10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended September 25, 2015

Commission File Number 1-7635

TWIN DISC, INCORPORATED

(Exact name of registrant as specified in its charter)

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

1328 Racine Street, Racine, Wisconsin 53403

(Address of principal executive offices)

(262) 638-4000

(Registrant's telephone number, including area code)

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__

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

Large Accelerated Filer                         Accelerated Filer √

Non-accelerated filer                         Smaller reporting company__

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

Yes               No √      

At October 26, 2015, the registrant had 11,351,924 shares of its common stock outstanding.

Part I.     FINANCIAL INFORMATION

Item 1.     Financial Statements

TWIN DISC, INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

(UNAUDITED)

	September 25,			June 30,
	2015			2015
ASSETS
Current assets:
Cash	$	23,036		$	22,936
Trade accounts receivable, net		31,290			43,883
Inventories		77,047			80,241
Deferred income taxes		3,776			4,863
Other		13,261			17,907
Total current assets		148,410			169,830
Property, plant and equipment, net		55,366			56,427
Goodwill, net		12,779			12,789
Deferred income taxes		12,931			4,878
Intangible assets, net		2,169			2,186
Other assets		4,137			3,752
Total assets	$	235,792		$	249,862
LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings and current maturities of long-term debt	$	3,571		$	3,571
Accounts payable		18,418			20,729
Accrued liabilities		28,946			32,754
Total current liabilities		50,935			57,054
Long-term debt		10,696			10,231
Accrued retirement benefits		37,157			38,362
Deferred income taxes		1,052			1,093
Other long-term liabilities		2,222			2,955
Total liabilities		102,062			109,695
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		11,517			12,259
Retained earnings		185,465			190,807
Accumulated other comprehensive loss		(36,529	)		(35,481	)
		160,453			167,585
Less treasury stock, at cost (1,776,074 and 1,832,121 shares, respectively)		27,200			28,057
Total Twin Disc shareholders' equity		133,253			139,528
Noncontrolling interest		477			639
Total equity		133,730			140,167
Total liabilities and equity	$	235,792		$	249,862

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

2

TWIN DISC, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

	For the Quarter Ended
	September 25,			September 26,
	2015			2014
Net sales	$	37,373		$	64,824
Cost of goods sold		29,183			42,435
Gross profit		8,190			22,389
Marketing, engineering and administrative expenses		15,240			15,910
Other operating income		(500	)		-
(Loss) earnings from operations		(6,550	)		6,479
Interest expense		91			164
Other (income) expense, net		(158	)		(340	)
		(67	)		(176	)
(Loss) earnings before income taxes and noncontrolling interest		(6,483	)		6,655
Income taxes		(2,208	)		2,593
Net (loss) earnings		(4,275	)		4,062
Less: Net earnings attributable to noncontrolling interest, net of tax		(48	)		(19	)
Net (loss) earnings attributable to Twin Disc	$	(4,323	)	$	4,043
Dividends per share	$	0.09		$	0.09
(Loss) earnings per share data:
Basic (loss) earnings per share attributable to Twin Disc common shareholders	$	(0.39	)	$	0.36
Diluted (loss) earnings per share attributable to Twin Disc common shareholders	$	(0.39	)	$	0.36
Weighted average shares outstanding data:
Basic shares outstanding		11,313			11,270
Dilutive stock awards		-			6
Diluted shares outstanding		11,313			11,276
Comprehensive income:
Net (loss) earnings	$	(4,275	)	$	4,062
Benefit plan adjustments, net of income taxes of $423 and $290, respectively		739			488
Foreign currency translation adjustment		(1,805	)		(4,328	)
Comprehensive (loss) income		(5,341	)		222
Less: Comprehensive income attributable to noncontrolling interest		(29	)		(28	)
Comprehensive (loss) income attributable to Twin Disc	$	(5,370	)	$	194

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

3

TWIN DISC, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(UNAUDITED)

	For the Quarter Ended
	September 25,			September 26,
	2015			2014
Cash flows from operating activities:
Net (loss) earnings	$	(4,275	)	$	4,062
Adjustments to reconcile net (loss) earnings to net cash (used) provided by operating activities:
Depreciation and amortization		2,221			2,564
Other non-cash changes, net		(6,628	)		962
Net change in operating assets and liabilities		6,310			(7,209	)
Net cash (used) provided by operating activities		(2,372	)		379
Cash flows from investing activities:
Proceeds from sale of business (see Note L)		3,500			-
Proceeds from life insurance policy		1,907			-
Acquisitions of fixed assets		(1,403	)		(2,175	)
Proceeds from sale of fixed assets		79			89
Other, net		(185	)		(166	)
Net cash provided (used) by investing activities		3,898			(2,252	)
Cash flows from financing activities:
Payments of notes payable		-			(29	)
Borrowings under revolving loan agreement		22,780			21,750
Repayments under revolving loan agreement		(22,315	)		(16,550	)
Proceeds from exercise of stock options		-			15
Dividends paid to shareholders		(1,019	)		(1,015	)
Dividends paid to noncontrolling interest		(192	)		(219	)
Excess tax benefits (shortfall) from stock compensation		52			(31	)
Payments of withholding taxes on stock compensation		(190	)		(314	)
Net cash (used) provided by financing activities		(884	)		3,607
Effect of exchange rate changes on cash		(542	)		(791	)
Net change in cash		100			943
Cash:
Beginning of period		22,936			24,757
End of period	$	23,036		$	25,700

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

4

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

A. Basis of Presentation

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 of normal recurring items, necessary for a fair presentation 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 financial statements 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 for June 30, 2015. The year-end condensed 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.

New Accounting Releases

In April 2015, the Financial Accounting Standards Board (“FASB”) issued guidance intended to amend current presentation guidance by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts. The amendments in this guidance are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 (the Company’s fiscal 2017). The adoption of this guidance is not expected to have a material impact on the Company’s financial statements and disclosures.

In August 2014, the FASB issued updated guidance intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern. The amendments in this guidance are effective for fiscal years ending after December 15, 2016 (the Company’s fiscal 2017), and interim periods within fiscal years beginning after December 15, 2016. The adoption of this guidance is not expected to have a material impact on the Company’s financial disclosures.

In June 2014, the FASB issued stock compensation guidance requiring that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The amendments in this guidance are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 (the Company’s fiscal 2017). The adoption of this guidance is not expected to have a material impact on the Company’s financial statements and disclosures.

In May 2014, the FASB issued updated guidance on revenue from contracts with customers. This revenue recognition guidance supersedes existing U.S. GAAP guidance, including most industry-specific guidance. The core principle is that an entity should recognize revenue to depict the transfer of 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, 2018 (the Company’s fiscal 2020). The Company is currently evaluating the potential impact of this guidance on the Company’s financial statements and disclosures.

In July 2015, the FASB issued guidance 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 measured under 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. This guidance is to be applied prospectively, and is effective for fiscal years beginning after December 15, 2016 (the Company’s fiscal 2018). The adoption of this guidance is not expected to have a material impact on the Company’s financial statements and disclosures.

In July 2015, the FASB issued guidance to reduce complexity in employee benefit plan accounting, which is consistent with its Simplification Initiative of improving areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. This guidance update consists of several parts that affect the reporting of defined benefit pension plans, defined contribution pension plans, and their fair value measurements, among others. This guidance is effective for fiscal years beginning after December 15, 2015 (the Company’s fiscal 2017). The adoption of this guidance is not expected to have a material impact on the Company’s financial disclosures.

5

B. Inventory

The major classes of inventories were as follows (in thousands):

	Sept. 25,		June 30,
	2015		2015
Inventories:
Finished parts	$	50,917	$	56,982
Work in process		9,346		8,292
Raw materials		16,784		14,967
	$	77,047	$	80,241

C.     Warranty

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 during the quarter ended September 25, 2015 and September 26, 2014 (in thousands):

	Sept. 25,			Sept. 26,
	2015			2014
Reserve balance, beginning of period	$	5,245		$	5,968
Current period (income) expense		(303	)		546
Payments or credits to customers		(721	)		(541	)
Translation		(1	)		(138	)
Reserve balance, end of period	$	4,220		$	5,835

The current portion of the warranty accrual ($2,986,000 and $3,681,000 for fiscal 2016 and 2015, respectively) is reflected in accrued liabilities, while the long-term portion ($1,234,000 and $2,154,000 for fiscal 2016 and 2015, respectively) is included in other long-term liabilities on the consolidated balance sheets.

D. Contingencies

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’s results of operations, financial position or cash flows.

E.     Business Segments

The Company and its subsidiaries are engaged in the manufacture and sale of marine and heavy-duty off-highway power transmission equipment. Principal products include marine transmissions, 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.

6

The Company has two reportable segments: manufacturing and distribution. These segments are managed separately because each provides different services and requires different technology and marketing strategies. 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.

Information about the Company’s segments is summarized as follows (in thousands):

	For the Quarter Ended
	Sept. 25,			Sept. 26,
	2015			2014
Net sales
Manufacturing segment sales	$	29,580		$	60,274
Distribution segment sales		20,201			24,011
Inter/Intra segment elimination - manufacturing		(8,477	)		(17,394	)
Inter/Intra segment elimination – distribution		(3,931	)		(2,067	)
	$	37,373		$	64,824
Net (loss) earnings attributable to Twin Disc
Manufacturing segment net (loss) earnings	$	(2,769	)	$	5,171
Distribution segment net earnings		475			1,178
Corporate and eliminations		(2,029	)		(2,306	)
	$	(4,323	)	$	4,043

	Sept. 25,			June 30,
	2015			2015
Assets
Manufacturing segment assets	$	238,017		$	254,749
Distribution segment assets		52,805			53,759
Corporate assets and elimination of inter‑company assets		(55,030	)		(58,646	)
	$	235,792		$	249,862

F. Stock-Based Compensation

Performance Stock Awards (“PSA”)

During the first quarter of fiscal 2016 and 2015, the Company granted a target number of 60,466 and 15,561 PSAs, respectively, to various employees of the Company, including executive officers. The fiscal 2016 PSAs will vest if the Company achieves (a) performance-based target objectives relating to average annual sales and consolidated economic profit, and (b) relative Total Shareholder Return (“TSR”) (as defined in the PSA Grant Agreement), in the cumulative three fiscal year period ending June 30, 2018. These PSAs are subject to adjustment if the Company’s net sales, economic profit and relative TSR for the period 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 90,699. Based upon actual results to date and the low probability of achieving the threshold performance levels, the Company is currently not accruing as compensation expense for the portion of the PSAs relating to the performance-based measure. Compensation expense relating to the relative TSR portion is recognized based on the grant date fair value over the vesting period.

The fiscal 2015 PSAs will vest if the Company achieves a specified target objective relating to consolidated economic profit (as defined in the PSA Grant Agreement) in the cumulative three fiscal year period ending June 30, 2017. These PSAs are subject to adjustment if the Company’s economic profit for the period 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 14,101. 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.

7

There were 86,415 and 54,863 unvested PSAs outstanding at September 25, 2015 and September 26, 2014, 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. There was no compensation expense for the quarters ended September 25, 2015 and September 26, 2014, related to PSAs. The weighted average grant date fair value of the unvested awards at September 25, 2015 was $19.31. At September 25, 2015, the Company had $1,669,000 of unrecognized compensation expense related to the unvested shares that would vest if the specified target objective was achieved for the fiscal 2016, 2015 and 2014 awards. The total fair value of PSAs vested as of September 25, 2015 and September 26, 2014 were $0.

Performance Stock Unit Awards (“PSU”)

During the first quarter of fiscal 2015, the Company granted a target number of 15,561 PSUs to various employees of the Company, including executive officers. There were no grants of PSUs during the first quarter of fiscal 2016. The fiscal 2015 PSUs will vest if the Company achieves a specified target objective relating to consolidated economic profit (as defined in the PSU Grant Agreement) in the cumulative three fiscal year period ending June 30, 2017. These PSUs are subject to adjustment if the Company’s economic profit for the period falls below or exceeds the specified target objective, and the maximum number of PSUs that can be awarded if the target objective is exceeded is 13,621. 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 the fiscal 2015 PSUs.

There were 29,855 and 52,041 unvested PSUs outstanding at September 25, 2015 and September 26, 2014, respectively. The weighted average grant date fair value of the unvested awards at September 25, 2015 was $27.24. PSUs are remeasured at fair-value based upon the Company’s stock price at the end of each reporting period. The fair-value of the PSUs is expensed over the performance period for the shares that are expected to ultimately vest. There was no compensation expense for the quarters ended September 25, 2015 and September 26, 2014, related to PSUs. At September 25, 2015, the Company had $359,000 of unrecognized compensation expense related to the unvested shares that would vest if the specified target objective was achieved for the fiscal 2015 and 2014 awards. The total fair value of PSU awards vested as of September 25, 2015 and September 26, 2014 were $0. The PSU awards are cash based, and would therefore be recorded as a liability on the Company’s consolidated balance sheets. As of September 25, 2015 and June 30, 2015, there were no awards included in liabilities in our consolidated balance sheets due to actual results to date and the low probability of achieving any of the threshold performance levels.

Restricted Stock Awards (“RS”)

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 quarter of fiscal 2016 and 2015, the Company granted 68,408 and 31,122 service based restricted shares, respectively, to employees in each year. There were 133,379 and 105,642 unvested shares outstanding at September 25, 2015 and September 26, 2014, respectively. Compensation expense of $355,000 and $108,000 was recognized for the quarters ended September 25, 2015 and September 26, 2014, respectively. The total fair value of restricted stock grants vested as of September 25, 2015 and September 26, 2014 was $461,000 and $654,000, respectively. As of September 25, 2015, the Company had $1,658,000 of unrecognized compensation expense related to restricted stock which will be recognized over the next three years.

G.     Pension and Other Postretirement Benefit Plans

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 and life insurance benefits for certain domestic retirees. Components of net periodic benefit cost for the defined benefit pension plans and the other postretirement benefit plan are as follows (in thousands):

8

	For the Quarter Ended
	Sept. 25,			Sept. 26,
	2015			2014
Pension Benefits:
Service cost	$	130		$	119
Interest cost		1,225			1,222
Expected return on plan assets		(1,692	)		(1,681	)
Amortization of transition obligation		9			9
Amortization of net loss		908			609
Net periodic benefit cost	$	580		$	278
Postretirement Benefits:
Service cost	$	7		$	8
Interest cost		151			145
Amortization of net actuarial loss		182			159
Net periodic benefit cost	$	340		$	312

The Company expects to contribute approximately $2,240,000 to its pension plans in fiscal 2016. As of September 25, 2015, $869,000 in contributions have been made.

The Company has reclassified $739,000 (net of $423,000 in taxes) of benefit plan adjustments from accumulated other comprehensive loss during the quarter ended September 25, 2015. The Company has reclassified $488,000 (net of $290,000 in taxes) of benefit plan adjustments from accumulated other comprehensive loss during the quarter ended September 26, 2014. These reclassifications are included in the computation of net periodic benefit cost.

H. Income Taxes

For the quarters ended September 25, 2015 and September 26, 2014, the Company’s effective income tax rate was 34.1% and 39.0% respectively. Expected foreign earnings are lower compared to prior year by $7,300,000. This resulted in lower foreign income inclusions and foreign tax credits, reducing the effective tax rate by 3.2%. Overall non-deductible expenses decreased by $550,000, reducing the effective tax rate by an additional 1.1%. The first quarter of fiscal 2016 rate reflects the impact of an expected domestic loss this year.

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 recent operating losses in a foreign jurisdiction, the Company has evaluated the realizability of the net deferred tax assets related to that jurisdiction. This evaluation concluded that, based primarily upon recent losses in this jurisdiction and failure to achieve targeted levels of improvement, a full valuation allowance continues to be necessary.

The Company has not provided for additional U.S. income taxes on cumulative earnings of consolidated foreign subsidiaries that are considered to be reinvested indefinitely. The Company reaffirms its position that these earnings remain permanently invested, and has no plans to repatriate funds to the U.S. for the foreseeable future. Such earnings could become taxable upon the sale or liquidation of these foreign subsidiaries or upon dividend repatriation.

Accounting policies for interim reporting require the Company to adjust its effective tax rate each quarter to be consistent with the estimated annual effective tax rate. Under this effective tax rate methodology, the Company applies an estimated annual income tax rate to its year-to-date ordinary earnings to derive its income tax provision each quarter. The impact of the Company’s operations in certain foreign locations is removed from the overall effective tax rate methodology and recorded directly based upon year-to-date results as these operations anticipate net operating losses for the year for which no tax benefit can be recognized.

9

The Company has approximately $895,000 of unrecognized tax benefits, including related interest and penalties, as of September 25, 2015, which, if recognized, would favorably impact the effective tax rate. There was no significant change 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 September 25, 2015. It appears possible that the amount of unrecognized tax benefits could change in the next twelve months due to on-going audit activity.

Annually, the Company files income tax returns in various taxing jurisdictions inside and outside the United States.  In general, the tax years that remain subject to examination are 2011 through 2015 for the major operations in Italy, Canada, Belgium, and Japan.  The tax years open to examination in the U.S. are for years subsequent to fiscal 2011. The state of Wisconsin income tax audit remains ongoing for the fiscal years 2010 through 2015. In the upcoming quarter the Company will commence an income tax audit by the state of Minnesota covering the period fiscal 2011 through fiscal 2013. During this quarter, the Company was notified and began an audit in Belgium. It is reasonably possible that at least one of these audit cycles will be completed during fiscal 2016.

I.     Goodwill and Other Intangibles

The changes in the carrying amount of goodwill, all of which is allocated to the manufacturing segment, for the quarter ended September 25, 2015 were as follows (in thousands):

	Gross Carrying Amount			Accumulated Impairment			Net Book Value
Balance at June 30, 2015	$	16,459		$	(3,670	)	$	12,789
Sale of business		(25	)		-			(25	)
Translation adjustment		15			-			15
Balance at September 25, 2015	$	16,449		$	(3,670	)	$	12,779

The gross carrying amount and accumulated amortization of the Company’s intangible assets that have defined useful lives and are subject to amortization as of September 25, 2015 and June 30, 2015 were as follows (in thousands):

	September 25, 2015
	Gross Carrying Amount		Accumulated Amortization			Accumulated Impairment			Net Book Value
Licensing agreements	$	3,015	$	(2,520	)	$	-		$	495
Non-compete agreements		2,128		(2,045	)		(83	)		-
Trade name		1,678		(215	)		-			1,463
Other		6,476		(5,279	)		(1,194	)		3
	$	13,297	$	(10,059	)	$	(1,277	)	$	1,961

	June 30, 2015
	Gross Carrying Amount		Accumulated Amortization			Accumulated Impairment			Net Book Value
Licensing agreements	$	3,015	$	(2,505	)	$	-		$	510
Non-compete agreements		2,128		(2,045	)		(83	)		-
Trade name		1,653		(194	)		-			1,459
Other		6,476		(5,278	)		(1,194	)		4
	$	13,272	$	(10,022	)	$	(1,277	)	$	1,973

The weighted average remaining useful life of the intangible assets included in the table above is approximately 15 years.

Intangible amortization expense was $37,000 for the quarter ended September 25, 2015, and $62,000 for the quarter ended September 26, 2014, respectively. Estimated intangible amortization expense for the remainder of fiscal 2016 and each of the next five fiscal years is as follows (in thousands):

Fiscal Year
2016	$	110
2017		142
2018		142
2019		142
2020		142
2021		142

The gross carrying amount of the Company’s intangible assets that have indefinite lives and are not subject to amortization as of September 25, 2015 and June 30, 2015 are $208,000 and $213,000, respectively. These assets are comprised of acquired trade names.

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J. Long-term Debt

Long-term debt at September 25, 2015 and June 30, 2015 consisted of the following (in thousands):

	September 25,			June 30,
	2015			2015
Revolving loan	$	10,672		$	10,208
10-year unsecured senior notes		3,571			3,571
Other		24			23
Subtotal		14,267			13,802
Less: current maturities and short-term borrowings		(3,571	)		(3,571	)
Total long-term debt	$	10,696		$	10,231

The revolving loan and unsecured senior notes listed above are subject to certain covenants, including restrictions on investments, acquisitions and indebtedness. Financial covenants, as defined, include a minimum consolidated net worth, a minimum EBITDA for the most recent four fiscal quarters, and a maximum total funded debt to EBITDA ratio. As of September 25, 2015, the Company was in compliance with these covenants.

The fair value of long-term debt is estimated by discounting the future cash flows at rates offered to the Company for similar debt instruments of comparable maturities. This rate was represented by the US Treasury Three-Year Yield Curve Rate (1.00% and 1.01% for September 25, 2015 and June 30, 2015, respectively), plus the current add-on related to the revolving loan agreement (1.00% for September 25, 2015 and June 30, 2015) resulting in a total rate of 2.00% and 2.01% for September 26, 2015 and June 30, 2015, respectively. The fair value of the Company’s 10-year unsecured senior notes due April 10, 2016 was approximately $3,691,000 and $3,726,000 at September 26, 2015 and June 30, 2015, respectively. The Company’s revolving loan agreement approximates fair value at September 25, 2015 and June 30, 2015. 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.

K. Shareholders’ Equity

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 315,000 shares as of the September 25, 2015 remain authorized for purchase.  The Company did not make any open market purchases of its shares during the current quarter.

The following is a reconciliation of the Company’s equity balances for the first fiscal quarter of 2015 and 2016 (in thousands):

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	Twin Disc, Inc. Shareholders’ Equity
							Accumulated
							Other						Non-
	Common			Retained			Comprehensive			Treasury			Controlling			Total
	Stock			Earnings			Income (Loss)			Stock			Interest			Equity
Balance, June 30, 2014	$	11,973		$	183,695		$	(15,943	)	$	(28,141	)	$	727		$	152,311
Net income					4,043									19			4,062
Translation adjustments								(4,337	)					9			(4,328	)
Benefit plan adjustments, net of tax								488									488
Cash dividends					(1,015	)								(219	)		(1,234	)
Compensation expense and windfall tax benefits		77															77
Shares (acquired) issued, net		(342	)								44						(298	)
Balance, September 26, 2014	$	11,708		$	186,723		$	(19,792	)	$	(28,097	)	$	536		$	151,078

	Twin Disc, Inc. Shareholders’ Equity
							Accumulated
							Other						Non-
	Common			Retained			Comprehensive			Treasury			Controlling			Total
	Stock			Earnings			Income (Loss)			Stock			Interest			Equity
Balance, June 30, 2015	$	12,259		$	190,807		$	(35,481	)	$	(28,057	)	$	639		$	140,167
Net (loss) income					(4,323	)								48			(4,275	)
Translation adjustments								(1,787	)					(18	)		(1,805	)
Benefit plan adjustments, net of tax								739									739
Cash dividends					(1,019	)								(192	)		(1,211	)
Compensation expense and windfall tax benefits		303															303
Shares (acquired) issued, net		(1,045	)								857						(188	)
Balance, September 25, 2015	$	11,517		$	185,465		$	(36,529	)	$	(27,200	)	$	477		$	133,730

Reconciliations for the changes in accumulated other comprehensive income (loss), net of tax, by component for the quarter ended September 26, 2014, and September 25, 2015, are as follows:

	Translation Adjustment			Benefit Plan Adjustment
Balance at June 30, 2014	$	20,779		$	(36,722	)
Other comprehensive loss before reclassifications		(4,337	)		-
Amounts reclassified from accumulated other comprehensive income		-			488
Net current period other comprehensive (loss) income		(4,337	)		488
Balance at September 26, 2014	$	16,442		$	(36,234	)

	Translation Adjustment			Benefit Plan Adjustment
Balance at June 30, 2015	$	6,740		$	(42,221	)
Other comprehensive loss before reclassifications		(1,787	)		51
Amounts reclassified from accumulated other comprehensive income		-			688
Net current period other comprehensive (loss) income		(1,787	)		739
Balance at September 25, 2015	$	4,953		$	(41,482	)

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Reconciliations for the reclassifications out of accumulated other comprehensive income (loss), net of tax for the quarter ended September 26, 2014 are as follows:

	Amount Reclassified
	Quarter Ended
	September 26, 2014
Amortization of benefit plan items
Actuarial losses	$	768	(a)
Transition asset and prior service benefit		9	(a)
Total before tax benefit		777
Tax benefit		289
Total reclassification net of tax	$	488

(a) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note G "Pension and Other Postretirement Benefit Plans" for further details).

Reconciliations for the reclassifications out of accumulated other comprehensive income (loss), net of tax for the quarter ended September 25, 2015 are as follows:

	Amount Reclassified
	Quarter Ended
	September 25, 2015
Amortization of benefit plan items
Actuarial losses	$	1,090	(a)
Transition asset and prior service benefit		9	(a)
Total before tax benefit		1,099
Tax benefit		411
Total reclassification net of tax	$	688

(a) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note G "Pension and Other Postretirement Benefit Plans" for further details).

L. Restructuring of Operations

On September 25, 2015, the Company, as part of its initiative to focus resources on core manufacturing and product development activities aimed at improving profitability, entered into an asset purchase agreement with one of its major distributor customers. Under this agreement, the Company sold distribution rights to its southeastern U.S. territories and certain assets, consisting primarily of inventories, for $4,100,000. The proceeds from the sale of distribution rights of $600,000 are deferred and will be amortized into revenue through June 2016, the initial term of the distribution agreement. The gain on sale of $500,000 is recorded as other operating income in the statement of operations in fiscal 2016. This gain is subject to purchase price adjustment, under the terms of the agreement. Any adjustments to this amount will be recorded in the quarter in which it is determined.

During the fourth quarter of fiscal 2015, the Company committed to a restructuring plan to reduce costs and improve efficiencies at its North American manufacturing operations. This restructuring resulted in a reduction of 79 people through a combination of early retirement and reduction in force. The restructuring was meant to be a proactive measure to offset the impact low oil and gas prices had on the demand from its customers. The Company recorded a pre-tax restructuring charge of $3,282,000 in the fourth quarter of fiscal 2015, upon announcement of the intended restructuring action. During fiscal 2015, the Company made no cash payments, resulting in an accrual balance of $3,282,000 at June 30, 2015. The Company made payments of $2,089,000 and recorded $71,000 additional expense in the first quarter of fiscal 2016, resulting in a September 25, 2015 balance of $1,264,000.

During the first quarter of fiscal 2014, the Company recorded a pre-tax restructuring charge of $1,094,000 representing the incremental cost above the minimum legal indemnity for a targeted workforce reduction at its Belgian operation, following finalization of negotiations with the local labor union. The minimum legal indemnity of $548,000 was recorded in the fourth quarter of fiscal 2013, upon announcement of the intended restructuring action. During fiscal 2014 and fiscal 2015, the Company made cash payments of $857,000 and $156,000, respectively, resulting in a June 30, 2015 balance of $494,000 after a favorable foreign exchange impact of $135,000. The Company made additional payments of $23,000 in the first quarter of fiscal 2016, resulting in a September 25, 2015 balance of $473,000 after an unfavorable foreign exchange impact of $2,000. This remaining obligation relates to increased pension benefits agreed to as part of the restructuring and is expected to be paid out over the next several years.

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Item 2.     Management Discussion and Analysis

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 fiscal 2015 financial statements and related notes.

Some of the statements in this Quarterly Report on Form 10-Q are “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 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’s Annual Report filed on Form 10-K for June 30, 2015 could cause actual results to be materially different from what is presented here.

Results of Operations

(In thousands)
	Quarter Ended
	September 25,					September 26,
	2015			%		2014		%
Net sales	$	37,373				$	64,824
Cost of goods sold		29,183					42,435
Gross profit		8,190			21.9%		22,389		34.5%
Marketing, engineering and administrative expenses		15,240			40.8%		15,910		24.5%
Other operating income		(500	)				-
(Loss) earnings from operations	$	(6,550	)		(17.5%)	$	6,479		10.0%

Comparison of the First Quarter of FY 2016 with the First Quarter of FY 2015

Net sales for the first quarter decreased 42.3%, or $27.5 million, to $37.4 million from $64.8 million in the same period a year ago. Currency translation had an unfavorable impact on fiscal 2016 sales compared to the prior year totaling $4.5 million due to the strengthening of the U.S. dollar against the euro and Asian currencies. Adjusting for constant currency, sales declined 35.4% compared to the fiscal 2015 first quarter. The significant decline is the result of reduced demand for the Company’s oil and gas related products in both North America and Asia driven by the global decline in oil and natural gas prices, along with softening demand in Asia for the Company’s commercial marine products. Demand from customers in Europe remains weak, while overall demand in North America remains stable for the Company’s commercial marine and industrial products. The sales decline was seen most heavily in North America, as the percentage of sales to this region fell to 49% of total consolidated net sales in the first quarter of fiscal 2016 compared to 55% for the full year fiscal 2015. By comparison, the European region increased as a percent of total to 20% (from 17%) and Asia Pacific remained relatively flat at 22% (compared to 21% for fiscal 2015).   

Sales at our manufacturing segment were down 50.9%, or $30.7 million, versus the same period last year. In the current fiscal year’s first quarter, our U.S. manufacturing operation, the largest, experienced a 65.1% decrease in sales versus the first fiscal quarter of 2015. The primary driver for this decrease was reduced shipments of pressure pumping transmissions and aftermarket components for the North American and Asian oil and gas markets, along with reduced demand for commercial marine product. The Company’s Italian manufacturing operations, which continue to be hampered by the softness in the European mega yacht and industrial markets, experienced a 20.8% decrease in sales compared to the prior fiscal year’s first quarter, primarily due to an unfavorable currency impact (17.6%). After adjusting for a 15.0% unfavorable currency impact, the Company’s Belgian manufacturing operation experienced relatively flat demand compared to the fiscal 2015 first quarter, reporting a 0.3% decline. The Company’s Swiss manufacturing operation, which supplies customized propellers for the global mega yacht and patrol boat markets, experienced a 15.9% decrease in sales, primarily due to currency impact and the timing of shipments for the global patrol boat and Italian mega yacht markets.

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Our distribution segment experienced a 15.9%, or $3.8 million, decrease in sales compared to the first quarter of fiscal 2015. The Company’s distribution operation in Singapore, its largest Company-owned distribution operation, saw a 52.0% decrease in sales compared to the prior fiscal year’s first quarter. This operation acts as the Company’s master distributor for Asia and has experienced record results in recent years as the Company’s products gain greater acceptance in the market. In the first fiscal quarter, this operation saw a significant decrease in shipments of pressure pumping and commercial marine transmissions for the Chinese market, along with an unfavorable currency impact. The Company’s distribution operation in the Northwest of the United States and Southwest of Canada experienced a decrease in sales of 46.3%. The year over year decrease was driven by reduced shipments of pressure pumping transmissions and aftermarket service and components for the Canadian oil and gas markets. The Company’s distribution operation in Australia, which provides boat accessories, propulsion and marine transmission systems for the pleasure craft market, saw an increase in sales of just over 12% from the prior fiscal year’s first quarter, after adjusting for an unfavorable currency impact (24.0%). This constant-currency increase was driven by improved shipments in the Australian mega yacht market compared to the prior year.

The elimination for net inter/intra segment sales decreased $7.1 million, accounting for the remainder of the net change in sales versus the same period last year.

Gross profit as a percentage of sales decreased 1260 basis points to 21.9% of sales, compared to 34.5% of sales for the same period last year. Gross profit for fiscal 2016’s first quarter was unfavorably impacted by the reduced volume ($9.9 million), a less profitable product mix (approximately $1.4 million) driven by lower sales of the Company’s oil and gas transmission products, an unfavorable currency impact ($1.0 million) and reduced absorption primarily at the Company’s U.S. manufacturing operations ($1.4 million).

For the fiscal 2016 first quarter, marketing, engineering and administrative (ME&A) expenses, as a percentage of sales, were 40.8%, compared to 24.5% for the fiscal 2015 first quarter. ME&A expenses decreased $0.7 million versus the same period last fiscal year. The decrease in ME&A expenses for the quarter relates to a currency movement ($0.8 million), reduced bonus expense ($0.7 million) and general cost containment measures. These decreases were partially offset by increases related to stock compensation expense following a prior year forfeiture ($0.2 million), increased pension expense ($0.5 million) and corporate development activities ($0.5 million).

During the first quarter of fiscal 2016, the Company sold the distribution rights and assets of its distribution entity covering the southeast U.S. territory for approximately $4.1 million, resulting in a net operating gain of $0.5 million.

Interest expense of $0.1 million for the quarter was down 44.5% versus last year’s first fiscal quarter. Total interest on the Company’s $60 million revolving credit facility (“revolver”) decreased 20.5% to $32,348 in fiscal 2016’s first quarter. The average borrowing on the revolver, computed monthly, decreased to $9.9 million in fiscal 2016’s first quarter, compared to $13.2 million in the same period a year ago. The interest rate on the revolver increased from a range of 1.16% to 1.17% in the prior fiscal year’s first quarter to a range of 1.20% to 1.21% in the current year. The interest expense on the Company’s $25 million Senior Note decreased 50%, at a fixed rate of 6.05%, due to a lower remaining principal balance.

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 and Australian dollar.

The fiscal 2016 first quarter tax rate was 34.1%, compared to the fiscal 2015 first quarter rate of 39.0%. Both periods were impacted by non-deductible operating losses in a foreign jurisdiction that is subject to a full valuation allowance. Adjusting both periods for the non-deductible losses, the fiscal 2016 first quarter rate would have been 35.2%, compared to 36.3% for the fiscal 2015 first quarter. The reduction in the fiscal 2016 effective tax rate was primarily a function of jurisdictional mix.

Financial Condition, Liquidity and Capital Resources

Comparison between September 25, 2015 and June 30, 2015

As of September 25, 2015, the Company had net working capital of $97.5 million, which represents a decrease of $15.3 million, or 13.6%, from the net working capital of $112.8 million as of June 30, 2015.

Cash increased $0.1 million to $23.0 million as of September 25, 2015, versus $22.9 million as of June 30, 2015. The majority of the cash as of September 25, 2015 is at our overseas operations in Europe ($14.5 million) and Asia-Pacific ($7.0 million).

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Trade receivables of $31.3 million were down $12.6 million, or approximately 29%, when compared to last fiscal year-end. The impact of foreign currency translation was to decrease accounts receivable by $0.4 million versus June 30, 2015. The net remaining decrease is driven by the sales volume decrease of just over 40% from the fourth quarter of fiscal 2015 compared to the first fiscal quarter of fiscal 2016.

Net inventory decreased by $3.2 million, or 4.0%, versus June 30, 2015 to $77.0 million. The impact of foreign currency translation was to decrease net inventory by $1.3 million versus June 30, 2015. After adjusting for the impact of foreign currency translation, the net decrease of $1.9 million is primarily the result of the sale of the inventories of Twin Disc Southeast, a Company-owned distributor in the southeast U.S., to a third party distributor ($3.3 million). On a consolidated basis, as of September 25, 2015, the Company’s backlog of orders to be shipped over the next six months approximates $37.5 million, compared to $34.4 million at June 30, 2015 and $64.0 million at September 26, 2014. The slight increase versus the end of the prior fiscal year is being experienced at the Company’s domestic manufacturing location. As a percentage of six month backlog, inventory has improved from 233% at June 30, 2015 to 205% at September 25, 2015.

Net property, plant and equipment (PP&E) decreased $1.1 million versus June 30, 2015. This includes the addition of $1.4 million in capital expenditures, primarily at the Company’s Racine-based manufacturing operation, which was more than offset by depreciation of $2.2 million. The net remaining decrease is due to foreign currency translation effects and asset disposals. In total, the Company expects to invest between $5 and $10 million in capital assets in fiscal 2016. These anticipated expenditures reflect the Company’s plans to continue investing in modern equipment and facilities, its global sourcing program and new products. 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 expanding capacity at its facilities around the world.

Accounts payable as of September 25, 2015 of $18.4 million were down $2.3 million, or 11.1%, from June 30, 2015. The impact of foreign currency translation was to decrease accounts payable by $0.1 million versus June 30, 2015. This decrease is consistent with the timing of certain payments, the Company’s lower six month backlog levels and the reduction in purchasing activity during the first quarter resulting from reduced sales levels compared to the fourth quarter of fiscal 2015.

Total borrowings and long-term debt as of September 25, 2015 increased by $0.5 million, or roughly 3%, to $14.3 million versus June 30, 2015. Cash needs were driven primarily by bonus and severance payments, partially offset by proceeds from the sale of the assets of Twin Disc Southeast and the receipt of a life insurance benefit. During the first quarter, the Company generated negative free cash flow (defined as operating cash flow less acquisitions of fixed assets) of ($3.8) million and ended the quarter with total debt, net of cash, of ($8.8) million, compared to ($9.1) million at June 30, 2015, for a net change of $0.3 million.

Total equity decreased $6.4 million, or 4.6%, to $133.7 million as of September 25, 2015. Retained earnings decreased by $5.3 million. The net decrease in retained earnings included $4.3 million in net loss for the first fiscal quarter, along with $1.0 million in dividend payments. Net unfavorable foreign currency translation of $1.8 million was reported. The net remaining increase in equity of $0.7 million primarily represents the amortization of net actuarial loss and prior service cost on the Company’s defined benefit pension plans.

On June 30, 2014, the Company entered into a revolving loan agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association. Pursuant to the Credit Agreement, the Company may, from time to time, enter into revolving credit loans in amounts not to exceed, in the aggregate, Wells Fargo’s revolving credit commitment of $60,000,000. The revolving credit commitment may be increased under the agreement by an additional $10,000,000 in the event that the conditions for “Incremental Loans” (as defined in the agreement) are satisfied. In general, outstanding revolving credit loans will bear interest at LIBOR plus 1.00%. The rate was 1.20% at September 25, 2015. In addition to principal and interest payments, the Company will be responsible for paying monthly commitment fees equal to 0.15% of the unused revolving credit commitment. The Company has the option of making additional prepayments subject to certain limitations. The Credit Agreement is scheduled to expire on May 31, 2018. The outstanding balance of $10,671,884 at September 25, 2015 is classified as long-term debt. This agreement contains certain covenants, including restrictions on investments, acquisitions and indebtedness. Financial covenants include a minimum consolidated adjusted net worth, a minimum EBITDA for the most recent four fiscal quarters of $11,000,000 at September 25, 2015, and a maximum total funded debt to EBITDA ratio of 3.0 at September 25, 2015. On August 3, 2015, the Credit Agreement was amended to revise the definition of EBITDA for the four consecutive fiscal quarters ending on and including June 30, 2015 to and including March 25, 2016 to add $3,300,000, reflective of the restructuring charge taken by the Company in the fourth quarter of the fiscal year ending June 30, 2015. As of September 25, 2015, the Company was in compliance with these financial covenants with a four quarter EBITDA total of $16,172,000 and a funded debt to EBITDA ratio of 0.88 (compared to $29,755,000 and 0.46 as of June 30, 2015, respectively). The minimum adjusted net worth covenant fluctuates based upon actual earnings and the Company’s compliance with that covenant is based on the Company’s shareholders’ equity as adjusted by certain pension accounting items. As of September 25, 2015, the minimum adjusted equity requirement was $124,741,000 compared to an actual result of $167,253,000 after all required adjustments.

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On June 30, 2014, the Company entered into an Amended and Restated Note Purchase and Private Shelf Agreement (the “Prudential Agreement”). Among other things, the Prudential Agreement: (a) amends and restates the “Note Agreement” between the Company and Purchasers dated as of April 10, 2006, as it has been amended from time to time (the “2006 Note Agreement”); and (b) sets forth the terms of the potential sale and purchase of up to $50,000,000 in “Shelf Notes” as defined in the Prudential Agreement (the “Shelf Notes”) by the Company to Prudential. The notes sold by the Company to the Existing Holders under the 2006 Agreement (the “2006 Notes”) are deemed outstanding under, and are governed by, the terms of the Prudential Agreement. The 2006 Notes bear interest on the outstanding principal balance at a fixed rate of 6.05% per annum and mature and become due and payable in full on April 10, 2016 (the “Payment Date”). Prior to the Payment Date, the Company is obligated to make quarterly payments of interest during the term of the 2006 Notes, plus prepayments of principal of $3,571,429 on April 10 of each year from 2010 to 2015, inclusive. The outstanding balance was $3,571,429 at September 25, 2015 and June 30, 2015, respectively. The entire outstanding balance was classified as a current maturity of long-term debt at September 25, 2015 and June 30, 2015, respectively. In addition to the interest payments and any mandatory principal payments required under the terms of the Shelf Note, the Company will pay an issuance fee of 0.10% of the aggregate principal balance of each of the Shelf Notes sold to, and purchased by, Prudential. The Company may prepay the Shelf Notes or the 2006 Notes, subject to certain limitations. At no time during the term of the Prudential Agreement may the aggregate outstanding principal amount of the 2006 Notes and the Shelf Notes exceed $35,000,000. The Prudential Agreement includes financial covenants regarding minimum net worth, minimum EBITDA for the most recent four fiscal quarters of $11,000,000 and a maximum total funded debt to EBITDA ratio of 3.0. On August 3, 2015, the Credit Agreement was amended to revise the definition of EBITDA for the four consecutive fiscal quarters ending on and including June 30, 2015 to and including March 25, 2016 to add $3,300,000, reflective of the restructuring charge taken by the Company in the fourth quarter of the fiscal year ending June 30, 2015. As of September 25, 2015, the Company was in compliance with these financial covenants. As part of the agreement, the Company will be required to make an offer to purchase the 2006 Notes and Shelf Notes upon a change of control, and any such offer must include the payment of a Yield-Maintenance Amount. The Prudential Agreement also includes certain covenants that limit, among other things, certain indebtedness, acquisitions and investments. The Prudential Agreement also has a most favored lender provision whereby the Prudential Agreement shall be automatically modified to include any additional covenant or event of default that is included in any agreement evidencing, securing, guarantying or otherwise related to other indebtedness in excess of $1,000,000.

Four quarter EBITDA, total funded debt, and adjusted net worth are non-GAAP measures, and are included herein for the purpose of disclosing the status of the Company’s compliance with the four quarter EBITDA, total funded debt to four quarter EBITDA ratio, and adjusted net worth covenants described above. In accordance with the Company’s revolving loan agreements and the Prudential Agreement:

● “Four quarter EBITDA” is defined as “the sum of (i) Net Income plus, to the extent deducted in the calculation of Net Income, (ii) interest expense, (iii) depreciation and amortization expense, (iv) income tax expense and (v) $3,300,000 adjustment;” and

● “Total funded debt” is defined as “(i) all Indebtedness for borrowed money (including without limitation, Indebtedness evidenced by promissory notes, bonds, debentures and similar interest-bearing instruments), plus (ii) all purchase money Indebtedness, plus (iii) the principal portion of capital lease obligations, plus (iv) the maximum amount which is available to be drawn under letters of credit then outstanding, all as determined for the Company and its consolidated Subsidiaries as of the date of determination, without duplication, and in accordance with generally accepted accounting principles applied on a consistent basis.”

● “Total funded debt to four quarter EBITDA” is defined as the ratio of total funded debt to four quarter EBITDA calculated in accordance with the above definitions.

● “Adjusted net worth” means the Company’s reported shareholder equity, excluding adjustments that result from (i) changes to the assumptions used by the Company in determining its pension liabilities or (ii) changes in the market value of plan assets up to an aggregate amount of adjustments equal to $34,000,000 (“Permitted Benefit Plan Adjustments”) for purposes of computing net worth at any time.

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The Company’s total funded debt as of September 25, 2015 and June 30, 2015 was equal to the total debt reported on the Company’s September 25, 2015 and June 30, 2015 Consolidated Balance Sheet, and therefore no reconciliation is included herein. The following table sets forth the reconciliation of the Company’s reported Net Earnings to the calculation of four quarter EBITDA for the four quarters ended September 25, 2015:

Four Quarter EBITDA Reconciliation
Net Earnings Attributable to Twin Disc	$	2,807,000
Depreciation & Amortization		9,843,000
Interest Expense		533,000
Income Taxes		(286,000	)
Adjustment		3,300,000
Four Quarter EBITDA	$	16,197,000
Total Funded Debt to Four Quarter EBITDA
Total Funded Debt	$	14,267,000
Divided by: Four Quarter EBITDA		16,197,000
Total Funded Debt to Four Quarter EBITDA		0.88

The following table sets forth the reconciliation of the Company’s reported shareholders’ equity to the calculation of adjusted net worth for the quarter ended September 25, 2015:

Total Twin Disc Shareholders’ Equity	$	133,253,000
Permitted Benefit Plan Adjustments		34,000,000
Adjusted Net Worth	$	167,253,000

As of September 25, 2015, the Company was in compliance with all of the covenants described above. As of September 25, 2015, the Company’s backlog of orders scheduled for shipment during the next six months (six-month backlog) was $37.5 million, or approximately 9% higher than the six-month backlog of $34.4 million as of June 30, 2015, but down 41% from the end of the first fiscal quarter of 2015. The current margins surrounding ongoing compliance with the above covenants, in particular, minimum EBITDA for the most recent four fiscal quarters and total funded debt to EBITDA, are expected to decrease in fiscal 2016. Based on its latest projections, the Company believes it will be a significant challenge to generate sufficient EBITDA levels throughout fiscal 2016 in order to maintain compliance with the above covenants. The Company has engaged its lenders in preliminary discussions regarding potential covenant violations. However, as with all forward-looking information, there can be no assurance that the Company will achieve or fail to achieve the projected results in future periods due to the uncertainties in certain of its markets. Please see the factors discussed under Item 1A, Risk Factors, of the Company’s Annual Report filed on Form 10-K for June 30, 2015 which could cause actual results to be materially different from what is presented here.

The Company’s balance sheet remains very strong, there are no off-balance-sheet arrangements other than the operating leases listed below, and we continue to have sufficient liquidity for near-term needs. The Company had $49.3 million of available borrowings on our $60 million revolving loan agreement as of September 25, 2015. The Company expects to continue to generate enough cash from operations to meet our operating and investing needs. As of September 25, 2015, the Company also had cash of $23.0 million, primarily at its overseas operations. These funds, with some restrictions and tax implications, are available for repatriation as deemed necessary by the Company. In fiscal 2016, the Company expects to contribute $2.2 million to its defined benefit pension plans, the minimum contributions required. However, if the Company elects to make voluntary contributions in fiscal 2016, it intends to do so using cash from operations and, if necessary, from available borrowings under existing credit facilities.

Net working capital decreased $15.3 million, or 13.6%, in fiscal 2016’s first quarter, and the current ratio decreased from 3.0 at June 30, 2015 to 2.9 at September 25, 2015. The decrease in net working capital was primarily driven by a decrease in accounts receivable and inventory, partially offset by a decrease in accounts payable and accrued liabilities due to the impact of reduced volume and the payment of severance and bonus obligations.

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The Company expects capital expenditures to be approximately $5 million - $10 million in fiscal 2016. These anticipated expenditures reflect the Company’s plans to continue investing in modern equipment and facilities, its global sourcing program and new products.

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

As of September 25, 2015, the Company has obligations under non-cancelable operating lease contracts and loan and senior note agreements for certain future payments.

The Company has approximately $895,000 of unrecognized tax benefits, including related interest and penalties, as of September 25, 2015, 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 Pension Committee to manage the operations and administration of the defined benefit plans. The Company estimates that fiscal 2016 contributions to all defined benefit plans will total $2,240,000. As of September 25, 2015, $869,000 in contributions have been made.

New Accounting Releases

In April 2015, the Financial Accounting Standards Board (“FASB”) issued guidance intended to amend current presentation guidance by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts. The amendments in this guidance are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 (the Company’s fiscal 2017). The adoption of this guidance is not expected to have a material impact on the Company’s financial statements and disclosures.

In August 2014, the FASB issued updated guidance intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern. The amendments in this guidance are effective for fiscal years ending after December 15, 2016 (the Company’s fiscal 2017), and interim periods within fiscal years beginning after December 15, 2016. The adoption of this guidance is not expected to have a material impact on the Company’s financial disclosures.

In June 2014, the FASB issued stock compensation guidance requiring that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The amendments in this guidance are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 (the Company’s fiscal 2017). The adoption of this guidance is not expected to have a material impact on the Company’s financial statements and disclosures.

In May 2014, the FASB issued updated guidance on revenue from contracts with customers. This revenue recognition guidance supersedes existing U.S. GAAP guidance, including most industry-specific guidance. The core principle is that an entity should recognize revenue to depict the transfer of 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, 2018 (the Company’s fiscal 2020). The Company is currently evaluating the potential impact of this guidance on the Company’s financial statements and disclosures.

In July 2015, the FASB issued guidance 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 measured under 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. This guidance is to be applied prospectively, and is effective for fiscal years beginning after December 15, 2016 (the Company’s fiscal 2018). The adoption of this guidance is not expected to have a material impact on the Company’s financial statements and disclosures.

19

In July 2015, the FASB issued guidance to reduce complexity in employee benefit plan accounting, which is consistent with its Simplification Initiative of improving areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. This guidance update consists of several parts that affect the reporting of defined benefit pension plans, defined contribution pension plans, and their fair value measurements, among others. This guidance is effective for fiscal years beginning after December 15, 2015 (the Company’s fiscal 2017). The adoption of this guidance is not expected to have a material impact on the Company’s financial disclosures.

Critical Accounting Policies

The preparation of this Quarterly Report requires management’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.

Twin Disc’s critical accounting policies are described in Item 7 of the Company’s Annual Report filed on Form 10-K for June 30, 2015. There have been no significant changes to those accounting policies subsequent to June 30, 2015.

Item 3.     Quantitative and Qualitative Disclosure About Market Risk

The Company is exposed 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 pursuant to clearly defined policies and procedures, which prohibit the use of financial instruments for trading or speculative purposes.

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 the LIBOR interest rate. In accordance with the $60,000,000 revolving loan agreement expiring May 31, 2018, the Company has the option of borrowing at LIBOR plus an additional “Add-On” of 1.0%. Due to the relative stability of interest rates, the Company did not utilize any financial instruments at September 25, 2015 to manage interest rate risk exposure. A 10 percent increase or decrease in the applicable interest rate would result in a change in pretax interest expense of approximately $13,000.

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 28% of the Company’s revenues in the quarter ended September 25, 2015 were denominated in currencies other than the U.S. dollar. Of that total, approximately 58% 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 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 2016 and 2015 was the euro. At September 25, 2015, the Company had two outstanding forward exchange contracts to purchase U.S. dollars and euros in the notional value of $450,000 with a weighted average maturity of 20 days. The fair value of the Company’s contracts was a loss of $6,000 at September 25, 2015. The Company had no outstanding forward exchange contracts at June 30, 2015.

20

Item 4.     Controls and Procedures

(a)     Evaluation of Disclosure Controls and Procedures

The Company’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.

(b)     Changes in Internal Control Over Financial Reporting

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 13a-15(f) and 15d-15(f). During the period covered by this report, no changes were made which have materially affected, or which are reasonably likely to materially affect, our internal control over financial reporting.

Part II.     OTHER INFORMATION

Item 1.     Legal Proceedings

Twin Disc 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.

Item 1A.     Risk Factors

There have been no material changes to the risk factors previously disclosed in response to Item 1A to Part I of our 2015 Annual Report on Form 10-K.

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds

(a) Unregistered Sales of Equity Securities

There were no securities of the Company sold by the Company during the quarter ended September 25, 2015, 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.

(b) Use of Proceeds

Not applicable.

(c) Issuer Purchases of Equity Securities

21

Issuer Purchases of Equity Securities

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
July 1, 2015   –   July 31, 2015		12,361		NA		0		315,000
August 1, 2015   –   August 28, 2015		0		NA		0		315,000
Aug. 29, 2015   –   Sep. 25, 2015		0		NA		0		315,000
Total		12,361		NA		0		315,000

The Company did not purchase any shares of Common Stock during the quarter ended September 25, 2015, pursuant to our publicly announced program (described below). 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 issued under the Twin Disc, Incorporated 2010 Long-Term Incentive Compensation Plan.

On February 1, 2008, the Board of Directors authorized the purchase of up to 500,000 shares of Common Stock at market values, of which 250,000 shares were purchased during fiscal 2009 and 125,000 shares were purchased during fiscal 2012. On July 27, 2012, the Board of Directors authorized the purchase of an additional 375,000 shares of Common Stock at market values. This authorization has no expiration. During the second quarter of fiscal 2013, the Company purchased 185,000 shares under this authorization.

Item 3.     Defaults Upon Senior Securities

None.

Item 5.     Other Information

None.

Item 6.     Exhibits

31a Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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

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

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

101.INS XBRL Instance Document

101.SCH XBRL Schema

101.CAL XBRL Calculation Linkbase

101.DEF XBRL Definition Linkbase

101.LAB XBRL Label Linkbase

101.PRE XBRL Presentation Linkbase

22

SIGNATURE

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.

	TWIN DISC, INCORPORATED
	(Registrant)
Date: November 4, 2015	/s/ DEBBIE A. LANGE
	Debbie A. Lange
	Corporate Controller
	Chief Accounting Officer

 23

EX-31.A

Exhibit 31a

CERTIFICATION

I, John H. Batten, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Twin Disc, Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s first fiscal quarter in the case of this quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 4, 2015	/s/ JOHN H. BATTEN
	John H. Batten
	President and Chief Executive Officer

EX-31.B

Exhibit 31b

CERTIFICATIONS

I, Jeffrey S. Knutson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Twin Disc, Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s first fiscal quarter in the case of this quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 4, 2015	/s/ JEFFREY S. KNUTSON
	Jeffrey S. Knutson
	Vice President – Finance, Chief Financial Officer, Treasurer and Secretary

EX-32.A

EXHIBIT 32a

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 Quarterly Report of Twin Disc, Incorporated (the “Company”) on Form 10-Q for the fiscal quarter ending September 25, 2015, as filed with the Securities and Exchange Commission as of the date hereof (the “Report”), I, John H. Batten, 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 the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 4, 2015	/s/ JOHN H. BATTEN
	John H. Batten
	President and Chief Executive Officer

EX-32.B

EXHIBIT 32b

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 Quarterly Report of Twin Disc, Incorporated (the “Company”) on Form 10-Q for the fiscal quarter ending September 25, 2015, as filed with the Securities and Exchange Commission as of the date hereof (the “Report”), I, Jeffrey S. Knutson, Vice President – Finance, Chief Financial Officer, Treasurer 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 the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 4, 2015	/s/ JEFFREY S. KNUTSON
	Jeffrey S. Knutson
	Vice President – Finance, Chief Financial Officer, Treasurer and Secretary

XML

Note I - Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Sep. 25, 2015	Jun. 30, 2015
Licensing Agreements [Member]
Gross Carrying Amount	$ 3,015	$ 3,015
Accumulated Amortization	$ (2,520)	$ (2,505)
Accumulated Impairment
Net Book Value	$ 495	$ 510
Noncompete Agreements [Member]
Gross Carrying Amount	2,128	2,128
Accumulated Amortization	(2,045)	(2,045)
Accumulated Impairment	$ (83)	$ (83)
Net Book Value
Trade Names [Member]
Gross Carrying Amount	$ 1,678	$ 1,653
Accumulated Amortization	$ (215)	$ (194)
Accumulated Impairment
Net Book Value	$ 1,463	$ 1,459
Other Intangible Assets [Member]
Gross Carrying Amount	6,476	6,476
Accumulated Amortization	(5,279)	(5,278)
Accumulated Impairment	(1,194)	(1,194)
Net Book Value	3	4
Gross Carrying Amount	13,297	13,272
Accumulated Amortization	(10,059)	(10,022)
Accumulated Impairment	(1,277)	(1,277)
Net Book Value	$ 1,961	$ 1,973

XML

Note K - Reclassifications of Accumulated Other Comprehensive Income (Loss), Net of Tax (Details) - USD ($)		3 Months Ended
		Sep. 26, 2015	Sep. 26, 2014
Reclassification out of Accumulated Other Comprehensive Income [Member] | Benefit Plan Adjustment [Member]
Actuarial losses	[1]	$ 1,090,000	$ 768,000
Transition asset and prior service benefit	[1]	9,000	9,000
Total before tax benefit		1,099,000	777,000
Income taxes		411,000	289,000
Net (loss) earnings		$ 688,000	488,000
Income taxes			2,593,000
Net (loss) earnings			$ 4,062,000

[1] These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note G "Pension and Other Postretirement Benefit Plans" for further details).

XML

Note F - Stock-based Compensation (Details Textual) - USD ($)	3 Months Ended		12 Months Ended
	Sep. 25, 2015	Sep. 26, 2014	Jun. 30, 2015
Performance Stock Unit Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	0	15,561
Allocated Share-based Compensation Expense	$ 0	$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Fair Value	0	$ 0
Deferred Compensation Share-based Arrangements, Liability, Current	$ 0		$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period			3 years
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized			13,621
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number	29,855	52,041
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value	$ 27.24
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Share-based Awards Other than Options	$ 359,000
Performance Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	60,466	15,561
Allocated Share-based Compensation Expense	$ 0	$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Fair Value	$ 0	$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years		3 years
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	90,699		14,101
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number	86,415	54,863
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value	$ 19.31
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Share-based Awards Other than Options	$ 1,669,000
Restricted Stock [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	1 year
Restricted Stock [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	68,408	31,122
Allocated Share-based Compensation Expense	$ 355,000	$ 108,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Fair Value	$ 461,000	$ 654,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number	133,379	105,642
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Share-based Awards Other than Options	$ 1,658,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	3 years

XML

Note J - Long-term Debt (Tables)

3 Months Ended

Sep. 25, 2015

Notes Tables

Schedule of Debt [Table Text Block]

	September 25,			June 30,
	2015			2015
Revolving loan	$	10,672		$	10,208
10-year unsecured senior notes		3,571			3,571
Other		24			23
Subtotal		14,267			13,802
Less: current maturities and short-term borrowings		(3,571	)		(3,571	)
Total long-term debt	$	10,696		$	10,231

XML

Note J - Long-term Debt (Details) - USD ($) $ in Thousands	Sep. 25, 2015	Jun. 30, 2015
Revolving Loan [Member]
Long-term debt	$ 10,672	$ 10,208
Ten Year Unsecured Senior Notes [Member]
Long-term debt	3,571	3,571
Other [Member]
Long-term debt	24	23
Long-term debt	14,267	13,802
Less: current maturities and short-term borrowings	(3,571)	(3,571)
Total long-term debt	$ 10,696	$ 10,231

XML

Note I - Goodwill and Other Intangibles (Details Textual) - USD ($)	3 Months Ended
	Sep. 25, 2015	Sep. 26, 2014	Jun. 30, 2015
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	15 years
Amortization of Intangible Assets	$ 37,000	$ 62,000
Indefinite-Lived Intangible Assets (Excluding Goodwill)	$ 208,000		$ 213,000

XML

Note L - Restructuring of Operations (Details Textual)		3 Months Ended				12 Months Ended
	Sep. 25, 2015 USD ($)	Sep. 25, 2015 USD ($)	Jun. 30, 2015 USD ($)	Sep. 27, 2013 USD ($)	Jun. 30, 2013 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)
North American Manufacturing Operations [Member]
Payments for Restructuring		$ 2,089,000				$ 0
Restructuring and Related Cost, Number of Positions Eliminated			79
Restructuring Charges		71,000	$ 3,282,000			3,282,000
Restructuring Reserve	$ 1,264,000	1,264,000
Belgian Operations [Member] | Additional Payment [Member]
Payments for Restructuring		23,000
Belgian Operations [Member]
Payments for Restructuring						156,000	$ 857,000
Restructuring Charges				$ 1,094,000	$ 548,000
Restructuring Reserve	473,000	473,000	$ 494,000			494,000
Restructuring Reserve, Translation Adjustment		$ (2,000)				$ 135,000
Disposal Group, Distribution Rights and Certain Assets [Member] | Proceeds from the Sale of Distribution Rights to Be Amortized into Revenue [Member]
Proceeds from Sale of Intangible Assets	600,000
Disposal Group, Distribution Rights and Certain Assets [Member]
Proceeds from Sale of Other Productive Assets	4,100,000
Gain (Loss) on Disposition of Assets	$ 500,000

XML

Note C - Warranty

3 Months Ended

Sep. 25, 2015

Notes to Financial Statements

Product Warranty Disclosure [Text Block]

C.     Warranty

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 during the quarter ended September 25, 2015 and September 26, 2014 (in thousands):

	Sept. 25,			Sept. 26,
	2015			2014
Reserve balance, beginning of period	$	5,245		$	5,968
Current period (income) expense		(303	)		546
Payments or credits to customers		(721	)		(541	)
Translation		(1	)		(138	)
Reserve balance, end of period	$	4,220		$	5,835

The current portion of the warranty accrual ($2,986,000 and $3,681,000 for fiscal 2016 and 2015, respectively) is reflected in accrued liabilities, while the long-term portion ($1,234,000 and $2,154,000 for fiscal 2016 and 2015, respectively) is included in other long-term liabilities on the consolidated balance sheets.

XML

Note K - Stockholders' Equity (Details Textual)	Sep. 25, 2015 shares
Common Stock [Member]
Stock Repurchase Program, Remaining Number of Shares Authorized to be Repurchased	315,000

XML

Note C - Warranty (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 25, 2015	Sep. 26, 2014
Reserve balance, beginning of period	$ 5,245	$ 5,968
Current period (income) expense	(303)	546
Payments or credits to customers	(721)	(541)
Translation	(1)	(138)
Reserve balance, end of period	$ 4,220	$ 5,835

XML

Note C - Warranty (Details Textual) - USD ($)	Sep. 25, 2015	Jun. 30, 2015
Product Warranty Accrual, Current	$ (2,986,000)	$ (3,681,000)
Product Warranty Accrual, Noncurrent	$ (1,234,000)	$ (2,154,000)

XML

Note K - Shareholders' Equity Reconciliation (Details) - USD ($)	3 Months Ended
	Sep. 25, 2015	Sep. 26, 2014
Common Stock [Member]
Beginning Balance	$ 12,259,000	$ 11,973,000
Net (loss) earnings
Foreign currency translation adjustment
Benefit plan adjustments, net of income taxes of $423 and $290, respectively
Cash dividends
Compensation expense and windfall tax benefits	$ 303,000	$ 77,000
Shares (acquired) issued, net	(1,045,000)	(342,000)
Ending Balance	11,517,000	11,708,000
Retained Earnings [Member]
Beginning Balance	190,807,000	183,695,000
Net (loss) earnings	$ (4,323,000)	$ 4,043,000
Foreign currency translation adjustment
Benefit plan adjustments, net of income taxes of $423 and $290, respectively
Cash dividends	$ (1,019,000)	$ (1,015,000)
Compensation expense and windfall tax benefits
Shares (acquired) issued, net
Ending Balance	$ 185,465,000	$ 186,723,000
AOCI Attributable to Parent [Member]
Beginning Balance	$ (35,481,000)	$ (15,943,000)
Net (loss) earnings
Foreign currency translation adjustment	$ (1,787,000)	$ (4,337,000)
Benefit plan adjustments, net of income taxes of $423 and $290, respectively	$ 739,000	$ 488,000
Cash dividends
Compensation expense and windfall tax benefits
Shares (acquired) issued, net
Ending Balance	$ (36,529,000)	$ (19,792,000)
Treasury Stock [Member]
Beginning Balance	$ (28,057,000)	$ (28,141,000)
Net (loss) earnings
Foreign currency translation adjustment
Benefit plan adjustments, net of income taxes of $423 and $290, respectively
Cash dividends
Compensation expense and windfall tax benefits
Shares (acquired) issued, net	$ 857,000	$ 44,000
Ending Balance	(27,200,000)	(28,097,000)
Noncontrolling Interest [Member]
Beginning Balance	639,000	727,000
Net (loss) earnings	48,000	19,000
Foreign currency translation adjustment	$ (18,000)	$ 9,000
Benefit plan adjustments, net of income taxes of $423 and $290, respectively
Cash dividends	$ (192,000)	$ (219,000)
Compensation expense and windfall tax benefits
Shares (acquired) issued, net
Ending Balance	$ 477,000	$ 536,000
Beginning Balance	140,167,000	152,311,000
Net (loss) earnings	(4,275,000)	4,062,000
Foreign currency translation adjustment	(1,805,000)	(4,328,000)
Benefit plan adjustments, net of income taxes of $423 and $290, respectively	739,000	488,000
Cash dividends	(1,211,000)	(1,234,000)
Compensation expense and windfall tax benefits	303,000	77,000
Shares (acquired) issued, net	(188,000)	(298,000)
Ending Balance	$ 133,730,000	$ 151,078,000

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Note E - Business Segments (Details Textual)	3 Months Ended
	Sep. 25, 2015
Number of Reportable Segments	2

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Note E - Revenues by Segment (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 25, 2015	Sep. 26, 2014
Manufacturing Segment [Member] | Operating Segments [Member]
Sales	$ 29,580	$ 60,274
Earnings	(2,769)	5,171
Manufacturing Segment [Member] | Inter/Intra Segment Elimination [Member]
Sales	(8,477)	(17,394)
Distribution Segment [Member] | Operating Segments [Member]
Sales	20,201	24,011
Earnings	475	1,178
Distribution Segment [Member] | Inter/Intra Segment Elimination [Member]
Sales	(3,931)	(2,067)
Corporate, Non-Segment [Member]
Earnings	(2,029)	(2,306)
Sales	37,373	64,824
Earnings	$ (4,323)	$ 4,043

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Note B - Inventory

3 Months Ended

Sep. 25, 2015

Notes to Financial Statements

Inventory Disclosure [Text Block]

B. Inventory

The major classes of inventories were as follows (in thousands):

	Sept. 25,		June 30,
	2015		2015
Inventories:
Finished parts	$	50,917	$	56,982
Work in process		9,346		8,292
Raw materials		16,784		14,967
	$	77,047	$	80,241

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Note E - Assets by Segment (Details) - USD ($)	Sep. 25, 2015	Jun. 30, 2015
Manufacturing Segment [Member] | Operating Segments [Member]
Assets	$ 238,017,000	$ 254,749,000
Distribution Segment [Member] | Operating Segments [Member]
Assets	52,805,000	53,759,000
Corporate, Non-Segment [Member]
Assets	(55,030,000)	(58,646,000)
Assets	$ 235,792,000	$ 249,862,000

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Note I - Estimated Intangibles (Details) $ in Thousands	Sep. 25, 2015 USD ($)
Fiscal Year
2016	$ 110
2017	142
2018	142
2019	142
2020	142
2021	$ 142

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Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Sep. 25, 2015	Jun. 30, 2015
Current assets:
Cash	$ 23,036,000	$ 22,936,000
Trade accounts receivable, net	31,290,000	43,883,000
Inventories	77,047,000	80,241,000
Deferred income taxes	3,776,000	4,863,000
Other	13,261,000	17,907,000
Total current assets	148,410,000	169,830,000
Property, plant and equipment, net	55,366,000	56,427,000
Goodwill, net	12,779,000	12,789,000
Deferred income taxes	12,931,000	4,878,000
Intangible assets, net	2,169,000	2,186,000
Other assets	4,137,000	3,752,000
Total assets	235,792,000	249,862,000
Current liabilities:
Short-term borrowings and current maturities of long-term debt	3,571,000	3,571,000
Accounts payable	18,418,000	20,729,000
Accrued liabilities	28,946,000	32,754,000
Total current liabilities	50,935,000	57,054,000
Long-term debt	10,696,000	10,231,000
Accrued retirement benefits	37,157,000	38,362,000
Deferred income taxes	1,052,000	1,093,000
Other long-term liabilities	2,222,000	2,955,000
Total liabilities	$ 102,062,000	$ 109,695,000
Commitments and contingencies (Note D)
Twin Disc shareholders' equity:
Preferred shares authorized: 200,000; issued: none; no par value	$ 0	$ 0
Common shares authorized: 30,000,000; issued: 13,099,468; no par value	11,517,000	12,259,000
Retained earnings	185,465,000	190,807,000
Accumulated other comprehensive loss	(36,529,000)	(35,481,000)
Equity before treasury stock	160,453,000	167,585,000
Less treasury stock, at cost (1,776,074 and 1,832,121 shares, respectively)	27,200,000	28,057,000
Total Twin Disc shareholders' equity	133,253,000	139,528,000
Noncontrolling interest	477,000	639,000
Total equity	133,730,000	140,167,000
Total liabilities and equity	$ 235,792,000	$ 249,862,000

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Note K - Accumulated Other Comprehensive income (Loss), Net of Tax (Details) - USD ($)	3 Months Ended
	Sep. 25, 2015	Sep. 26, 2014
Translation Adjustment [Member]
Balance at June 30, 2014	$ 6,740,000	$ 20,779,000
Other comprehensive loss before reclassifications	$ (1,787,000)	$ (4,337,000)
Amounts reclassified from accumulated other comprehensive income
Net current period other comprehensive (loss) income	$ (1,787,000)	$ (4,337,000)
Balance at September 26, 2014	4,953,000	16,442,000
Benefit Plan Adjustment [Member]
Balance at June 30, 2014	(42,221,000)	$ (36,722,000)
Other comprehensive loss before reclassifications	51,000
Amounts reclassified from accumulated other comprehensive income	688,000	$ 488,000
Net current period other comprehensive (loss) income	739,000	488,000
Balance at September 26, 2014	(41,482,000)	$ (36,234,000)
Balance at June 30, 2014	(35,481,000)
Balance at September 26, 2014	$ (36,529,000)

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Condensed Consolidated Statement of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Sep. 25, 2015	Sep. 26, 2014
Cash flows from operating activities:
Net (loss) earnings	$ (4,275,000)	$ 4,062,000
Adjustments to reconcile net (loss) earnings to net cash (used) provided by operating activities:
Depreciation and amortization	2,221,000	2,564,000
Other non-cash changes, net	(6,628,000)	962,000
Net change in operating assets and liabilities	6,310,000	(7,209,000)
Net cash (used) provided by operating activities	(2,372,000)	$ 379,000
Cash flows from investing activities:
Proceeds from sale of business (see Note L)	3,500,000
Proceeds from life insurance policy	1,907,000
Acquisitions of fixed assets	(1,403,000)	$ (2,175,000)
Proceeds from sale of fixed assets	79,000	89,000
Other, net	(185,000)	(166,000)
Net cash provided (used) by investing activities	3,898,000	(2,252,000)
Cash flows from financing activities:
Payments of notes payable	0	(29,000)
Borrowings under revolving loan agreement	22,780,000	21,750,000
Repayments under revolving loan agreement	(22,315,000)	(16,550,000)
Proceeds from exercise of stock options	0	15,000
Dividends paid to shareholders	(1,019,000)	(1,015,000)
Dividends paid to noncontrolling interest	(192,000)	(219,000)
Excess tax benefits (shortfall) from stock compensation	52,000	(31,000)
Payments of withholding taxes on stock compensation	(190,000)	(314,000)
Net cash (used) provided by financing activities	(884,000)	3,607,000
Effect of exchange rate changes on cash	(542,000)	(791,000)
Net change in cash	100,000	943,000
Cash:
Beginning of period	22,936,000	24,757,000
End of period	$ 23,036,000	$ 25,700,000

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Note G - Pension and Other Postretirement Benefit Plans (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 25, 2015	Sep. 26, 2014
Pension Benefits [Member]
Pension Benefits:
Service cost	$ 130	$ 119
Interest cost	1,225	1,222
Expected return on plan assets	(1,692)	(1,681)
Amortization of transition obligation	9	9
Amortization of net loss	908	609
Net periodic benefit cost	580	278
Postretirement Benefits [Member]
Pension Benefits:
Service cost	7	8
Interest cost	151	145
Amortization of net loss	182	159
Net periodic benefit cost	$ 340	$ 312

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Note E - Business Segments (Tables)

3 Months Ended

Sep. 25, 2015

Notes Tables

Reconciliation of Revenue from Segments to Consolidated [Table Text Block]

	For the Quarter Ended
	Sept. 25,			Sept. 26,
	2015			2014
Net sales
Manufacturing segment sales	$	29,580		$	60,274
Distribution segment sales		20,201			24,011
Inter/Intra segment elimination - manufacturing		(8,477	)		(17,394	)
Inter/Intra segment elimination – distribution		(3,931	)		(2,067	)
	$	37,373		$	64,824
Net (loss) earnings attributable to Twin Disc
Manufacturing segment net (loss) earnings	$	(2,769	)	$	5,171
Distribution segment net earnings		475			1,178
Corporate and eliminations		(2,029	)		(2,306	)
	$	(4,323	)	$	4,043

Reconciliation of Assets from Segment to Consolidated [Table Text Block]

	Sept. 25,			June 30,
	2015			2015
Assets
Manufacturing segment assets	$	238,017		$	254,749
Distribution segment assets		52,805			53,759
Corporate assets and elimination of inter‑company assets		(55,030	)		(58,646	)
	$	235,792		$	249,862

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Note H - Income Taxes (Details Textual) - USD ($)	3 Months Ended
	Sep. 25, 2015	Sep. 26, 2014
Italy, Canada, Belgium, and Japan [Member]
Open Tax Years	2011 through 2015
U.S. [Member]
Open Tax Years	subsequent to fiscal 2011
Wisconsin [Member]
Open Tax Years	2010 through 2015
Minnesota [Member] | Scenario, Forecast [Member]
Open Tax Years	2011 through fiscal 2013
Effective Income Tax Rate Reconciliation, Percent	34.10%	39.00%
Income Tax Reconciliation, Difference Between Expected Foreign Earnings and Prior Year's Foreign Earnings	$ 7,300,000
IncomeTaxReconciliationDifferenceBetweenExpectedForeignEarningsAndPriorYearsForeignEarningsPercentage	3.20%
Income Tax Reconciliation Reduction In Non-Deductible Expenses	$ 550,000
Income Tax Reconciliation Reduction In Effective Tax Rate	1.10%
Unrecognized Tax Benefits that Would Impact Effective Tax Rate	$ 895,000

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Note I - Goodwill and Other Intangibles (Tables)

3 Months Ended

Sep. 25, 2015

Notes Tables

Schedule of Goodwill [Table Text Block]

	Gross Carrying Amount			Accumulated Impairment			Net Book Value
Balance at June 30, 2015	$	16,459		$	(3,670	)	$	12,789
Sale of business		(25	)		-			(25	)
Translation adjustment		15			-			15
Balance at September 25, 2015	$	16,449		$	(3,670	)	$	12,779

Schedule of Acquired Finite-Lived Intangible Assets by Major Class [Table Text Block]

	September 25, 2015
	Gross Carrying A mount		Accumulated Amortization			Accumulated Impairment			Net Book Value
Licensing agreements	$	3,015	$	(2,520	)	$	-		$	495
Non-compete agreements		2,128		(2,045	)		(83	)		-
Trade name		1,678		(215	)		-			1,463
Other		6,476		(5,279	)		(1,194	)		3
	$	13,297	$	(10,059	)	$	(1,277	)	$	1,961

	June 30, 2015
	Gross Carrying Amount		Accumulated Amortization			Accumulated Impairment			Net Book Value
Licensing agreements	$	3,015	$	(2,505	)	$	-		$	510
Non-compete agreements		2,128		(2,045	)		(83	)		-
Trade name		1,653		(194	)		-			1,459
Other		6,476		(5,278	)		(1,194	)		4
	$	13,272	$	(10,022	)	$	(1,277	)	$	1,973

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

Fiscal Year
2016	$	110
2017		142
2018		142
2019		142
2020		142
2021		142

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Note A - Basis of Presentation

3 Months Ended

Sep. 25, 2015

Notes to Financial Statements

Basis of Presentation and Significant Accounting Policies [Text Block]

A. Basis of Presentation

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 of normal recurring items, necessary for a fair presentation 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 financial statements 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 for June 30, 2015. The year-end condensed 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.

New Accounting Releases

In April 2015, the Financial Accounting Standards Board (“FASB”) issued guidance intended to amend current presentation guidance by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts.

The amendments in this guidance are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 (the Company’s fiscal 2017). The adoption of this guidance is not expected to have a material impact on the Company’s financial statements and disclosures.

In August 2014, the FASB issued updated guidance intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern. The amendments in this guidance are effective for fiscal years ending after December 15, 2016 (the Company’s fiscal 2017), and interim periods within fiscal years beginning after December 15, 2016. The adoption of this guidance is not expected to have a material impact on the Company’s financial disclosures.

In June 2014, the FASB issued stock compensation guidance requiring that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The amendments in this guidance are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 (the Company’s fiscal 2017). The adoption of this guidance is not expected to have a material impact on the Company’s financial statements and disclosures.

In May 2014, the FASB issued updated guidance on revenue from contracts with customers. This revenue recognition guidance supersedes existing U.S. GAAP guidance, including most industry-specific guidance. The core principle is that an entity should recognize revenue to depict the transfer of 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, 2018 (the Company’s fiscal 2020). The Company is currently evaluating the potential impact of this guidance on the Company’s financial statements and disclosures.

In July 2015, the FASB issued guidance 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 measured under 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. This guidance is to be applied prospectively, and is effective for fiscal years beginning after December 15, 2016 (the Company’s fiscal 2018). The adoption of this guidance is not expected to have a material impact on the Company’s financial statements and disclosures.

In July 2015, the FASB issued guidance to reduce complexity in employee benefit plan accounting, which is consistent with its Simplification Initiative of improving areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. This guidance update consists of several parts that affect the reporting of defined benefit pension plans, defined contribution pension plans, and their fair value measurements, among others. This guidance is effective for fiscal years beginning after December 15, 2015 (the Company’s fiscal 2017). The adoption of this guidance is not expected to have a material impact on the Company’s financial disclosures.

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Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) - $ / shares	Sep. 25, 2015	Jun. 30, 2015
Preferred Shares, Authorized (in shares)	200,000	200,000
Preferred Shares, Issued (in shares)	0	0
Preferred Shares, No Par Value (in dollars per share)	$ 0	$ 0
Common Shares, Authorized (in shares)	30,000,000	30,000,000
Common Shares, Issued (in shares)	13,099,468	13,099,468
Common Shares, No Par Value (in dollars per share)	$ 0	$ 0
Treasury Stock, Shares (in shares)	1,776,074	1,832,121

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Note K - Stockholders' Equity

3 Months Ended

Sep. 25, 2015

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

K. Shareholders’ Equity

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 315,000 shares as of the September 25, 2015 remain authorized for purchase.  The Company did not make any open market purchases of its shares during the current quarter.

The following is a reconciliation of the Company’s equity balances for the first fiscal quarter of 2015 and 2016 (in thousands):

	Twin Disc, Inc. Shareholders’ Equity
							Accumulated
							Other						Non-
	Common			Retained			Comprehensive			Treasury			Controlling			Total
	Stock			Earnings			Income (Loss)			Stock			Interest			Equity
Balance, June 30, 2014	$	11,973		$	183,695		$	(15,943	)	$	(28,141	)	$	727		$	152,311
Net income					4,043									19			4,062
Translation adjustments								(4,337	)					9			(4,328	)
Benefit plan adjustments, net of tax								488									488
Cash dividends					(1,015	)								(219	)		(1,234	)
Compensation expense and windfall tax benefits		77															77
Shares (acquired) issued, net		(342	)								44						(298	)
Balance, September 26, 2014	$	11,708		$	186,723		$	(19,792	)	$	(28,097	)	$	536		$	151,078

	Twin Disc, Inc. Shareholders’ Equity
							Accumulated
							Other						Non-
	Common			Retained			Comprehensive			Treasury			Controlling			Total
	Stock			Earnings			Income (Loss)			Stock			Interest			Equity
Balance, June 30, 2015	$	12,259		$	190,807		$	(35,481	)	$	(28,057	)	$	639		$	140,167
Net (loss) income					(4,323	)								48			(4,275	)
Translation adjustments								(1,787	)					(18	)		(1,805	)
Benefit plan adjustments, net of tax								739									739
Cash dividends					(1,019	)								(192	)		(1,211	)
Compensation expense and windfall tax benefits		303															303
Shares (acquired) issued, net		(1,045	)								857						(188	)
Balance, September 25, 2015	$	11,517		$	185,465		$	(36,529	)	$	(27,200	)	$	477		$	133,730

Reconciliations for the changes in accumulated other comprehensive income (loss), net of tax, by component for the quarter ended September 26, 2014, and September 25, 2015, are as follows:

	Translation Adjustment			Benefit Plan Adjustment
Balance at June 30, 2014	$	20,779		$	(36,722	)
Other comprehensive loss before reclassifications		(4,337	)		-
Amounts reclassified from accumulated other comprehensive income		-			488
Net current period other comprehensive (loss) income		(4,337	)		488
Balance at September 26, 2014	$	16,442		$	(36,234	)

	Translation Adjustment			Benefit Plan Adjustment
Balance at June 30, 2015	$	6,740		$	(42,221	)
Other comprehensive loss before reclassifications		(1,787	)		51
Amounts reclassified from accumulated other comprehensive income		-			688
Net current period other comprehensive (loss) income		(1,787	)		739
Balance at September 25, 2015	$	4,953		$	(41,482	)

Reconciliations for the reclassifications out of accumulated other comprehensive income (loss), net of tax for the quarter ended September 26, 2014 are as follows:

	Amount Reclassified
	Quarter Ended
	September 26, 2014
Amortization of benefit plan items
Actuarial losses	$	768	(a)
Transition asset and prior service benefit		9	(a)
Total before tax benefit		777
Tax benefit		289
Total reclassification net of tax	$	488

(a) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note G "Pension and Other Postretirement Benefit Plans" for further details).

Reconciliations for the reclassifications out of accumulated other comprehensive income (loss), net of tax for the quarter ended September 25, 2015 are as follows:

	Amount Reclassified
	Quarter Ended
	September 25, 2015
Amortization of benefit plan items
Actuarial losses	$	1,090	(a)
Transition asset and prior service benefit		9	(a)
Total before tax benefit		1,099
Tax benefit		411
Total reclassification net of tax	$	688

(a) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note G "Pension and Other Postretirement Benefit Plans" for further details).

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Document And Entity Information - shares	3 Months Ended
	Sep. 25, 2015	Oct. 26, 2015
Entity Registrant Name	TWIN DISC INC
Entity Central Index Key	0000100378
Trading Symbol	twin
Current Fiscal Year End Date	--06-30
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		11,351,924
Document Type	10-Q
Document Period End Date	Sep. 25, 2015
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Amendment Flag	false

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Note L - Restructuring of Operations

3 Months Ended

Sep. 25, 2015

Notes to Financial Statements

Restructuring, Impairment, and Other Activities Disclosure [Text Block]

L. Restructuring of Operations

On September 25, 2015, the Company, as part of its initiative to focus resources on core manufacturing and product development activities aimed at improving profitability, entered into an asset purchase agreement with one of its major distributor customers. Under this agreement, the Company sold distribution rights to its southeastern U.S. territories and certain assets, consisting primarily of inventories, for $4,100,000. The proceeds from the sale of distribution rights of $600,000 are deferred and will be amortized into revenue through June 2016, the initial term of the distribution agreement. The gain on sale of $500,000 is recorded as other operating income in the statement of operations in fiscal 2016. This gain is subject to purchase price adjustment, under the terms of the agreement. Any adjustments to this amount will be recorded in the quarter in which it is determined.

During the fourth quarter of fiscal 2015, the Company committed to a restructuring plan to reduce costs and improve efficiencies at its North American manufacturing operations.

This restructuring resulted in a reduction of 79 people through a combination of early retirement and reduction in force. The restructuring was meant to be a proactive measure to offset the impact low oil and gas prices had on the demand from its customers.

The Company recorded a pre-tax restructuring charge of $3,282,000 in the fourth quarter of fiscal 2015, upon announcement of the intended restructuring action. During fiscal 2015, the Company made no cash payments, resulting in an accrual balance of $3,282,000 at June 30, 2015. The Company made payments of $2,089,000 and recorded $71,000 additional expense in the first quarter of fiscal 2016, resulting in a September 25, 2015 balance of $1,264,000.

During the first quarter of fiscal 2014, the Company recorded a pre-tax restructuring charge of $1,094,000 representing the incremental cost above the minimum legal indemnity for a targeted workforce reduction at its Belgian operation, following finalization of negotiations with the local labor union. The minimum legal indemnity of $548,000 was recorded in the fourth quarter of fiscal 2013, upon announcement of the intended restructuring action. During fiscal 2014 and fiscal 2015, the Company made cash payments of $857,000 and $156,000, respectively, resulting in a June 30, 2015 balance of $494,000 after a favorable foreign exchange impact of $135,000. The Company made additional payments of $23,000 in the first quarter of fiscal 2016, resulting in a September 25, 2015 balance of $473,000 after an unfavorable foreign exchange impact of $2,000. This remaining obligation relates to increased pension benefits agreed to as part of the restructuring and is expected to be paid out over the next several years.

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Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited) - USD ($) shares in Thousands	3 Months Ended
	Sep. 25, 2015	Sep. 26, 2014
Net sales	$ 37,373,000	$ 64,824,000
Cost of goods sold	29,183,000	42,435,000
Gross profit	8,190,000	22,389,000
Marketing, engineering and administrative expenses	15,240,000	$ 15,910,000
Other operating income	(500,000)
(Loss) earnings from operations	(6,550,000)	$ 6,479,000
Interest expense	91,000	164,000
Other (income) expense, net	(158,000)	(340,000)
Non-operating income (expense)	(67,000)	(176,000)
(Loss) earnings before income taxes and noncontrolling interest	(6,483,000)	6,655,000
Income taxes	(2,208,000)	2,593,000
Net (loss) earnings	(4,275,000)	4,062,000
Less: Net earnings attributable to noncontrolling interest, net of tax	(48,000)	(19,000)
Net (loss) earnings attributable to Twin Disc	$ (4,323,000)	$ 4,043,000
Dividends per share (in dollars per share)	$ 0.09	$ 0.09
(Loss) earnings per share data:
Basic (loss) earnings per share attributable to Twin Disc common shareholders (in dollars per share)	(0.39)	0.36
Diluted (loss) earnings per share attributable to Twin Disc common shareholders (in dollars per share)	$ (0.39)	$ 0.36
Weighted average shares outstanding data:
Basic shares outstanding (in shares)	11,313	11,270
Dilutive stock awards (in shares)		6
Diluted shares outstanding (in shares)	11,313	11,276
Comprehensive income:
Net (loss) earnings	$ (4,275,000)	$ 4,062,000
Benefit plan adjustments, net of income taxes of $423 and $290, respectively	739,000	488,000
Foreign currency translation adjustment	(1,805,000)	(4,328,000)
Comprehensive (loss) income	(5,341,000)	222,000
Less: Comprehensive income attributable to noncontrolling interest	(29,000)	(28,000)
Comprehensive (loss) income attributable to Twin Disc	$ (5,370,000)	$ 194,000

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Note F - Stock-based Compensation

3 Months Ended

Sep. 25, 2015

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

F. Stock-Based Compensation

Performance Stock Awards (“PSA”)

During the first quarter of fiscal 2016 and 2015, the Company granted a target number of 60,466 and 15,561 PSAs, respectively, to various employees of the Company, including executive officers. The fiscal 2016 PSAs will vest if the Company achieves (a) performance-based target objectives relating to average annual sales and consolidated economic profit, and (b) relative Total Shareholder Return (“TSR”) (as defined in the PSA Grant Agreement), in the cumulative three fiscal year period ending June 30, 2018. These PSAs are subject to adjustment if the Company’s net sales, economic profit and relative TSR for the period 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 90,699. Based upon actual results to date and the low probability of achieving the threshold performance levels, the Company is currently not accruing as compensation expense for the portion of the PSAs relating to the performance-based measure. Compensation expense relating to the relative TSR portion is recognized based on the grant date fair value over the vesting period.

The fiscal 2015 PSAs will vest if the Company achieves a specified target objective relating to consolidated economic profit (as defined in the PSA Grant Agreement) in the cumulative three fiscal year period ending June 30, 2017. These PSAs are subject to adjustment if the Company’s economic profit for the period 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 14,101. 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.

There were 86,415 and 54,863 unvested PSAs outstanding at September 25, 2015 and September 26, 2014, 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. There was no compensation expense for the quarters ended September 25, 2015 and September 26, 2014, related to PSAs. The weighted average grant date fair value of the unvested awards at September 25, 2015 was $19.31. At September 25, 2015, the Company had $1,669,000 of unrecognized compensation expense related to the unvested shares that would vest if the specified target objective was achieved for the fiscal 2016, 2015 and 2014 awards. The total fair value of PSAs vested as of September 25, 2015 and September 26, 2014 were $0.

Performance Stock Unit Awards (“PSU”)

During the first quarter of fiscal 2015, the Company granted a target number of 15,561 PSUs to various employees of the Company, including executive officers. There were no grants of PSUs during the first quarter of fiscal 2016. The fiscal 2015 PSUs will vest if the Company achieves a specified target objective relating to consolidated economic profit (as defined in the PSU Grant Agreement) in the cumulative three fiscal year period ending June 30, 2017. These PSUs are subject to adjustment if the Company’s economic profit for the period falls below or exceeds the specified target objective, and the maximum number of PSUs that can be awarded if the target objective is exceeded is 13,621. 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 the fiscal 2015 PSUs.

There were 29,855 and 52,041 unvested PSUs outstanding at September 25, 2015 and September 26, 2014, respectively. The weighted average grant date fair value of the unvested awards at September 25, 2015 was $27.24. PSUs are remeasured at fair-value based upon the Company’s stock price at the end of each reporting period. The fair-value of the PSUs is expensed over the performance period for the shares that are expected to ultimately vest. There was no compensation expense for the quarters ended September 25, 2015 and September 26, 2014, related to PSUs. At September 25, 2015, the Company had $359,000 of unrecognized compensation expense related to the unvested shares that would vest if the specified target objective was achieved for the fiscal 2015 and 2014 awards. The total fair value of PSU awards vested as of September 25, 2015 and September 26, 2014 were $0. The PSU awards are cash based, and would therefore be recorded as a liability on the Company’s consolidated balance sheets. As of September 25, 2015 and June 30, 2015, there were no awards included in liabilities in our consolidated balance sheets due to actual results to date and the low probability of achieving any of the threshold performance levels.

Restricted Stock Awards (“RS”)

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 quarter of fiscal 2016 and 2015, the Company granted 68,408 and 31,122 service based restricted shares, respectively, to employees in each year. There were 133,379 and 105,642 unvested shares outstanding at September 25, 2015 and September 26, 2014, respectively. Compensation expense of $355,000 and $108,000 was recognized for the quarters ended September 25, 2015 and September 26, 2014, respectively. The total fair value of restricted stock grants vested as of September 25, 2015 and September 26, 2014 was $461,000 and $654,000, respectively. As of September 25, 2015, the Company had $1,658,000 of unrecognized compensation expense related to restricted stock which will be recognized over the next three years.

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Note E - Business Segments

3 Months Ended

Sep. 25, 2015

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

E.     Business Segments

The Company and its subsidiaries are engaged in the manufacture and sale of marine and heavy-duty off-highway power transmission equipment. Principal products include marine transmissions, 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 has two reportable segments: manufacturing and distribution. These segments are managed separately because each provides different services and requires different technology and marketing strategies. 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.

Information about the Company’s segments is summarized as follows (in thousands):

	For the Quarter Ended
	Sept. 25,			Sept. 26,
	2015			2014
Net sales
Manufacturing segment sales	$	29,580		$	60,274
Distribution segment sales		20,201			24,011
Inter/Intra segment elimination - manufacturing		(8,477	)		(17,394	)
Inter/Intra segment elimination – distribution		(3,931	)		(2,067	)
	$	37,373		$	64,824
Net (loss) earnings attributable to Twin Disc
Manufacturing segment net (loss) earnings	$	(2,769	)	$	5,171
Distribution segment net earnings		475			1,178
Corporate and eliminations		(2,029	)		(2,306	)
	$	(4,323	)	$	4,043

	Sept. 25,			June 30,
	2015			2015
Assets
Manufacturing segment assets	$	238,017		$	254,749
Distribution segment assets		52,805			53,759
Corporate assets and elimination of inter‑company assets		(55,030	)		(58,646	)
	$	235,792		$	249,862

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Note G - Pension and Other Postretirement Benefit Plans (Tables)

3 Months Ended

Sep. 25, 2015

Notes Tables

Schedule of Net Benefit Costs [Table Text Block]

	For the Quarter Ended
	Sept. 25,			Sept. 26,
	2015			2014
Pension Benefits:
Service cost	$	130		$	119
Interest cost		1,225			1,222
Expected return on plan assets		(1,692	)		(1,681	)
Amortization of transition obligation		9			9
Amortization of net loss		908			609
Net periodic benefit cost	$	580		$	278
Postretirement Benefits:
Service cost	$	7		$	8
Interest cost		151			145
Amortization of net actuarial loss		182			159
Net periodic benefit cost	$	340		$	312

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Significant Accounting Policies (Policies)

3 Months Ended

Sep. 25, 2015

Accounting Policies [Abstract]

New Accounting Pronouncements, Policy [Policy Text Block]

New Accounting Releases

In April 2015, the Financial Accounting Standards Board (“FASB”) issued guidance intended to amend current presentation guidance by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts.

The amendments in this guidance are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 (the Company’s fiscal 2017). The adoption of this guidance is not expected to have a material impact on the Company’s financial statements and disclosures.

In August 2014, the FASB issued updated guidance intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern. The amendments in this guidance are effective for fiscal years ending after December 15, 2016 (the Company’s fiscal 2017), and interim periods within fiscal years beginning after December 15, 2016. The adoption of this guidance is not expected to have a material impact on the Company’s financial disclosures.

In June 2014, the FASB issued stock compensation guidance requiring that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The amendments in this guidance are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 (the Company’s fiscal 2017). The adoption of this guidance is not expected to have a material impact on the Company’s financial statements and disclosures.

In May 2014, the FASB issued updated guidance on revenue from contracts with customers. This revenue recognition guidance supersedes existing U.S. GAAP guidance, including most industry-specific guidance. The core principle is that an entity should recognize revenue to depict the transfer of 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, 2018 (the Company’s fiscal 2020). The Company is currently evaluating the potential impact of this guidance on the Company’s financial statements and disclosures.

In July 2015, the FASB issued guidance 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 measured under 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. This guidance is to be applied prospectively, and is effective for fiscal years beginning after December 15, 2016 (the Company’s fiscal 2018). The adoption of this guidance is not expected to have a material impact on the Company’s financial statements and disclosures.

In July 2015, the FASB issued guidance to reduce complexity in employee benefit plan accounting, which is consistent with its Simplification Initiative of improving areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. This guidance update consists of several parts that affect the reporting of defined benefit pension plans, defined contribution pension plans, and their fair value measurements, among others. This guidance is effective for fiscal years beginning after December 15, 2015 (the Company’s fiscal 2017). The adoption of this guidance is not expected to have a material impact on the Company’s financial disclosures.

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Note I - Goodwill and Other Intangibles

3 Months Ended

Sep. 25, 2015

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

I.     Goodwill and Other Intangibles

The changes in the carrying amount of goodwill, all of which is allocated to the manufacturing segment, for the quarter ended September 25, 2015 were as follows (in thousands):

	Gross Carrying Amount			Accumulated Impairment			Net Book Value
Balance at June 30, 2015	$	16,459		$	(3,670	)	$	12,789
Sale of business		(25	)		-			(25	)
Translation adjustment		15			-			15
Balance at September 25, 2015	$	16,449		$	(3,670	)	$	12,779

The gross carrying amount and accumulated amortization of the Company’s intangible assets that have defined useful lives and are subject to amortization as of September 25, 2015 and June 30, 2015 were as follows (in thousands):

	September 25, 2015
	Gross Carrying A mount		Accumulated Amortization			Accumulated Impairment			Net Book Value
Licensing agreements	$	3,015	$	(2,520	)	$	-		$	495
Non-compete agreements		2,128		(2,045	)		(83	)		-
Trade name		1,678		(215	)		-			1,463
Other		6,476		(5,279	)		(1,194	)		3
	$	13,297	$	(10,059	)	$	(1,277	)	$	1,961

	June 30, 2015
	Gross Carrying Amount		Accumulated Amortization			Accumulated Impairment			Net Book Value
Licensing agreements	$	3,015	$	(2,505	)	$	-		$	510
Non-compete agreements		2,128		(2,045	)		(83	)		-
Trade name		1,653		(194	)		-			1,459
Other		6,476		(5,278	)		(1,194	)		4
	$	13,272	$	(10,022	)	$	(1,277	)	$	1,973

The weighted average remaining useful life of the intangible assets included in the table above is approximately 15 years.

Intangible amortization expense was $37,000 for the quarter ended September 25, 2015, and $62,000 for the quarter ended September 26, 2014, respectively. Estimated intangible amortization expense for the remainder of fiscal 2016 and each of the next

five fiscal years is as follows (in thousands):

Fiscal Year
2016	$	110
2017		142
2018		142
2019		142
2020		142
2021		142

The gross carrying amount of the Company’s intangible assets that have indefinite lives and are not subject to amortization as of September 25, 2015 and June 30, 2015 are $208,000 and $213,000, respectively. These assets are comprised of acquired trade names.

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Note G - Pension and Other Postretirement Benefit Plans

3 Months Ended

Sep. 25, 2015

Notes to Financial Statements

Pension and Other Postretirement Benefits Disclosure [Text Block]

G.     Pension and Other Postretirement Benefit Plans

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 and life insurance benefits for certain domestic retirees. Components of net periodic benefit cost for the defined benefit pension plans and the other postretirement benefit plan are as follows (in thousands):

	For the Quarter Ended
	Sept. 25,			Sept. 26,
	2015			2014
Pension Benefits:
Service cost	$	130		$	119
Interest cost		1,225			1,222
Expected return on plan assets		(1,692	)		(1,681	)
Amortization of transition obligation		9			9
Amortization of net loss		908			609
Net periodic benefit cost	$	580		$	278
Postretirement Benefits:
Service cost	$	7		$	8
Interest cost		151			145
Amortization of net actuarial loss		182			159
Net periodic benefit cost	$	340		$	312

The Company expects to contribute approximately $2,240,000 to its pension plans in fiscal 2016. As of September 25, 2015, $869,000 in contributions have been made.

The Company has reclassified $739,000 (net of $423,000 in taxes) of benefit plan adjustments from accumulated other comprehensive loss during the quarter ended September 25, 2015. The Company has reclassified $488,000 (net of $290,000 in taxes) of benefit plan adjustments from accumulated other comprehensive loss during the quarter ended September 26, 2014. These reclassifications are included in the computation of net periodic benefit cost.

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Note H - Income Taxes

3 Months Ended

Sep. 25, 2015

Notes to Financial Statements

Income Tax Disclosure [Text Block]

H. Income Taxes

For the quarters ended September 25, 2015 and September 26, 2014, the Company’s effective income tax rate was 34.1% and 39.0% respectively. Expected foreign earnings are lower compared to prior year by $7,300,000. This resulted in lower foreign income inclusions and foreign tax credits, reducing the effective tax rate by 3.2%. Overall non-deductible expenses decreased by $550,000, reducing the effective tax rate by an additional 1.1%. The first quarter of fiscal 2016 rate reflects the impact of an expected domestic loss this year.

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 recent operating losses in a foreign jurisdiction, the Company has evaluated the realizability of the net deferred tax assets related to that jurisdiction. This evaluation concluded that, based primarily upon recent losses in this jurisdiction and failure to achieve targeted levels of improvement, a full valuation allowance continues to be necessary.

The Company has not provided for additional U.S. income taxes on cumulative earnings of consolidated foreign subsidiaries that are considered to be reinvested indefinitely. The Company reaffirms its position that these earnings remain permanently invested, and has no plans to repatriate funds to the U.S. for the foreseeable future. Such earnings could become taxable upon the sale or liquidation of these foreign subsidiaries or upon dividend repatriation.

Accounting policies for interim reporting require the Company to adjust its effective tax rate each quarter to be consistent with the estimated annual effective tax rate. Under this effective tax rate methodology, the Company applies an estimated annual income tax rate to its year-to-date ordinary earnings to derive its income tax provision each quarter. The impact of the Company’s operations in certain foreign locations is removed from the overall effective tax rate methodology and recorded directly based upon year-to-date results as these operations anticipate net operating losses for the year for which no tax benefit can be recognized.

The Company has approximately $895,000 of unrecognized tax benefits, including related interest and penalties, as of September 25, 2015, which, if recognized, would favorably impact the effective tax rate. There was no significant change 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 September 25, 2015. It appears possible that the amount of unrecognized tax benefits could change in the next twelve months due to on-going audit activity.

Annually, the Company files income tax returns in various taxing jurisdictions inside and outside the United States.  In general, the tax years that remain subject to examination are 2011 through 2015 for the major operations in Italy, Canada, Belgium, and Japan.  The tax years open to examination in the U.S. are for years subsequent to fiscal 2011. The state of Wisconsin income tax audit remains ongoing for the fiscal years 2010 through 2015. In the upcoming quarter the Company will commence an income tax audit by the state of Minnesota covering the period fiscal 2011 through fiscal 2013. During this quarter, the Company was notified and began an audit in Belgium. It is reasonably possible that at least one of these audit cycles will be completed during fiscal 2016.

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Note J - Long-term Debt

3 Months Ended

Sep. 25, 2015

Notes to Financial Statements

Debt Disclosure [Text Block]

J. Long-term Debt

Long-term debt at September 25, 2015 and June 30, 2015 consisted of the following (in thousands):

	September 25,			June 30,
	2015			2015
Revolving loan	$	10,672		$	10,208
10-year unsecured senior notes		3,571			3,571
Other		24			23
Subtotal		14,267			13,802
Less: current maturities and short-term borrowings		(3,571	)		(3,571	)
Total long-term debt	$	10,696		$	10,231

The revolving loan and unsecured senior notes listed above are subject to certain covenants, including restrictions on investments, acquisitions and indebtedness. Financial covenants, as defined, include a minimum consolidated net worth, a minimum EBITDA for the most recent four fiscal quarters, and a maximum total funded debt to EBITDA ratio. As of September 25, 2015, the Company was in compliance with these covenants.

The fair value of long-term debt is estimated by discounting the future cash flows at rates offered to the Company for similar debt instruments of comparable maturities. This rate was represented by the US Treasury Three-Year Yield Curve Rate (1.00% and 1.01% for September 25, 2015 and June 30, 2015, respectively), plus the current add-on related to the revolving loan agreement (1.00% for September 25, 2015 and June 30, 2015) resulting in a total rate of 2.00% and 2.01% for September 26, 2015 and June 30, 2015, respectively. The fair value of the Company’s 10-year unsecured senior notes due April 10, 2016 was approximately $3,691,000 and $3,726,000 at September 26, 2015 and June 30, 2015, respectively. The Company’s revolving loan agreement approximates fair value at September 25, 2015 and June 30, 2015. 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.

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Note G - Pension and Other Postretirement Benefit Plans (Details Textual) - USD ($)	3 Months Ended
	Sep. 25, 2015	Sep. 26, 2014
Defined Benefit Plans, Estimated Future Employer Contributions in Next Fiscal Year	$ 2,240,000
Defined Benefit Plan, Contributions by Employer	869,000
Other Comprehensive (Income) Loss, Amortization Adjustment from AOCI, Pension and Other Postretirement Benefit Plans, for Net Prior Service Cost (Credit), Net of Tax	739,000	$ 488,000
Other Comprehensive (Income) Loss, Amortization Adjustment from AOCI, Pension and Other Postretirement Benefit Plans, for Net Prior Service Cost (Credit), Tax	$ 423,000	$ 290,000

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Note C - Warranty (Tables)

3 Months Ended

Sep. 25, 2015

Notes Tables

Schedule of Product Warranty Liability [Table Text Block]

	Sept. 25,			Sept. 26,
	2015			2014
Reserve balance, beginning of period	$	5,245		$	5,968
Current period (income) expense		(303	)		546
Payments or credits to customers		(721	)		(541	)
Translation		(1	)		(138	)
Reserve balance, end of period	$	4,220		$	5,835

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Note K - Stockholders' Equity (Tables)

3 Months Ended

Sep. 25, 2015

Notes Tables

Schedule of Stockholders Equity [Table Text Block]

	Twin Disc, Inc. Shareholders’ Equity
							Accumulated
							Other						Non-
	Common			Retained			Comprehensive			Treasury			Controlling			Total
	Stock			Earnings			Income (Loss)			Stock			Interest			Equity
Balance, June 30, 2014	$	11,973		$	183,695		$	(15,943	)	$	(28,141	)	$	727		$	152,311
Net income					4,043									19			4,062
Translation adjustments								(4,337	)					9			(4,328	)
Benefit plan adjustments, net of tax								488									488
Cash dividends					(1,015	)								(219	)		(1,234	)
Compensation expense and windfall tax benefits		77															77
Shares (acquired) issued, net		(342	)								44						(298	)
Balance, September 26, 2014	$	11,708		$	186,723		$	(19,792	)	$	(28,097	)	$	536		$	151,078

	Twin Disc, Inc. Shareholders’ Equity
							Accumulated
							Other						Non-
	Common			Retained			Comprehensive			Treasury			Controlling			Total
	Stock			Earnings			Income (Loss)			Stock			Interest			Equity
Balance, June 30, 2015	$	12,259		$	190,807		$	(35,481	)	$	(28,057	)	$	639		$	140,167
Net (loss) income					(4,323	)								48			(4,275	)
Translation adjustments								(1,787	)					(18	)		(1,805	)
Benefit plan adjustments, net of tax								739									739
Cash dividends					(1,019	)								(192	)		(1,211	)
Compensation expense and windfall tax benefits		303															303
Shares (acquired) issued, net		(1,045	)								857						(188	)
Balance, September 25, 2015	$	11,517		$	185,465		$	(36,529	)	$	(27,200	)	$	477		$	133,730

Reconciliation For The Changes In Accumulated Other Comprehensive Income Loss Net Of Tax By Component [TableTextBlock]

	Translation Adjustment			Benefit Plan Adjustment
Balance at June 30, 2014	$	20,779		$	(36,722	)
Other comprehensive loss before reclassifications		(4,337	)		-
Amounts reclassified from accumulated other comprehensive income		-			488
Net current period other comprehensive (loss) income		(4,337	)		488
Balance at September 26, 2014	$	16,442		$	(36,234	)

	Translation Adjustment			Benefit Plan Adjustment
Balance at June 30, 2015	$	6,740		$	(42,221	)
Other comprehensive loss before reclassifications		(1,787	)		51
Amounts reclassified from accumulated other comprehensive income		-			688
Net current period other comprehensive (loss) income		(1,787	)		739
Balance at September 25, 2015	$	4,953		$	(41,482	)

Reclassification out of Accumulated Other Comprehensive Income [Table Text Block]

	Amount Reclassified
	Quarter Ended
	September 26, 2014
Amortization of benefit plan items
Actuarial losses	$	768	(a)
Transition asset and prior service benefit		9	(a)
Total before tax benefit		777
Tax benefit		289
Total reclassification net of tax	$	488

	Amount Reclassified
	Quarter Ended
	September 25, 2015
Amortization of benefit plan items
Actuarial losses	$	1,090	(a)
Transition asset and prior service benefit		9	(a)
Total before tax benefit		1,099
Tax benefit		411
Total reclassification net of tax	$	688

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Note J - Long-term Debt (Details Textual)	3 Months Ended	12 Months Ended
	Sep. 25, 2015 USD ($)	Jun. 30, 2015 USD ($)
Ten Year Unsecured Senior Notes [Member]
Debt Instrument, Maturity Date	Apr. 10, 2016
Debt Instrument, Term	10 years
Long-term Debt, Fair Value	$ 3,691,000	$ 3,726,000
Debt Instrument, Basis Spread on Variable Rate	1.00%	1.00%
Number Of Recent Quarters Considered For Minimum Effective Interest Rate	4
Fair Value Assumptions, Risk Free Interest Rate	1.00%	1.01%
Debt Instrument, Interest Rate, Effective Percentage	2.00%	2.01%

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Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited) (Parentheticals) - USD ($) $ in Thousands	3 Months Ended
	Sep. 25, 2015	Sep. 26, 2014
Benefit plan adjustments, Tax	$ 423	$ 290

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Note D - Contingencies

3 Months Ended

Sep. 25, 2015

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

D. Contingencies

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’s results of operations, financial position or cash flows.

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Note B - Inventory (Details) - USD ($) $ in Thousands	Sep. 25, 2015	Jun. 30, 2015
Inventories:
Finished parts	$ 50,917	$ 56,982
Work in process	9,346	8,292
Raw materials	16,784	14,967
Total inventories	$ 77,047	$ 80,241

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Note I - Goodwill Rollforward (Details) $ in Thousands	3 Months Ended
	Sep. 25, 2015 USD ($)
Beginning Balance	$ 16,459
Beginning Balance	(3,670)
Beginning Balance	12,789
Sale of business	(25)
Translation adjustment	15
Ending Balance	16,449
Ending Balance	(3,670)
Ending Balance	$ 12,779

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Note B - Inventory (Tables)

3 Months Ended

Sep. 25, 2015

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	Sept. 25,		June 30,
	2015		2015
Inventories:
Finished parts	$	50,917	$	56,982
Work in process		9,346		8,292
Raw materials		16,784		14,967
	$	77,047	$	80,241