged. The maturities of the forward exchange contracts generally coincide with the settlement dates of the related transactions. Gains and losses on these contracts are recorded in Other expense, net in the Condensed Consolidated Statement of Operations as the changes in the fair value of the contracts are recognized and generally offset the gains and losses on the hedged items in the same period. The primary currency to which the Company was exposed in fiscal 2018 and 2017 was the euro. At December 29, 2017, the Company had no outstanding forward exchange contracts. At June 30, 2017, one of the Company’s foreign subsidiaries had three outstanding forward exchange contracts to purchase U.S. dollars in the notional value of $1,050,000 with a weighted average maturity of 53 days. The fair value of the Company’s contract was a loss of $29,000 at June 30, 2017.

The ~~Company~~’sCompany’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“the Exchange Act”) as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective in recording, processing, summarizing, and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, and that such information is accumulated and communicated to the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosure.

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act ~~Rule~~ Rules 13a-15(f) and 15d-15(f). During the most recent fiscal quarter, no changes were made which have materially affected, or which are reasonably likely to materially affect, our internal control over financial reporting.

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.

There have been no ~~other~~ material changes to the risk factors previously disclosed in response to Item 1A to Part I of our ~~2017~~2023 Annual Report on Form 10-K.

There were no securities of the Company sold by the Company during the quarter ended ~~December~~March 29, ~~2017,~~2024, which were not registered under the Securities Act of 1933, in reliance upon an exemption from registration provided by Section 4 (2) of the Act.

The amounts shown in Column (a) above represent shares of common stock delivered to the Company as payment of withholding taxes due on the vesting of restricted stock and performance stock issued under the Twin Disc, Incorporated ~~2010~~2021 and 2018 Long-Term Incentive Compensation ~~Plan.~~Plans.

Under authorizations granted by the Board of Directors on February 1, 2008 and July 27, 2012, the Company was authorized to purchase 500,000 shares of its common stock. This authorization has no expiration, and as of ~~December~~March 29, ~~2017,~~2024, 315,000 may yet be purchased under these authorizations. The Company did not purchase any shares of its common stock pursuant to these authorizations during the quarter ended ~~December~~March 29, ~~2017.~~2024.

The discussion of limitations upon the payment of dividends as a result of the Credit Agreement between the Company and BMO Harris Bank, N.A., as discussed in Part I, Item 2, "Management's Discussion and Analysis " under the heading "Financial Condition, Liquidity and Capital Resources," is incorporated herein by reference.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	December 29, 2017			June 30, 2017

ASSETS
Current assets:
Cash	$	15,766		$	16,367
Trade accounts receivable, net		29,214			31,392
Inventories		74,037			66,193
Prepaid expenses		7,683			8,295
Other		7,979			7,187
Total current assets		134,679			129,434

Property, plant and equipment, net		47,820			48,212
Deferred income taxes		21,462			24,198
Goodwill, net		2,759			2,585
Intangible assets, net		2,032			2,009
Other assets		4,434			4,460

Total assets	$	213,186		$	210,898

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	23,404		$	21,301
Accrued liabilities		23,335			23,222
Total current liabilities		46,739			44,523

Long-term debt		4,684			6,323
Accrued retirement benefits		30,463			33,706
Deferred income taxes		976			1,011
Other long-term liabilities		1,675			1,768

Total liabilities		84,537			87,331

Commitments and contingencies (Note D)

Equity:
Twin Disc shareholders' equity:
Preferred shares authorized: 200,000; issued: none; no par value		-			-
Common shares authorized: 30,000,000; issued: 13,099,468; no par value		10,086			10,429
Retained earnings		168,646			169,368
Accumulated other comprehensive loss		(27,427	)		(32,671	)
		151,305			147,126
Less treasury stock, at cost (1,514,576 and 1,580,335 shares, respectively)		23,199			24,205

Total Twin Disc shareholders' equity		128,106			122,921

Noncontrolling interest		543			646

Total equity		128,649			123,567

Total liabilities and equity	$	213,186		$	210,898

	For the Quarter Ended						For the Two Quarters Ended
	December 29, 2017			December 30, 2016			December 29, 2017			December 30, 2016

Net sales	$	56,546		$	33,672		$	101,611		$	69,507
Cost of goods sold		38,420			24,723			69,590			51,385
Gross profit		18,126			8,949			32,021			18,122

Marketing, engineering and administrative expenses		15,268			12,560			28,936			25,035
Restructuring expenses		831			816			2,049			1,074
Income (loss) from operations		2,027			(4,427	)		1,036			(7,987	)

Interest expense		83			122			147			175
Other expense (income), net		69			(456	)		268			(346	)
		152			(334	)		415			(171	)

Income (loss) before income taxes and noncontrolling interest		1,875			(4,093	)		621			(7,816	)
Income tax expense (benefit)		5,925			(1,201	)		1,267			(2,253	)

Net loss		(4,050	)		(2,892	)		(646	)		(5,563	)
Less: Net earnings attributable to noncontrolling interest, net of tax		(63	)		(20	)		(76	)		(45	)

Net loss attributable to Twin Disc	$	(4,113	)	$	(2,912	)	$	(722	)	$	(5,608	)

Loss per share data:
Basic loss per share attributable to Twin Disc common shareholders	$	(0.36	)	$	(0.26	)	$	(0.06	)	$	(0.50	)
Diluted loss per share attributable to Twin Disc common shareholders	$	(0.36	)	$	(0.26	)	$	(0.06	)	$	(0.50	)

Weighted average shares outstanding data:
Basic shares outstanding		11,297			11,242			11,278			11,231
Diluted shares outstanding		11,297			11,242			11,278			11,231

Comprehensive (loss) income:
Net loss	$	(4,050	)	$	(2,892	)	$	(646	)	$	(5,563	)
Benefit plan adjustments, net of income taxes of $674, $399, $952 and $798, respectively		1,734			750			2,208			1,422
Foreign currency translation adjustment		488			(4,198	)		3,029			(3,515	)
Comprehensive (loss) income		(1,828	)		(6,340	)		4,591			(7,656	)
Less: Comprehensive income attributable to noncontrolling interest		(62	)		(31	)		(69	)		(112	)

Comprehensive (loss) income attributable to Twin Disc	$	(1,890	)	$	(6,371	)	$	4,522		$	(7,768	)

	For the Two Quarters Ended
	December 29, 2017			December 30, 2016

Cash flows from operating activities:

Net loss	$	(646	)	$	(5,563	)
Adjustments to reconcile net loss to net cash provided (used) by operating activities:
Depreciation and amortization		3,263			3,680
Restructuring expenses		162			174
Provision for deferred income taxes		1,613			(2,580	)
Stock compensation expense and other non-cash changes, net		1,064			720
Net change in operating assets and liabilities		(1,644	)		1,130

Net cash provided (used) by operating activities		3,812			(2,439	)

Cash flows from investing activities:

Acquisitions of fixed assets		(3,013	)		(1,094	)
Proceeds from sale of fixed assets		79			9
Other, net		(129	)		(129	)

Net cash used by investing activities		(3,063	)		(1,214	)

Cash flows from financing activities:

Borrowings under revolving loan agreement		35,315			26,948
Repayments under revolving loan agreement		(36,957	)		(27,666	)
Dividends paid to noncontrolling interest		(172	)		(109	)
Tax shortfall from stock compensation		-			(153	)
Payments of withholding taxes on stock compensation		(400	)		(140	)

Net cash used by financing activities		(2,214	)		(1,120	)

Effect of exchange rate changes on cash		864			(509	)

Net change in cash		(601	)		(5,282	)

Cash:
Beginning of period		16,367			18,273

End of period	$	15,766		$	12,991

	December 29, 2017		June 30, 2017		March 29, 2024		June 30, 2023
Inventories:
Finished parts	$	49,052	$	45,829	$	64,191	$	66,956
Work in process		10,141		8,358		24,698		23,374
Raw materials		14,844		12,006		40,956		41,600
	$	74,037	$	66,193	$	129,845	$	131,930

	For the Quarter Ended						For the Two Quarters Ended						For the Quarter Ended						For the Three Quarters Ended
	December 29, 2017			December 30, 2016			December 29, 2017			December 30, 2016			March 29, 2024			March 31, 2023			March 29, 2024			March 31, 2023
Reserve balance, beginning of period	$	2,326		$	3,036		$	2,062		$	3,607		$	4,488		$	4,145		$	3,476		$	3,329
Current period expense		723			61			1,381			243
Current period expense and adjustments														1,656			371			4,377			2,052
Payments or credits to customers		(589	)		(506	)		(1,022	)		(1,268	)		(1,236	)		(510	)		(2,948	)		(1,381	)
Translation		7			(49	)		46			(40	)		(13	)		12			(10	)		18
Reserve balance, end of period	$	2,467		$	2,542		$	2,467		$	2,542		$	4,895		$	4,018		$	4,895		$	4,018

					Elimination of
	Manufacturing		Distribution		Intercompany Sales			Total
Industrial	$	5,779	$	1,084	$	(631	)	$	6,232
Land-based transmissions		16,701		9,286		(6,898	)		19,089
Marine and propulsion systems		40,160		23,052		(17,968	)		45,244
Other		-		3,600		(4	)		3,596
Total	$	62,640	$	37,022	$	(25,501	)	$	74,161

	For the Two Quarters Ended
	December 29, 2017
Transition Tax (provisional)	$	-
Net impact on U.S. deferred tax assets and liabilities (provisional)		(4,565	)
Net discrete impacts of the enactment of the Tax Act	$	(4,565	)

	Net Book Value Rollforward
	Gross Carrying Amount		Accumulated Impairment			Net Book Value
Balance at June 30, 2017	$	16,407	$	(13,822	)	$	2,585
Translation adjustment		174		-			174
Balance at December 29, 2017	$	16,581	$	(13,822	)	$	2,759

	Net Book Value Rollforward								Net Book Value By Asset Type									Net Book Value Rollforward									Net Book Value By Asset Type
	Gross Carrying Amount		Accumulated Amortization / Impairment			Net Book Value			Licensing agreements			Trade Name			Other			Gross Carrying Amount			Accumulated Amortization / Impairment			Net Book Value			Customer Relationships			Technology Know-how			Trade Name			Other
Balance at June 30, 2017	$	13,436	$	(11,632	)	$	1,804		$	390		$	1,319		$	95
Balance at June 30, 2023																		$	31,925		$	(19,288	)	$	12,637		$	6,553		$	2,422		$	668		$	2,994
Addition		19		-			19			-			-			19			89			-			89			-			-			-			89
Reduction																			(631	)		631			-			-			-			-			-
Amortization		-		(89	)		(89	)		(30	)		(43	)		(16	)		-			(2,458	)		(2,458	)		(935	)		(923	)		(39	)		(561	)
Translation adjustment		94		-			94			-			87			7			(111	)		-			(111	)		(66	)		(135	)		105			(15	)
Balance at December 29, 2017	$	13,549	$	(11,721	)	$	1,828		$	360		$	1,363		$	105
Balance at March 29, 2024																		$	31,272		$	(21,115	)	$	10,157		$	5,552		$	1,364		$	734		$	2,507

Fiscal Year
2024	$	945
2025		3,274
2026		2,290
2027		1,531
2028		1,382
2029		735
Total	$	10,157

	Translation		Benefit Plan
	Adjustment		Adjustment
Balance at June 30, 2017	$	6,130	$	(38,801	)
Translation adjustment during the quarter		2,547		-
Amounts reclassified from accumulated other comprehensive income		-		474
Net current period other comprehensive income		2,547		474
Balance at September 29, 2017	$	8,677	$	(38,327	)
Translation adjustment during the quarter		489		-
Other comprehensive income before reclassifications		-		1,695
Amounts reclassified from accumulated other comprehensive income		-		39
Net current period other comprehensive income		489		1,734
Balance at December 29, 2017	$	9,166	$	(36,593	)

	Translation			Benefit Plan			Cash Flow			Net Investment
	Adjustment			Adjustment			Hedges			Hedges
Balance, June 30, 2023	$	(1,582	)	$	(5,948	)	$	688		$	1,272
Translation adjustment during the quarter		(3,096	)		-			-			-
Amounts reclassified from accumulated other comprehensive loss		-			(171	)		(6	)		222
Net current period other comprehensive (loss) income		(3,096	)		(171	)		(6	)		222
Balance, September 29, 2023		(4,678	)		(6,119	)		682			1,494
Translation adjustment during the quarter		5,155			-			-			-
Amounts reclassified from accumulated other comprehensive loss		-			(108	)		(183	)		(302	)
Net current period other comprehensive income (loss)		5,155			(108	)		(183	)		(302	)
Balance at December 29, 2023		477			(6,227	)		499			1,192
Translation adjustment during the quarter		(3,040	)		-			-			-
Amounts reclassified from accumulated other comprehensive loss		-			(191	)		40			156
Net current period other comprehensive (loss) income		(3,040	)		(191	)		40			156
Balance at March 29, 2024	$	(2,563	)	$	(6,418	)	$	539		$	1,348

	Amount Reclassified			Amount Reclassified			Amount Reclassified				Amount Reclassified
	Quarter Ended			Two Quarters Ended			Quarter Ended				Three Quarters Ended
	December 29, 2017			December 29, 2017			March 29, 2024				March 29, 2024
Changes in benefit plan items
Actuarial losses	$	703	(a)	$	1,445	(a)	$	(198	)	(a)	$	(461	)	(a)
Transition asset and prior service benefit		10	(a)		20	(a)		(3	)	(a)		(11	)	(a)
Total amortization		713			1,465			(201	)			(472	)
Other benefit plan adjustments		(1,695	)		(1,695	)
Income taxes		674			952
Income tax expense								10				2
Total reclassification net of tax	$	1,734		$	2,208		$	(191	)		$	(470	)

Accrued restructuring liability, June 30, 2017	$	92
Additions during the year		2,049
Payments and adjustments		(2,127	)
Accrued restructuring liability, December 29, 2017	$	14

	Balance Sheet Location	March 29, 2024		June 30, 2023
Lease Assets
Operating lease right-of-use assets	Right-of-use assets operating leases	$	14,498	$	13,133
Finance lease right-of-use assets	Property, plant and equipment, net		4,845		4,427

Lease Liabilities
Operating lease liabilities	Accrued liabilities	$	1,957	$	2,343
Operating lease liabilities	Lease obligations		12,638		10,811
Finance lease liabilities	Accrued liabilities		628		643
Finance lease liabilities	Other long-term liabilities		4,542		4,314

					Elimination of
	Manufacturing		Distribution		Intercompany Sales			Total
Industrial	$	7,076	$	1,548	$	(1,321	)	$	7,303
Land-based transmissions		16,785		8,692		(5,902	)		19,575
Marine and propulsion systems		40,492		19,867		(16,505	)		43,854
Other		-		3,732		(692	)		3,040
Total	$	64,353	$	33,839	$	(24,420	)	$	73,772

					Elimination of
	Manufacturing		Distribution		Intercompany Sales			Total
Industrial	$	16,773	$	3,670	$	(1,994	)	$	18,449
Land-based transmissions		46,385		29,910		(22,765	)		53,530
Marine and propulsion systems		112,387		63,430		(47,166	)		128,651
Other		-		10,107		(28	)		10,079
Total	$	175,545	$	107,117	$	(71,953	)	$	210,709

					Elimination of
	Manufacturing		Distribution		Intercompany Sales			Total
Industrial	$	20,732	$	4,322	$	(3,208	)	$	21,846
Land-based transmissions		48,329		16,743		(14,888	)		50,184
Marine and propulsion systems		100,546		49,838		(40,751	)		109,633
Other		-		12,829		(1,456	)		11,373
Total	$	169,607	$	83,732	$	(60,303	)	$	193,036

Fiscal Year
2018	$	101
2019		187
2020		173
2021		158
2022		151
2023		150

	Operating Leases			Finance Leases
2024	$	766		$	248
2025		2,828			877
2026		2,288			828
2027		2,023			775
2028		1,972			695
2029		1,965			513
Thereafter		9,844			2,674
Total future lease payments		21,686			6,610
Less: Amount representing interest		(7,091	)		(1,440	)
Present value of future payments	$	14,595		$	5,170

	Statement of Comprehensive	For the Quarter Ended					For the Three Quarters Ended
	Income Location	March 29, 2024		March 31, 2023			March 29, 2024			March 31, 2023
Derivative designated as hedge:
Interest rate swap	Interest expense	$	62	$	76		$	200		$	238
Interest rate swap	Unrealized gain (loss) on hedges		40		(133	)		(148	)		206
Net investment hedge	Unrealized gain (loss) on hedges		156		(91	)		75			(232	)

	March 31, 2023
	As Computed Under Previous Method			Effect of Accounting Change			As Reported Under New Method
ASSETS
Current assets:
Cash	$	14,024		$	-		$	14,024
Trade accounts receivable, net		44,438			-			44,438
Inventories		136,153			-			136,153
Assets held for sale		2,968			-			2,968
Prepaid expenses		10,025			-			10,025
Other		8,341			-			8,341
Total current assets		215,949			-			215,949

Property, plant and equipment, net		40,700			-			40,700
Right-of-use assets operating leases		12,415			-			12,415
Intangible assets, net		11,239			-			11,239
Deferred income taxes		2,542			-			2,542
Other assets		2,668			-			2,668

Total assets	$	285,513		$	-		$	285,513

LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$	2,000		$	-		$	2,000
Accounts payable		29,726			-			29,726
Accrued liabilities		56,886			-			56,886
Total current liabilities		88,612			-			88,612

Long-term debt		29,276			-			29,276
Lease obligations		9,897			-			9,897
Accrued retirement benefits		10,315			-			10,315
Deferred income taxes		3,391			-			3,391
Other long-term liabilities		5,403			-			5,403
Total liabilities		146,894			-			146,894

Twin Disc shareholders' equity:
Preferred shares authorized: 200,000; issued: none; no par value		-			-			-
Common shares authorized: 30,000,000; issued: 14,632,802; no par value		42,145			-			42,145
Retained earnings		136,815			(23,291	)		113,524
Accumulated other comprehensive (loss) income		(28,503	)		23,291			(5,212	)
		150,457			-			150,457
Less treasury stock, at cost (819,398 shares, respectively)		12,527			-			12,527

Total Twin Disc shareholders' equity		137,930			-			137,930

Noncontrolling interest		689			-			689
Total equity		138,619			-			138,619

Total liabilities and equity	$	285,513		$	-		$	285,513

	For the Three Quarters Ended March 31, 2023
	As Computed Under Previous Method			Effect of Accounting Change			As Reported Under New Method

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,972		$	1,821		$	3,793
Adjustments to reconcile net income to net cash provided by activities:
Depreciation and amortization		6,936			-			6,936
Gain on sale of assets		(4,237	)		-			(4,237	)
Provision for deferred income taxes		(1,462	)		-			(1,462	)
Stock compensation expense		2,355			-			2,355
Net change in operating assets and liabilities		1,295			(1,821	)		(526	)

Net cash provided by operating activities		6,859			-			6,859

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant, and equipment		(6,783	)		-			(6,783	)
Proceeds from sale of fixed assets		7,177			-			7,177
Proceeds on note receivable		-			-			-
Other, net		199			-			199

Net cash provided by investing activities		593			-			593

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving loan arrangements		65,862			-			65,862
Repayments of revolving loan arrangements		(69,823	)		-			(69,823	)
Repayments of other long-term debt		(1,534	)		-			(1,534	)
Payments of finance lease obligations		(231	)		-			(231	)
Payments of withholding taxes on stock compensation		(463	)		-			(463	)

Net cash used by financing activities		(6,189	)		-			(6,189	)

Effect of exchange rate changes on cash		240			-			240

Net change in cash		1,503			-			1,503

Cash:
Beginning of period		12,521			-			12,521

End of period	$	14,024		$	-		$	14,024

	For the Three Quarters Ended March 31, 2023
	As Computed Under Previous Method			Effect of Accounting Change			As Reported Under New Method
Retained earnings
Balance at June 30, 2022		135,031			(25,112	)		109,919
Net income attributable to Twin Disc		1,784			1,821			3,605
Balance at March 31, 2023	$	136,815		$	(23,291	)	$	113,524

Accumulated other comprehensive (loss) income
Balance at June 30, 2022		(32,086	)		25,112			(6,974	)
Translation adjustments		3,028			-			3,028
Benefit plan adjustments, net of tax		581			(1,821	)		(1,240	)
Unrealized loss on hedges, net of tax		(26	)		-			(26	)
Balance at March 31, 2023	$	(28,503	)	$	23,291		$	(5,212	)

(In thousands)
	Quarter Ended											Two Quarters Ended											Quarter Ended										Three Quarters Ended
	December 29, 2017		%			December 30, 2016			%			December 29, 2017		%			December 30, 2016			%			March 29, 2024		% of Net Sales			March 31, 2023		% of Net Sales			March 29, 2024		% of Net Sales			March 31, 2023			% of Net Sales
Net sales	$	56,546				$	33,672					$	101,611				$	69,507					$	74,161				$	73,772				$	210,709				$	193,036
Cost of goods sold		38,420					24,723						69,590					51,385						53,221					54,507					149,377					143,451
COGS - Sale of boat management system product line and related inventory																								-					-					3,099					-
Gross profit		18,126		32.1	%		8,949			26.6	%		32,021		31.5	%		18,122			26.1	%		20,940		28.2	%		19,265		26.1	%		58,233		27.6	%		49,585			25.7	%
Marketing, engineering and administrative expenses		15,268		27.0	%		12,560			37.3	%		28,936		28.5	%		25,035			36.0	%		17,199		23.2	%		14,626		19.8	%		51,268		24.3	%		45,688			23.7	%
Restructuring of operations		831		1.5	%		816			2.4	%		2,049		2.0	%		1,074			1.5	%
Income (loss) from operations	$	2,027		3.6	%	$	(4,427	)		-13.1	%	$	1,036		1.0	%	$	(7,987	)		-11.5	%
Restructuring expense																								139		0.2	%		33		0.0	%		207		0.1	%		208			0.1	%
Other operating expense (income)																								-		0.0	%		1		0.0	%		-		0.0	%		(4,149	)		-2.1	%
Income from operations																							$	3,602		4.9	%	$	4,605		6.2	%	$	6,758		3.2	%	$	7,838			4.1	%

Period	(a) Total Number of Shares Purchased		(b) Average Price Paid per Share	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs

Sept. 30, 2017 – Oct. 27, 2017		0	NA		0		315,000

Oct. 28, 2017 – Nov. 24, 2017		0	NA		0		315,000

Nov. 25, 2017 – Dec. 29, 2017		7,119	NA		0		315,000

Total		7,119	NA		0		315,000

Period	(a) Total Number of Shares Purchased	(b) Average Price Paid per Share	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs

December 30, 2023 – January 26, 2024	582	NA	0	315,000

January 27 – February 23, 2024	0	NA	0	315,000

February 24 – March 29, 2024	626	NA	0	315,000

Total	0	NA	0	315,000

~~31b~~
31b	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~32a~~
32a	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~32b~~
32b	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~101.PRE~~
101.PRE	Inline XBRL Presentation Linkbase

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

	TWIN DISC, INCORPORATED
	(Registrant)


Date: ~~February 6, 2018~~May 8, 2024	/s/ ~~DEBBIE A. LANGE~~JEFFREY S. KNUTSON
	~~Debbie A. Lange~~Jeffrey S. Knutson
	~~Corporate Controller~~Vice President – Finance, Chief Financial Officer, Treasurer and Secretary
	Chief Accounting Officer