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SECURITIES AND
EXCHANGE COMMISSION Washington,
D.C. 20549 FORM 11-
K Annual Report
Pursuant to Section 15(d) of the Securities
Exchange Act of 1934 As of December 31,
2006 and December 31, 2005 and for the year ended December 31, 2006 Commission file
number 1 7635 A. Full title of the plan and the address
of the plan if different from that of the issuer named below: TWIN DISC, INCORPORATED THE
ACCELERATOR 401 (K) SAVINGS PLAN B. Name of issuer
of the securities held pursuant to the Plan and the address of its principal
executive office: TWIN DISC,
INCORPORATED 1328 Racine
Street Racine, WI 53403 AUDITED FINANCIAL
STATEMENTS Years Ended December 31,
2006 and 2005 Independent Auditors
Report Statements of Net Assets
Available for Benefits Statement of Changes in Net
Assets Available for Benefits Notes to Financial
Statements Schedule of Assets Held for
Investment INDEPENDENT AUDITORS REPORT Benefits
Committee We have audited the accompanying
statements of net assets available for benefits of the Twin Disc, Incorporated -
The Accelerator 401(k) Savings Plan as of December 31, 2006 and 2005, and the
related statements of changes in net assets available for benefits and
supplemental schedule for the years then ended. These financial statements are
the responsibility of the Plans management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our audits in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion. In our opinion, the financial
statements referred to above, present fairly, in all material respects, the net
assets available for benefits of the Plan as of December 31, 2006 and 2005, and
the changes in its net assets available for benefits for the years then ended in
conformity with accounting principles generally accepted in the United States of
America. Our audit was conducted for the
purpose of forming an opinion on the basic financial statements taken as a
whole. The supplemental Schedule of Assets Held for Investment Purposes
December 31, 2006, is presented for the purpose of additional analysis and is
not a required part of the basic financial statements but is supplementary
information required by the Department of Labors rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. This supplemental schedule is the responsibility of the Plans management.
The supplemental schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole. /s/ Reilly, Penner & Benton,
LLP 1 Statements of Net Assets
Available for Benefits
The accompanying notes to financial statements are an integral part of these
statements. 2
The accompanying notes to financial statements are an integral part of these
statements. 3
TWIN DISC,
INCORPORATED
THE
ACCELERATOR 401(k) SAVINGS PLAN
Racine,
Wisconsin
TABLE OF
CONTENTS
Page
1
2
3
4-8
9
Twin
Disc, Incorporated
The Accelerator 401(k) Savings Plan
Racine, Wisconsin
June 19,
2007
Milwaukee,
WI
TWIN DISC,
INCORPORATED
THE
ACCELERATOR 401(K) SAVINGS PLAN
Racine,
Wisconsin
December 31, 2006 and
2005
2006
2005
Assets:
Investment options at fair
value
$62,642,361
$54,665,738
Receivables:
Employer match
contribution
8,065
7,129
Participant
contribution
25,404
22,857
Total
receivables
33,469
29,986
Net assets reflecting all
investments at fair value
62,675,830
54,695,724
Adjustment from fair value
to contract value for
fully benefit-responsive
investment contracts
112,560
105,341
Net assets
available for plan benefits
$62,788,390
$54,801,065
TWIN DISC, INCORPORATED
THE ACCELERATOR 401(K) SAVINGS PLAN
Racine,
Wisconsin
Statements of
Changes in Net Assets Available for Benefits
Years Ended
December 31, 2006 and 2005
2006
2005
Additions:
Additions to
net assets attributed to:
Investment
income:
Net
appreciation in fair value of investments
$4,445,722
$1,559,556
Interest
78,959
74,025
Dividends
3,025,849
1,961,261
Net investment
gain
7,550,530
3,594,842
Contributions:
Employer
1,081,000
686,948
Participant
2,724,236
2,419,921
Rollovers
83,408
136,255
Total
contributions
3,888,644
3,243,124
Total
additions
11,439,174
6,837,966
Deductions:
Deductions from
net assets attributed to:
Administrative
fees
2,298
1,853
Benefits paid
to participants
3,449,551
3,031,789
Total
deductions
3,451,849
3,033,642
Change in net
assets available for plan benefits
7,987,325
3,804,324
Net assets
available for plan benefits, beginning of year
54,801,065
50,996,741
Net assets
available for plan benefits, end of year
$62,788,390
$54,801,065
TWIN DISC, INCORPORATED THE ACCELERATOR 401(k) SAVINGS PLAN
Racine, Wisconsin
Notes to
Financial Statements
December 31, 2006 and 2005
1. Basis of Presentation and Significant Accounting Policies
General
The following brief description of the Twin Disc, Incorporated The Accelerator 401(k) Savings Plan (the Plan) is provided for general information purposes only. Participants should refer to the plan agreement for a more complete description of the Plans provisions. The Plan, established April 1, 1986, is a defined-contribution plan covering substantially all Twin Disc, Incorporated (the Company) domestic employees and is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Eligibility
An employee of the Company is eligible for plan participation after completing two months of employment.
Contributions
Participants may elect to contribute on a pre-tax basis up to 100% of annual gross income with contributions limited under provisions of the Internal Revenue Code.
For participants who are employed by Twin Disc, Inc., the Company contributes an amount equal to a percentage of each participants 401(k) contributions, up to 6% of compensation. The contribution percentages for the years ended December 31, 2006 and 2005 was 50%. For participants who are employed by the Twin Disc South East subsidiary, the Company contributes a matching contribution equal to 25% of each participants 401(k) contributions, up to 6% of compensation, and a profit sharing contribution equal to 2.5% of each participants compensation. The Internal Revenue Code has set a maximum of $15,000 and $14,000 for tax-deferred contributions that may be excluded for any individual participant in 2006 and 2005, respectively. The Internal Revenue Code also allows additional catch-up contributions for participants age fifty and over. The maximum additional contribution allowed was $5,000 and $4,000 in 2006 and 2005, respectively. No federal income tax is paid on the tax-deferred contributions and growth thereon until the participant withdraws them from the Plan.
The Plan enables participants to allocate their contributions and account balances among various investment options offered by the Plan. Assets of the Plan are segregated and invested based upon the total allocation of the participants accounts. Participants may direct such allocations in any whole percentage increment and allocations can be changed at any time.
Vesting
Participants are immediately 100% vested in their individual account balances.
Withdrawals
After-tax contributions may be withdrawn at any time upon receipt of written notice by the Trustee. Pre-tax contributions may only be withdrawn, prior to employment termination, in the event of severe financial hardship or once annually upon attainment of age 59½. A final distribution is paid to the participant upon termination of employment with the Company. Final distributions in excess of $5,000 may be deferred as elected by the participant until age 70 ½.
4
TWIN DISC, INCORPORATED THE ACCELERATOR 401(k) SAVINGS PLAN
Racine, Wisconsin
Notes to
Financial Statements
December 31, 2006 and 2005
(Continued)
1. Basis of Presentation and Significant Accounting Policies (Continued)
Participant Accounts
The trusteeship of the Plan is T. Rowe Price Trust Company, and the recordkeeping services for the Plan T. Rowe Price Retirement Plan Services, Inc. (T. Rowe Price). T. Rowe Price maintains individual accounts for each participant for their respective investment in each of twelve available investment funds. For all investment programs which are mutual funds or collective trust funds, participant balances are maintained on a share or unit method, as appropriate. Participant investments in the Twin Disc, Inc. Stock were accounted for on a share method. Shares and share values as of December 31, 2006 and 2005 were as follows:
Shares | Share Value | ||||
December 31, | December 31, | ||||
2006 | 2005 | 2006 | 2005 | ||
Twin Disc, Inc. Stock | 73,173 | 32,553 | $35.50 | $44.69 | |
Participant Loans
Participants may be granted a loan against their individual account balance limited to the lesser of $50,000 or 50% of the account balance. Loans are granted in a uniform and nondiscriminatory manner based on the loan policy as set forth by the Benefits Committee. The loan proceeds are made pro-rata from the investment elections of the participant. Each participant's individual account and the interest and principal paid on the loan shall be credited only to such participant's account balance. Any such loan shall be repaid over a period not exceeding five years unless the loan is used to purchase a principal residence, in which case the loan shall be repaid over a period not exceeding fifteen years.
Basis of Accounting
The financial statements of the Plan are prepared under the accrual method of accounting.
Administrative Expenses
Certain administrative expenses of the Plan are paid by the Company at its discretion. The remaining administrative expenses are paid by the Plan.
Benefit Payments
Benefits are recorded when paid.
5
TWIN DISC, INCORPORATED THE ACCELERATOR 401(k) SAVINGS PLAN
Racine, Wisconsin
Notes to
Financial Statements
December 31, 2006 and 2005
(Continued)
1. Basis of Presentation and Significant Accounting Policies (Continued)
Investment
Valuation
Investments of the Plan are stated at fair value. The values of investments in mutual funds and common stocks are determined by the last reported market price on the last business day of the year. Investments in collective trust funds, other than the T. Rowe Price Stable Value Common Trust Fund (see below), are valued at redemption prices established by the trustee of the funds based on the quoted market prices of the underlying investments. Participant loans are valued at cost which approximates fair value. The Plan presents in the statement of changes in net assets, the net appreciation (depreciation) in the fair value of its investments, which consists of the realized gains or losses and the unrealized appreciation (depreciation) on those investments. Purchases and sales of investments are recorded on a trade-date basis. Dividends are recorded on the ex-dividend date. Interest is recognized when earned.
The fair value of the T. Rowe Price Stable Value Common Trust Fund is determined by T. Rowe Price Retirement Plan Services, Inc. The collective trust fund invests in short-term and long-term conventional and synthetic investment contracts issued by insurance companies and other institutions that meet the high credit quality standards established by T. Rowe Price. There is an adjustment made on the Statements of Net Assets Available for Benefits to adjust the investment contracts from fair value to contract value (which represents contributions received, plus interest, less plan withdrawals).
2.
Investments
The following presents investments that represent 5 % or more of the Plans net assets:
December 31, | ||
2006 | 2005 | |
Mutual Funds: | ||
Dodge & Cox Balanced Fund | $ 4,252,755 | $ 3,277,303 |
Pimco Total Return Fund | 4,877,746 | 4,648,094 |
T. Rowe Price Equity Income Fund | 4,266,658 | 3,306,322 |
T. Rowe Price Growth Stock Fund | 12,879,405 | 11,485,150 |
T. Rowe Price Mid Cap Value Fund | 10,671,556 | 8,773,858 |
T. Rowe Price Small Cap Value Fund | 3,155,645 | --- |
T. Rowe Price Stable Value Common Trust Fund | 13,242,352 | 12,623,980 |
6
TWIN DISC, INCORPORATED THE ACCELERATOR 401(k) SAVINGS PLAN
Racine, Wisconsin
Notes to
Financial Statements
December 31, 2006 and 2005
(Continued)
2.
Investments (Continued)
During 2006 and 2005, the Plans investments (including gains and losses on investments bought and sold as well as held during the year) appreciated in value by $4,445,722 and $1,559,556, respectively, as follows:
December 31, | ||
2006 | 2005 | |
Mutual funds | $ 3,273,040 | $ 729,780 |
Common stock | 955,179 | 786,542 |
Collective trust fund | 217,503 | 43,234 |
$ 4,445,722 | $ 1,559,556 | |
3. T. Rowe Price Stable Value Common Trust Fund
The Plan has assets invested in the T. Rowe Price Stable Value Common Trust Fund. This fund holds Guaranteed and Synthetic Investment Contracts. Information pertaining to the funds for the year ended December 31, 2006 is as follows:
Crediting | Adjustment to | |||||||||
Average | Interest | Investments at | Investments at | Contract | ||||||
Yield | Rate | Fair Value | Contract Value | Value | ||||||
4.81% | 4.68% | $7,422,984,000 | $7,486,776,000 | $63,792,000 | ||||||
Information pertaining to the fund for the year ended December 31, 2005 is as follows: | ||||||||||
Crediting | Adjustment to | |||||||||
Average | Interest | Investments at | Investments at | Contract | ||||||
Yield | Rate | Fair Value | Contract Value | Value | ||||||
4.33% | 4.42% | $7,027,409,000 | $7,086,543,000 | $59,134,000 |
4.
Income Tax Status
The Plan obtained its latest determination letter on March 19, 2002, in which the Internal Revenue Service stated the Plan as then designed, was in compliance with the applicable requirements of the Internal Revenue Code. The Plan administrator and the Plan's tax counsel believe that the Plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code. Therefore, no provision for income taxes has been included in the Plan's financial statements.
5.
Termination of Plan
Although the Company has not expressed any intent to terminate the Plan, it may do so at any time.
7
TWIN DISC, INCORPORATED THE ACCELERATOR 401(k) SAVINGS PLAN
Racine, Wisconsin
Notes to
Financial Statements
December 31, 2006 and 2005
(Continued)
6.
Party-in-Interest Transactions
Transactions involving employer securities, funds administered by T. Rowe Price Retirement Plan Services, Inc., the current trustee and recordkeeper of the Plan, and participant loans are considered party-in-interest transactions. These transactions are not, however, considered prohibited transactions under 29 CFR 408(b) of the ERISA regulations.
7. Amounts
Allocated to Withdrawn Participants
Plan assets of $10,805,445 and $10,100,943 have been allocated to the accounts of persons who are no longer active participants of the Plan as of December 31, 2006 and 2005, respectively, but who have not yet received distributions as of that date.
8. Use of
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of additions and deductions during the reporting periods. Actual amounts could differ from those estimates.
9. Risks
and Uncertainties
The Plans investments are exposed to various risks, such as interest rate, market and credit risks. Due to the level of risk associated with certain investments and the level of uncertainty related to changes in the values of investments, it is at least reasonably possible that changes in risks in the near term would materially affect participants account balances and the amounts reported in the Statements of Net Assets Available for Benefits and the Statements of Changes in Net Assets Available for Benefits.
10.
Subsequent Events
In February 2007, the Company made a one-time discretionary match contribution to all Racine active Twin Disc, Incorporated employees as of December 31, 2006 and to Racine Twin Disc, Incorporated employees who retired during 2006 that participated and contributed to the Plan during 2006. The amount of the contribution was based on the employees payroll during for 2006.
Effective January 2007, the Company has amended the Plan to allow Roth after-tax employee contributions. Roth contributions are made by employees with after-tax dollars. Federal income tax is paid on the Roth contributions when made to the Plan. A qualified distribution from the Roth component, including any earnings received from the investment of Roth contributions, is tax-free to the participant if taken five years after the year of the first Roth contribution and if the participant has reached the age of 591/2, become totally disabled, or deceased. If the distribution is not qualified, any withdrawal from the account will be partially taxable to the participant.
8
TWIN DISC, INCORPORATED | ||||
THE ACCELERATOR 401(K) SAVINGS PLAN | ||||
Racine, Wisconsin | ||||
Employer Identification #39-0667110 | ||||
Plan 005 | ||||
Schedule of Assets Held for Investment Purposes - Schedule H, Line 4i | ||||
December 31, 2006 | ||||
Description of asset |
Shares/Units | Fair Value | ||
Dodge & Cox Balanced Fund | 48,837 | $4,252,755 | ||
Goldman Sachs Growth Opportunities A Fund | 24,404 | 530,305 | ||
Pimco Total Return Fund | 469,918 | 4,877,746 | ||
* T. Rowe Price Equity Income Fund | 144,388 | 4,266,658 | ||
* T. Rowe Price Growth Stock Fund | 407,190 | 12,879,405 | ||
* T. Rowe Price Mid Cap Value Fund | 419,809 | 10,671,556 | ||
* T. Rowe Price Small Cap Value Fund | 76,575 | 3,155,645 | ||
* T. Rowe Price Stable Value Common Trust Fund | 13,242,352 | 13,242,352 | ||
Boston Company International Core Equity | 110,725 | 1,770,184 | ||
* Twin Disc, Inc. - Common Stock | 73,173 | 2,597,638 | ||
Vanguard 500 Index Fund | 13,344 | 1,742,626 | ||
William Blair Small Cap Growth Fund | 60,889 | 1,547,185 | ||
* Participant Loans, interest rates ranging | ||||
between 5.0% and 10.5%, maturities | ||||
ranging from 2007 to 2019 | 1,220,866 | |||
$62,754,921 | ||||
* The party involved is known to be a party-in-interest to the Plan.
9
EXHIBITS TO
THE ANNUAL REPORT ON FORM 11 K
The exhibits listed below are filed as part of this Annual Report on Form 11K. Each exhibit is listed according to the number assigned to it in the Exhibit Table of Item 601 of Regulation SK.
Exhibit | |
Number | Description |
----------- | -------------------------------------------------------------------------------------------------------------------------------------- |
23 | Consent of Independent Accountants, filed herewith. |
99.1 | Section 906 Certification |
99.2 | Section 906 Certification |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the members of the Committee which administers the Plan have duly caused this annual report to be signed by the undersigned hereunto duly authorized.
TWIN DISC, INCORPORATED | ||
THE ACCELERATOR 401(K) SAVINGS PLAN | ||
June 29, 2007 | /s/ Christopher J. Eperjesy | |
------------------- | ---------------------------------------------------------------- | |
Christopher J. Eperjesy | ||
Vice President Finance, Chief Financial Officer | ||
and Secretary | ||
/s/ Denise L. Wilcox | ||
----------------------------------------------------------------- | ||
Denise L. Wilcox | ||
Vice President Human Resources |
10
Exhibit
99.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Twin Disc, Incorporated The Accelerator 401 (k) Savings Plan (the Plan) on Form 11-K for the plan year ending December 31, 2006, as filed with the Securities and Exchange Commission as of the date hereof (the Report) , I, Michael E. Batten, Chairman, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) the Report fully complies with Section 13(a) or 15(d) of the Securities Exchange Act 1934, and
(2) the information contained in the report fairly presents, in all material respects, the financial condition of the Plan.
A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.
/s/ Michael E.
Batten
---------------------------------------------
Michael E. Batten
Chairman, President and Chief Executive
Officer
June 29,
2007
Exhibit
99.2 |
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Twin Disc, Incorporated The Accelerator 401 (k) Savings Plan (the Plan) on Form 11-K for the plan year ending December 31, 2006, as filed with the Securities and Exchange Commission as of the date hereof (the Report) , I, Christopher J. Eperjesy, Vice President Finance, Chief Financial Officer and Secretary of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) the Report fully complies with Section 13(a) or 15(d) of the Securities Exchange Act 1934, and
(2) the information contained in the report fairly presents, in all material respects, the financial condition of the Plan.
A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.
/s/ Christopher J.
Eperjesy --------------------------------------------- Christopher J. Eperjesy Vice President Finance, Chief Financial Officer & Secretary |
June 29,
2007
|