Note L - Stock-based Compensation

12 Months Ended

Jun. 30, 2024

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

L. STOCK-BASED COMPENSATION

In fiscal 2022, the Company adopted the Twin Disc, Incorporated 2021 Long-Term Incentive Plan (the “2021 LTI Plan”). Benefits under the 2021 LTI Plan may be granted, awarded or paid in any one or a combination of stock options, stock appreciation rights, restricted stock awards, restricted stock units, cash-settled restricted stock units, performance stock awards, performance stock unit awards, performance unit awards, and dividend equivalent awards. There is reserved for issuance under the Plan an aggregate of 715,000 shares of the Company’s common stock, which may be authorized and unissued shares or shares reacquired by the Company in the open market or a combination of both. The aggregate amount is subject to proportionate adjustments for stock dividends, stock splits and similar changes.

In fiscal 2021, the Company adopted the Twin Disc, Incorporated 2020 Stock Incentive Plan for Non-Employee Directors (the “2020 Directors' Plan”) a plan to grant non-employee directors’ equity-based awards. Benefits under the 2020 Directors’ Plan may be granted, awarded or paid in any one or a combination of stock options, restricted stock awards, or cash-settled restricted stock units. Under the 2020 Directors’ Plan, non-employee directors may elect to receive all or a portion of their base cash retainer in the form of restricted stock. There is reserved for issuance under the 2020 Directors’ Plan an aggregate of 750,000 shares of the Company's common stock, which may be authorized and unissued shares or shares reacquired by the Company in the open market or a combination of both. The aggregate amount is subject to proportionate adjustments for stock dividends, stock splits and similar changes.

Shares available for future awards as of June 30 were as follows (assuming that outstanding performance awards are issued at the target level of performance):

	2024		2023
2020 Directors' Plan		521,550		560,531
2021 LTI Plan		41,439		233,270

Performance Stock Awards (“PSA”)

In fiscal 2024 and 2023, the Company granted a target number of 119,349 and 118,131 PSAs, respectively, to various employees of the Company, including executive officers.

The PSAs granted in fiscal 2024 will vest if the Company achieves performance-based target objectives relating to average return on invested capital and cumulative EBITDA (as defined in the PSA Grant Agreement), in the cumulative three fiscal year period ending June 30, 2026. These PSAs are subject to adjustment if the Company’s return on invested capital and cumulative EBITDA falls below or exceeds the specified target objective, and the maximum number of performance shares that can be awarded if the target objective is exceeded is 238,698. Based upon actual results to date, the Company is currently accruing compensation expense for these PSAs.

The PSAs granted in fiscal 2023 will vest if the Company achieves performance-based target objectives relating to average return on invested capital and cumulative EBITDA (as defined in the PSA Grant Agreement), in the cumulative three fiscal year period ending June 30, 2025. These PSAs are subject to adjustment if the Company’s return on invested capital and cumulative EBITDA falls below or exceeds the specified target objective, and the maximum number of performance shares that can be awarded if the target objective is exceeded is 234,166. Based upon actual results to date, the Company is currently accruing compensation expense for these PSAs.

There were 233,861 and 437,862 unvested PSAs outstanding at June 30, 2024 and 2023, respectively. The fair value of the PSAs (on the date of grant) is expensed over the performance period for the shares that are expected to ultimately vest. The compensation expense for the year ended June 30, 2024 and 2023, related PSAs, was $1,648 and $1,218, respectively. The tax benefit from compensation expense for the year ended June 30, 2024 and 2023, related to PSAs, was $386 and $286, respectively. The weighted average grant date fair value of the unvested awards at June 30, 2024 was $11.81. At June 30, 2024, the Company had $1,327 of unrecognized compensation expense related to the unvested shares that would vest if the specified target objective was achieved for the fiscal 2024 and 2023 awards. The total fair value of performance stock awards vested in fiscal 2024 and fiscal 2023 was $1,659.

Performance Stock Unit Awards (“PSUA”)

The PSUAs entitle an individual to shares of common stock of the Company or cash in lieu of shares of Company common stock if specific terms and conditions or restrictions are met through a specified date. During fiscal 2024 and 2023 , the Company granted a target number of 10.5 and 0 PSUAs, respectively, to various individuals in the Company. The fiscal 2024 PSUAs will vest if the Company achieves performance-based target objectives relating to average return on invested capital and cumulative EBITDA (as defined in the PSUA Grant Agreement), in the cumulative three fiscal year period ending June 30, 2026. These PSUAs are subject to adjustment if the Company’s return on invested capital and cumulative EBITDA falls below or exceeds the specified target objective, and the maximum number of performance shares that can be awarded if the target objective is exceeded is 20.9. The compensation expense for the year ended June 30, 2024 and 2023, related PSAs, was $40 and $0, respectively.

Restricted Stock Awards (“RS”)

The Company has unvested RS outstanding that will vest if certain service conditions are fulfilled. The fair value of the RS grants is recorded as compensation over the vesting period, which is generally 1 to 3 years. During fiscal 2024 and 2023, the Company granted 118,544 and 179,959 service-based restricted shares, respectively, to employees and non-employee directors in each year. A total of 2,413 and 0 shares of restricted stock were forfeited during fiscal 2024 and 2023, respectively. There were 308,564 and 272,438 unvested shares outstanding at June 30, 2024 and 2023, respectively. Compensation expense of $1,265 and $1,317 was recognized during the year ended June 30, 2024 and 2023, respectively, related to these service-based awards. The tax benefit from compensation expense for the year ended June 30, 2024 and 2023, related to these service-based awards, was $297 and $309, respectively. The total fair value of restricted stock grants vested in fiscal 2024 and 2023 was $2,345 and $1,699, respectively. As of June 30, 2024, the Company had $1,280 of unrecognized compensation expense related to restricted stock which will be recognized over the next three years.

Restricted Stock Unit Awards (“RSU”)

In fiscal 2024 and 2023, the Company granted 7,089 and 72,376 RSUs, respectively, to various employees of the Company, including executive officers.

The RSUs granted in fiscal 2023 will vest if the employee remains employed by the Company through a specified date from the date of grant. The fair value of the RSUs (on the date of grant) is recorded as compensation expense over the vesting period.

The RSUs granted in fiscal 2023 will vest if the employee remains employed by the Company through June 30, 2025 and if the Company achieves performance-based target objectives relating to average return on invested capital and cumulative EBITDA (as defined in the RSU Grant Agreement), in the cumulative three fiscal year period ending June 30, 2025. These RSUs are subject to adjustment if the Company’s return on invested capital and cumulative EBITDA falls below or exceeds the specified target objective, and the maximum number of shares that can be earned if the target objective is exceeded is 144,752. Based upon actual results to date, the Company is currently accruing compensation expense for these RSUs.

There were 134,989 and 130,163 unvested RSUs outstanding at June 30, 2024 and June 30, 2023, respectively. Compensation expense of $496 and $461 was recognized during the year ended June 30, 2024 and 2023, respectively. The tax benefit from compensation expense for the year ended June 30, 2024 and 2023, related to these service-based awards, was $116 and $108, respectively. The weighted average grant date fair value of the unvested awards at June 30, 2024 was $10.97. As of June 30, 2024, the Company had $287 of unrecognized compensation expense related to RSUs which will be recognized over the next year.