<PAGE> 1
                                UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                           Washington, D. C.  20549
                           ------------------------
                                  FORM 10-K
                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) 
                   OF THE SECURITIES EXCHANGE ACT OF 1934
                ---------------------------------------------  
                  For the Fiscal Year Ended June 30, 2002
                       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 Number)

1328 Racine Street, Racine, Wisconsin                     53403
-------------------------------------         -------------------------------
(Address of Principal Executive Office)                (Zip Code)

Registrant's Telephone Number, including area code:  (262)638-4000

Securities registered pursuant to Section 12(b) of the Act:

  Title of each class               Name of each exchange on which registered:
Common stock, no par value                    New York Stock Exchange
--------------------------          -----------------------------------------
Securities registered pursuant to Section 12(g) of the Act: 

                          Common stock, no par value
----------------------------------------------------------------------------- 
                               (Title of Class)

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   X    No     

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X].

At August 30, 2002, the aggregate market value of the common stock held by
non-affiliates of the registrant was $38,607,690.  Determination of stock
ownership by affiliates was made solely for the purpose of responding to this
requirement and registrant is not bound by this determination for any other
purpose.

At August 30, 2002, the registrant had 2,807,832 shares of its common stock
outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Proxy Statement for the Annual Meeting of Shareholders to be
held October 18, 2002 are incorporated by reference into Part III.


<PAGE> 2


PART  I


Item 1.  Business

Twin Disc was incorporated under the laws of the state of Wisconsin in 1918. 
Twin Disc designs, manufactures and sells heavy duty off-highway power
transmission equipment.  Products offered include: hydraulic torque
converters; power-shift transmissions; marine transmissions and surface
drives; universal joints; gas turbine starting drives; power take-offs and
reduction gears; industrial clutches; fluid couplings and control systems. The
Company sells its products to customers primarily in the construction
equipment, industrial equipment, government, marine, energy and natural
resources and agricultural markets.  The Company's worldwide sales to both
domestic and foreign customers are transacted through a direct sales force and
a distributor network.  There have been no significant changes in products or
markets since the beginning of the fiscal year.  The products described above
have accounted for more than 90% of revenues in each of the last three fiscal
years.

Most of the Company's products are machined from cast iron, forgings, cast
aluminum and bar steel which generally are available from multiple sources and
which are believed to be in adequate supply.

The Company has pursued a policy of applying for patents in both the United
States and certain foreign countries on inventions made in the course of its
development work for which commercial applications are considered probable. 
The Company regards its patents collectively as important but does not
consider its business dependent upon any one of such patents.

The business is not considered to be seasonal except to the extent that
employee vacations are taken mainly in the months of July and August
curtailing production during that period.

The Company's products receive direct widespread competition, including from
divisions of other larger independent manufacturers.  The Company also
competes for business with parts manufacturing divisions of some of its major
customers.  Primary competitive factors for the Company's products are
performance, price, service and availability.  Ten customers accounted for
approximately 44% of the Company's consolidated net sales during the year
ended June 30, 2002. Sewart Supply, Inc., an independent distributor of Twin
Disc products, accounted for approximately 11% of consolidated net sales in
2002.

Unfilled open orders for the next six months of $31,484,000 at June 30, 2002
compares to $39,405,000 at June 30, 2001.  Since orders are subject to
cancellation and rescheduling by the customer, the six-month order backlog is
considered more representative of operating conditions than total backlog. 
However, as procurement and manufacturing "lead times" change, the backlog
will increase or decrease; and thus it does not necessarily provide a valid
indicator of the shipping rate.  Cancellations are generally the result of
rescheduling activity and do not represent a material change in backlog. 

Management recognizes that there are attendant risks that foreign governments
may place restrictions on dividend payments and other movements of money, but
these risks are considered minimal due to the political relations the United
States maintains with the countries in which the Company operates or the
relatively low investment within individual countries. The Company's business
is not subject to renegotiation of profits or termination of contracts at the
election of the Government.


Engineering and development costs include research and development expenses
for new product development and major improvements to existing products, and
other charges for ongoing efforts to refine existing products. Research and
development costs charged to operations totaled $1,887,000, $1,929,000 and
$1,852,000 in 2002, 2001 and 2000, respectively.  Total engineering and
development costs were $6,569,000, $5,791,000 and $6,322,000 in 2002, 2001 and
2000,  respectively.

Compliance with federal, state and local provisions regulating the discharge
of materials into the environment, or otherwise relating to the protection of
the environment, is not anticipated to have a material effect on capital
expenditures, earnings or the competitive position of the Company.

The number of persons employed by the Company at June 30, 2002 was 936.

A summary of financial data by segment and geographic area for the years ended
June 30, 2002, 2001 and 2000 appears in Note K to the consolidated financial
statements on pages 21 through 23 of this form.


<PAGE> 3

On April 2, 2001, the Company entered into a Joint Venture Agreement with
Niigata Engineering Co. LTD., Japan to form NICO Transmissions Co., Inc.
(NTC).  NTC is an engineering and marketing company supporting the Company's
expanding global marine product line as well as a distribution company for
Niigata's family of transmission products.

Pursuant to the terms of the Joint Venture Agreement, the Company contributed
$0.7 million in exchange for a controlling 66% ownership interest in NTC and
Niigata contributed $0.3 million for a 34% ownership interest.  NTC
contributed $12.2 million in net sales and $0.3 million in net earnings to the
Company in 2002.  See Item 8 and Note F to the consolidated financial
statements.


I
tem 2.  Properties

The Company owns two manufacturing, assembly and office facilities in Racine,
Wisconsin, U.S.A. and one in Nivelles, Belgium.  The aggregate floor space of
these three plants approximates 677,000 square feet. One of the Racine
facilities includes office space which is the location of the Company's
corporate headquarters. The Company leases additional manufacturing, assembly
and office facilities in Decima, Italy.

The Company also has operations in the following locations, all of which are
used for sales offices, warehousing and light assembly or product service. 
The following properties are leased:

      Jacksonville, Florida, U.S.A.        Chambery, France

      Miami, Florida, U.S.A.               Brisbane, Queensland, Australia

      Coburg, Oregon, U.S.A.               Perth, Western Australia, Australia

      Kent, Washington, U.S.A.             Singapore

      Edmonton, Alberta, Canada            Shanghai, China

      Vancouver, British Columbia, Canada  Capezzano Planore, Italy

The properties are generally suitable for operations and are utilized in the
manner for which they were designed.  Manufacturing facilities are currently
operating at less than 65% capacity and are adequate to meet foreseeable needs
of the Company.


Item 3.  Legal Proceedings

Twin Disc is a defendant in several product liability or related claims
considered either adequately covered by appropriate liability insurance or
involving amounts not deemed material to the business or financial condition
of the Company.


The Company has joined with a group of potentially responsible parties in
signing a consent decree with the Illinois Environmental Protection Agency
("IEPA") to conduct a remedial investigation and feasibility study at the
Interstate Pollution Control facility in Rockford, Illinois.  The IEPA issued
its record of decision in September 1999, selecting a remedy with an estimated
cost of $2.4 million (in year 1999 dollars), but the United States
Environmental Protection Agency ("USEPA") has not formally approved that
decision.  The actual remedy cost may be higher due to additional monitoring
that may be required by the USEPA.  The Company's total potential liability on
the site cannot be estimated with particularity until a final decision is
reached on that aspect of the remedy, and until an allocation scheme is
adopted by the parties.  Based upon current assumptions, however, the Company
anticipates potential liability of approximately $200,000.

The Company has also joined with a group of potentially responsible parties in
signing a consent decree with the Illinois Environmental Protection Agency to
conduct a remedial investigation and feasibility study at the MIG\DeWane
Landfill in Rockford, Illinois.  The consent decree was signed on March 29,
1991, and filed with the federal court in the Northern District of Illinois. 
The IEPA issued its record of decision for the site in April 2000, selecting a
remedy with an estimated cost of $18 million (in year 2000 dollars). The
Company's total potential liability on the site cannot be estimated with
particularity until an allocation scheme is adopted by the parties.  Based
upon current assumptions, however, the Company anticipates potential liability
of approximately $300,000.


Item 4.  Submission of Matters to a Vote of Security Holders

None.

<PAGE> 4
 
Executive Officers of the Registrant

<TABLE>
Pursuant to General Instruction G(3) of Form 10-K, the following list is
included as an unnumbered Item in Part I of this Report in lieu of being
included in the Proxy Statement for the Annual Meeting of Shareholders to
be held on October 18, 2002.
<CAPTION>
                          Principal Occupation
     Name                   Last Five Years                              Age
---------------     ----------------------------------------------       - -  

<S>                  <C>                                                 <C>
Michael E. Batten    Chairman, Chief Executive Officer since 1983        62 

Michael H. Joyce     President - Chief Operating Officer since 1995      61

James O. Parrish     Vice President - Finance and Treasurer since 1982   62

Lance J. Melik       Vice President and General Manager - Transmission   59
                     And Industrial Products since October 2001; 
                     formerly Vice President - Transmission and 
                     Industrial Products since 1999 and Vice President - 
                     Corporate Development since September 1995
              
Paul A. Pelligrino   Vice President - Engineering since 1996             63

Henri Claude Fabry   Vice President - Global Distribution since          56
                     October 2001; formerly Vice President Marine and          
                     Distribution since 1999; formerly Director of 
                     Marketing and Sales, Twin Disc International S.A. 
                     since February 1997

James E. Feiertag    Executive Vice President since October 2001:        45
                     formerly Vice President - Manufacturing since  
                     November 2000; formerly Vice President of                 
                     Manufacturing for the Drives and Systems Group,           
                     Rockwell Automation Group since 1999; formerly            
                     Director of Manufacturing for the Drives Group,           
                     Rockwell Automation Group

Fred H. Timm         Vice President - Administration and Secretary       56
                     since October 2001, formerly Corporate Controller  
                     And Secretary since 1995

John H. Batten       Vice President and General Manager - Marine         37    
                     since October 2001; formerly Commercial Manager - 
                     Marine and Propulsion since 1998, formerly
                     Application Engineer since 1997
</TABLE>


Officers are elected annually by the Board of Directors at the Board meeting
held preceding each Annual Meeting of the Shareholders.  Each officer holds
office until his successor is duly elected, or until he resigns or is removed
from office.  John H. Batten is the son of Michael E. Batten.


<PAGE> 5


PART II


Item 5.  Market for the Registrant's Common Stock and Related Stockholder
Matters

<TABLE>
The Company's common stock is traded on the New York Stock Exchange under the
symbol TDI. The price information below represents the high and low sales
prices for each period:
<CAPTION>
    Fiscal Year Ended June 30, 2002         Fiscal Year Ended June 30, 2001
                     High      Low                           High     Low
    <S>             <C>       <C>           <C>             <C>      <C>
    First Quarter   16.20     14.16         First Quarter   17.81    15.75 
    Second Quarter  14.55     12.25         Second Quarter  17.31    14.25
    Third Quarter   16.75     14.00         Third Quarter   15.09    13.06
    Fourth Quarter  16.95     14.00         Fourth Quarter  17.30    14.25
</TABLE>


Quarterly dividends of $0.175 per share were declared and paid for each of the
quarters above. As of June 30, 2002 there were 1,003 shareholder accounts. The
sales price of Twin Disc common stock as of August 30, 2002 was 13.75.


Pursuant to a shareholder rights plan (the "Rights Plan"), on April 17, 1998,
the Board of Directors declared a dividend distribution, payable to
shareholders of record at the close of business on June 30, 1998, of one
Preferred Stock Purchase Right ("Rights") for each outstanding share of Common
Stock.  The Rights will expire 10 years after issuance, and will be
exercisable only if a person or group becomes the beneficial owner of 15% or
more of the Common Stock (or 25% in the case of any person or group which
currently owns 15% or more of the shares or who shall become the Beneficial
Owner of 15% or more of the shares as a result of any transfer by reason of
the death of or by gift from any other person who is an Affiliate or an
Associate of such existing holder or by succeeding such a person as trustee of
a trust existing on the record date) (an "Acquiring Person"), or 10 business
days following the commencement of a tender or exchange offer that would
result in the offeror beneficially owning 25% or more of the Common Stock.  A
person who is not an Acquiring Person will not be deemed to have become an
Acquiring Person solely as a result of a reduction in the number of shares of
Common Stock outstanding due to a repurchase of Common Stock by the Company
until such person becomes beneficial owner of any additional shares of Common
Stock.  Each Right will entitle shareholders who received
the Rights to buy one newly issued unit of one one-hundredth of a share of
Series A Junior Preferred Stock at an exercise price of $160, subject to
certain anti-dilution adjustments.  The Company will generally be entitled to
redeem the Rights at $.05 per Right at any time prior to 10 business days
after a public announcement of the existence of an Acquiring Person. In
addition, if (i) a person or group accumulates more than 25% of the Common
Stock (except pursuant to an offer for all outstanding shares of Common Stock
which the independent directors of the Company determine to be fair to and
otherwise in the best interests of the Company and its shareholders and except
solely due to a reduction in the number of shares of Common Stock outstanding
due to the repurchase of Common Stock by the Company), (ii) a merger takes
place with an Acquiring Person where the Company is the surviving corporation
and its Common Stock is not changed or exchanged, (iii) an Acquiring Person
engages in certain self-dealing transactions, or (iv) during such time as
there is an Acquiring Person, an event occurs which results in such Acquiring
Person's ownership interest being increased by more than 1% (e.g., a reverse
stock split), each Right (other than Rights held by the Acquiring Person and
certain related parties which become void) will represent the right to
purchase, at the exercise price, Common Stock (or in certain circumstances, a
combination of securities and/or assets) having a value of twice the exercise
price.  In addition, if following the public announcement of the existence of
an Acquiring Person the Company is acquired in a merger or other business
combination transaction, except a merger or other business combination
transaction that takes place after the consummation of an offer for all
outstanding shares of Common Stock that the independent directors of the
Company have determined to be fair, or a sale or transfer of 50% or more of
the Company's assets or earning power is made, each Right (unless previously
voided) will represent the right to purchase, at the exercise price, common
stock of the acquiring entity having a value of twice the exercise price at
the time.

The Rights may have certain anti-takeover effects.  The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
without conditioning the offer on a substantial number of Rights being
acquired.  However, the Rights are not intended to prevent a take-over, but
rather are designed to enhance the ability of the Board of Directors to
negotiate with an acquirer on behalf of all of the shareholders.  In addition,
the Rights should not interfere with a proxy contest.

The Rights should not interfere with any merger or other business combination
approved by the Board of Directors since the Rights may be redeemed by the
Company at $.05 per Right prior to 10 business days after the public
announcement of the existence of an Acquiring Person.

The news release announcing the declaration of the Rights dividend, dated
April 17, 1998, filed as Item 14(a)(3), Exhibit 4(b) of Part IV of the Annual
Report on Form 10-K for the year ended June 30, 1998 is hereby incorporated by
reference.


<PAGE> 6
Recent Sales of Unregistered Securities

During the period covered by this report, the Company offered participants in
the Twin Disc, Incorporated B The Accelerator 401(k) Savings Plan (the "Plan")
the option to invest their Plan accounts in a fund comprised of Company stock. 
Participation interests of Plan participants in the Plan, which may be
considered securities, were not registered with the SEC.  During the fiscal
year ended June 30, 2002, 68 Plan participants allocated an aggregate of
$81,000 toward this investment option.  Participant accounts in the Plan
consist of a combination of employee deferrals, Company matching
contributions, and, in some cases, additional Company profit-sharing
contributions.  No underwriters were involved in these transactions.  On
September 6, 2002, the Company filed a Form S-8 to register 100,000 shares of
Company common stock offered through the Plan, as well as an indeterminate
amount of Plan participation interests.  


Item 6.  Selected Financial Data

<TABLE>
Financial Highlights
(dollars in thousands, except per share amounts and shares outstanding)
<CAPTION>
                                         For the years ended June 30, 
Statement of Operations Data:   2002      2001      2000      1999      1998
<S>                           <C>       <C>       <C>       <C>       <C>
Net sales                     $179,385  $180,786  $177,987  $168,142  $202,643
Net earnings (loss)              2,058     6,169     3,773    (1,018)    9,363
Basic earnings (loss) per share    .73      2.20      1.34      (.36)     3.30
Diluted earnings (loss) per share  .73      2.20      1.34      (.36)     3.24
Dividends per share                .70       .70       .70      .805       .76

Balance Sheet Data (at end of period):
Total assets                   157,280   156.734   174,190   176,900   160,954
Total Long-Term Obligations     18,583    23,404    31,254    17,112    19,949
</TABLE>


On April 2, 2001, the Company entered into a Joint Venture Agreement with
Niigata Engineering Co. LTD., Japan to form NICO Transmissions Co., Inc.
(NTC).  NTC's balance sheet and statement of operations as of and for the year
ended March 31, 2002 is consolidated with the Company's balance sheet and
statement of operations as of and for the year ended June 30, 2002.  NTC
contributed $12,217 in net sales, $263 in net earnings, $.09 in both basic and
diluted earnings per share, $6,169 in assets and $0 in long-term obligations
to the Company in 2002 (dollars in thousands, except per share amounts).   



Item 7.  Management's Discussion and Analysis of Financial Condition and
Results of Operations

Note on Forward-Looking Statements
Statements in this report (including but not limited to certain statements in

Items 1, 3 and 7) and in other Company communications that are not historical
facts are forward-looking statements, which are based on management's current
expectations.  These statements involve risks and uncertainties that could
cause actual results to differ materially from what appears here.

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 could cause actual results to be materially
different from what is presented here.


Results of Operations

Net Sales, New Orders and Backlog

Net sales for the last three fiscal years have been very stable. Sales of $181
million in fiscal 2001 were 2 percent ahead of the previous fiscal year and
then declined by a lesser amount to $179 million in fiscal 2002.  However, the
drop in fiscal 2002 would have been about 8 percent were it not for the
addition of first-year revenues from NICO Transmission Company (NTC), a
Japanese marketing and engineering joint venture established at the end of
fiscal 2001, that offsets declines in our continuing core business.  Order
rates for most of our products were down throughout much of the past two 

<PAGE> 7
fiscal years, contributing, along with improved deliveries, to a steady
decline in backlog.  The backlog of orders scheduled for shipment during the
next six months (six-month backlog) dropped 26 percent to $39 million between
June 2000 and June 2001 and another 20 percent, to $31 million at end of
fiscal 2002.

Demand continued at a steady pace for the first part of fiscal 2001, but eased
somewhat by mid-year.  Shipments followed the same pattern with favorable
year-to-year comparisons during the first half in all forward-market product
lines as well as aftermarket service parts.  As fiscal 2001 progressed, we
experienced softening demand for power-shift transmissions and torque
converters and for power take-offs used in irrigation and waste recycling
applications.  These declines were partially offset by the increased volume of
shipments for military applications, surface drive marine propulsion units,
and the continuing steady demand for marine transmissions produced overseas. 
Indicative of a modest recovery in certain of the Company's markets, fourth
quarter shipments of power take-offs were approximately equal to year earlier
levels.

The contraction in global economic activity continued into fiscal 2002 and was
most significantly reflected in the declining shipments of pleasure craft
marine transmissions.  Marine market softness persisted throughout the year
and was the largest single factor in the lower core business sales.  While
there were minor upturns in demand for most products, there also were
unanticipated declines that resulted in overall relatively soft demand and
reduced shipments across the board.  The exception to that was a modest
increase in propulsion product sales. 

Shipments from our wholly owned distribution companies, primarily those
offshore, continued to register sales gains in fiscal 2001 as recovering
economies, particularly in the Pacific Rim, were a positive influence.  In
fiscal 2002, shipments declined as a result of weak market conditions and
stronger foreign competition caused by the continuing strength of the U.S.
dollar.  

The U.S. dollar strengthened against most currencies in fiscal years 2000 and
2001 and maintained that edge until the final months of fiscal 2002.  As a
result, through most of the past three fiscal years there has been increased
pricing pressure from non-dollar based competition, and sales from our
offshore subsidiaries have been reported at lower levels when translated into
U.S. dollars.  Until the fiscal 2002 drop in shipments from our Belgian
subsidiary, there was an offsetting favorable impact caused by higher margins
realized on dollar-denominated sales.  Price increases, implemented
selectively in each year, generated revenues about equal to the rate of
inflation.

At the end of fiscal 2001, the six-month backlog was $39 million, a
substantial reduction from the prior year-end.  The decline was due primarily
to reduced orders for marine and industrial products.  As fiscal 2002 opened,
order rates generally remained weak but longer-term military orders rolling
into the six-month window and irregular order peaks helped to stabilize the
six-month backlog through most of the year.  During the fourth quarter, those
contracts were completed and weaker seasonal order patterns were seen.  In
addition, customers continued to adjust to the shorter lead times achieved
over the past two years.  As a result, the six-month backlog at the end of
fiscal 2002 had declined to $31 million, 20 percent below the prior year-end.


Margins, Costs and Expenses

A strong focus on continuous improvement in manufacturing methods and
processes enabled us to improve domestic manufacturing margins throughout the
past three fiscal years.  With the exception of our Belgian operation, which
was hampered by reduced volume during the past year, similar efforts in Europe
have led to better margins in that area as well.  We also have maintained
pressure on fixed costs to help sustain our profitability during cyclical
downturns.

In fiscal 2001, incremental improvements in all aspects of our manufacturing
operations from on-time delivery to inventory reduction and cellular layout
led the way to higher gross margins.  During the fourth quarter, we provided
for approximately $1 million of inventory obsolescence and $500,000 for a
marine transmission warranty program.  Although the fourth-quarter margin was
down somewhat from the comparable period a year earlier, it was consistent
with previous fiscal 2001 quarters.  


<PAGE> 8
Despite declining production volume in fiscal 2002, domestic manufacturing
margins improved due to a more favorable product mix and the increased
efficiencies mentioned previously.  However, we were unable to overcome the
volume induced margin declines at our principal plant in Europe and the lower
margins on NTC sales into its home market.  As a result, the consolidated
gross margin declined by almost two percentage points in the most recently
completed fiscal year. 

Marketing, engineering, and administrative (ME&A) expense declined four
percent in fiscal 2000 as a result of previous-year staff reductions,
continued attention to cost, and closure of our South African distribution
operation.  In fiscal 2001, ME&A was virtually unchanged from the previous
year.  Approximately one-half of the $2.9 million increase in fiscal 2002
spending was due to the first-year expenses of NTC, and the balance consisted
of added marketing and engineering expenses related to the development and
introduction of new marine and electronic controls products.

Early in fiscal 2001, we closed our wholly owned distribution company in Spain
and engaged an independent company to represent Twin Disc in that market.  The
impact on revenues and profitability was not significant.  During the third
fiscal quarter, we sold our minority interest in Niigata Converter Company to
our joint-venture partner and recorded a gain of $3.9 million in Other income. 
Most of the proceeds were applied to the outstanding debt, but a portion was
used to capitalize a new marketing and engineering joint venture that will
support our global marine product line.  Recognizing the reduced order
activity in the latter half of fiscal 2001, severance and voluntary separation
programs to reduce the domestic manufacturing workforce were implemented in
the fourth quarter.  In addition, representing about one-third of the $1.5
million fourth quarter restructuring charge (see Footnote Q to the
consolidated financial statements), reserves were taken for the closure of two
sales offices and one assembly facility whose activities will continue to be
handled from other locations.  The facilities were closed in fiscal 2001 and
early fiscal 2002.  In addition, there were manpower adjustments at several
other facilities.  It is anticipated that the restructuring will result in
annual pretax savings of approximately $1,600,000 when fully effective in
fiscal 2003.  The savings are generated primarily by the reduction in
manpower.

The Company adopted the Statement of Financial Accounting Standards Board No.
142, "Goodwill and Other Intangible Assets," at the beginning of fiscal 2002. 
On review, it was determined that there is no impairment in these assets and
thus no losses were recorded for the fiscal year.  The favorable after-tax
impact on earnings due to discontinuing the amortization of goodwill and other
intangible assets was $171,000, or $.06 per share for the fiscal year.


Interest, Taxes and Net Earnings

Interest expense declined in fiscal 2001 as debt was reduced by $8 million
and, although a large portion of our debt is in fixed-rate notes, we benefited
from the drop in U.S. interest rates.  Additionally, settlement of a federal
tax issue in the fiscal fourth quarter allowed the reversal of previously
accrued interest expense.  In fiscal 2002, rates remained low and debt was
reduced a further $8 million, resulting in another large drop in interest
expense.  

In each of the past three fiscal years, limitations on foreign tax credit
utilization, the relatively high proportion of foreign earnings, and
settlement of some state tax issues resulted in an unusually high effective
tax rate.  The effective rate in fiscal 2002 was increased further by two
third-quarter adjustments totaling about $300,000.  A tax incentive provided
by the Belgian government several years ago was disallowed by the European
Commission and was repaid, and the United States tax provision was adjusted
upward for the taxes due on an asset sale gain recorded in last year's third
quarter.  Statutory rates generally have not changed. 


Liquidity and Capital Resources

The net cash provided by operating activities in fiscal 2001 remained at
about the same $7 million level as the previous year. In both years, positive
cash flows from earnings, depreciation, and working capital reductions were
partially offset by taxes and by increased contributions to the Company
pension fund.  In fiscal 2002, operating cash flows increased to $13 million
with the favorable impact of inventory reductions and reduced pension
contributions. 

Expenditures for capital equipment for the past three fiscal years have been
held to a level of about one-half depreciation.  While the desire to conserve
cash has been one consideration, we also have been more selective in adding
major machine tools and have focused on our core competency manufacturing
cells.  Plans are for increased spending in the coming year to provide for
further development of key cells. 


<PAGE> 9
Liquidity has improved in each of the last two years.  Cash balances have
risen, debt has been reduced, working capital has remained at about $50
million, and the current ratio has been unchanged at 2.2. The Company's
balance sheet is strong, there are no off-balance sheet arrangements, and we
continue to have sufficient liquidity for near-term needs.  

The Company has obligations under non-cancelable operating lease contracts and
loan and senior note agreements for certain future payments.  A summary of
those commitments follows (in thousands):

<TABLE>
<CAPTION>
                                    Less than      1-3        4-5      After
Contractual Obligations    Total     1 Year       Years      Years    5 Years
<S>                       <C>        <C>         <C>         <C>      <C>
Short-term debt           $ 1,708    $ 1,708        -          -         -
Revolving loan borrowing  $10,000        -       $10,000       -         -
Long-term debt            $11,440    $ 2,857     $ 5,726    $ 2,857      -
Operating leases          $ 7,890    $ 2,605     $ 2,981    $ 1,152   $ 1,152
</TABLE>


The Company believes the capital resources available in the form of existing
cash, lines of credit (see Footnote H to the consolidated financial
statements), and funds provided by operations will be adequate to meet
anticipated capital expenditures and other foreseeable future business
requirements.


Other Matters
 
Environmental Matters

The Company is involved in various stages of investigation relative to
hazardous waste sites on the United States EPA National Priorities List.  It
is not possible at this time to determine the ultimate outcome of those
matters; but, as discussed further in Footnote P to the consolidated financial
statements, they are not expected to affect materially the Company's
operations, financial position, or cash flows.

Critical Accounting Policies

The preparation of this Annual 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 significant accounting policies are described in Note A to the
consolidated financial statements on pages 16 and 17 of this form.  Not all of
these significant accounting policies require management to make difficult,
subjective, or complex judgments or estimates.  However, the policies
management considers most critical to understanding and evaluating our
reported financial results are the following:

Revenue Recognition
Twin Disc recognizes revenue from product sales at the time of shipment and
passage of title.  While we respect the customer's right to return products
that were shipped in error or do not function properly, historical experience
shows those types of adjustments have been immaterial and thus no provision is
made.  With respect to other revenue recognition issues, management has
concluded that its policies are appropriate and in accordance with the
guidance provided by Securities and Exchange Commission's Staff Accounting
Bulletin (SAB) No. 101, "Revenue Recognition".

Accounts Receivable

Twin Disc performs ongoing credit evaluations of our customers and adjusts
credit limits based on payment history and the customer's credit-worthiness as
determined by review of current credit information.  We continuously monitor
collections and payments from our customers and maintain a provision for
estimated credit losses based upon our historical experience and any specific
customer-collection issues.  In addition, senior management reviews the
accounts receivable aging on a monthly basis to determine if any receivable
balances may be uncollectible.  Although our accounts receivable are dispersed
among a large customer base, a significant change in the liquidity or
financial position of any one of our largest customers could have a material
adverse impact on the collectability of our accounts receivable and future
operating results. 


<PAGE> 10
Inventory
Inventories are valued at the lower of cost or market.  Cost has been
determined by the last-in, first-out (LIFO) method for the parent company, and
by the first-in, first-out (FIFO) method for all other inventories. 
Management specifically identifies obsolete products and analyzes historical
usage, forecasted production based on future orders, demand forecasts, and
economic trends when evaluating the adequacy of the reserve for excess and
obsolete inventory.  The adjustments to the reserve are estimates that could
vary significantly, either favorably or unfavorably, from the actual
requirements if future economic conditions, customer demand or competitive
conditions differ from expectations.  

Warranty
Twin Disc 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
extent of the market 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.

Income Taxes
As part of the process of preparing our consolidated financial statements,
income taxes in each of the jurisdictions in which we operate must be
estimated.  This process involves estimating the actual current tax exposure
and assessing the realizability of temporary differences.  A valuation
allowance is recorded if it is deemed more likely than not that a temporary
difference will be realized.

Recently Issued Accounting Standards
During fiscal 2002, the Financial Accounting Standards Board issued several
statements of accounting standards that are discussed in Note A to the
consolidated financial statements on pages 16 and 17 of this form.



I
tem 7(a). 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. Discussions of the Company's
accounting policies and further disclosure relating to financial instruments
is included in Note A to the consolidated financial statements on pages 16 and
17 of this form.

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 prime and LIBOR interest rates.
Those debt facilities bear interest predominantly at the prime interest rate
minus .5% or LIBOR plus 1%.  Due to the relative stability of interest rates,
the Company did not utilize any financial instruments at June 30, 2002 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 $30,000.

Commodity price risk - The Company is exposed to fluctuation in market prices
for such commodities as steel and aluminum. Due to the relative stability of
these commodities, 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 one-third of the Company's revenues in the years
ended June 30, 2002 and 2001 were denominated in currencies other than the
U.S. dollar.  Of that total, approximately two-thirds was denominated in euros
with the balance composed of Japanese yen 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 used to hedge the currency fluctuations on
significant transactions denominated in foreign currencies.


<PAGE> 11
Derivative Financial Instruments - The Company has written policies and
procedures that place all financial instruments under the direction of the
company corporate treasury and restrict derivative transactions to those
intended for hedging purposes.  The use of financial instruments for trading
purposes is prohibited.  The Company uses financial instruments to manage the
market risk from changes in foreign exchange rates.

In the first quarter of fiscal 2001, the Company adopted SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," as amended by
SFAS No. 137 and No. 138.  The statement requires all derivative instruments
to be recorded in the statement of financial position at fair value.  The
change in the fair value of a derivative is required to be recorded each
period in current earnings or other comprehensive income, depending on whether
the derivative is designed as part of a hedge transaction and, if so, the type
of hedge transaction.  Initial adoption and subsequent application of SFAS No.
133 did not have a material effect on the Company's statement of financial
position or results of operations.

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 income (expense), net in the 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 2002 was the Euro.  At
June 30, 2002 the Company had net outstanding forward exchange contracts to
purchase Euros in the value of $2,053,000 with a weighted average maturity of
40 days.  The fair value of the Company's contracts was approximately $0.2
million at June 30, 2002.  The primary currencies to which the Company was
exposed in 2001 were the Belgian Franc and the Italian Lira.  The fair value
of the Company's contracts to purchase Belgian Francs and sell Italian Lira
was approximately $0.1 million and $0.0 million, respectively at June 30,
2001.


Item 8.  Financial Statements and Supplementary Data

See consolidated financial statements and Financial Statement Schedule on
Pages 10 through 28 of this form.

<TABLE>
Sales and Earnings by Quarter (dollars in thousands, except per share amounts)
<CAPTION>
2002                      1st Qtr.   2nd Qtr.   3rd Qtr.   4th Qtr.    Year
<S>                       <C>        <C>        <C>        <C>       <C>
Net sales                 $40,631    $43,986    $41,928    $52,840   $179,385
Gross profit                8,546      9,962      9,614     12,117     40,239
Net earnings                  272        423        (37)     1,400      2,058
Basic earnings per share      .10        .15       (.01)       .49        .73
Diluted earnings per share    .10        .15       (.01)       .49        .73
Dividends per share          .175       .175       .175       .175        .70
<CAPTION>
2001                      1st Qtr.   2nd Qtr.   3rd Qtr.   4th Qtr.    Year
<S>                       <C>        <C>        <C>        <C>       <C>
Net sales                 $41,349    $44,025    $47,642    $47,770   $180,786
Gross profit                9,744     10,456     11,878     11,617     43,695
Net earnings                  906        960      4,033        270      6,169
Basic earnings per share      .32        .34       1.44        .10       2.20
Diluted earnings per share    .32        .34       1.44        .10       2.20
Dividends per share          .175       .175       .175       .175        .70

During the third quarter of 2001, the Company sold its investment in Niigata
Converter Company, Ltd., resulting in a net gain of $2,288,000 or $.81 per
share.  See Note D to the consolidated financial statements. 

On April 2, 2001, the Company entered into a Joint Venture Agreement with
Niigata Engineering Co. LTD., Japan to form NICO Transmissions Co., Inc.
(NTC).  See Note F to the consolidated financial statements.  NTC's balance
sheet and statement of operations as of and for the year ended March 31, 2002
is consolidated with the Company's balance sheet and statement of operations
as of and for the year ended June 30, 2002. The impact of NTC on the Company
in 2002 (dollars in thousands, except per share amounts) is as follows:
<CAPTION>
                         1st Qtr.   2nd Qtr.   3rd Qtr.   4th Qtr.    Year
<S>                      <C>        <C>        <C>        <C>         <C>
Net sales                  $2,609     $3,058     $2,881     $3,669    $12,217
Net earnings                   45         22         94        102        263
Basic earnings per share      .01        .01        .03        .04        .09
Diluted earnings per share    .01        .01        .03        .04        .09
</TABLE>



<PAGE> 12

Item 9.  Change in and Disagreements with Accountants on Accounting and
Financial Disclosure

None.


PART III


Item 10.  Directors and Executive Officers of the Registrant

For information with respect to the executive officers of the Registrant, see
"Executive Officers of the Registrant" at the end of Part I of this report. 
For information with respect to the Directors of the Registrant, see "Election
of Directors" in the Proxy Statement for the Annual Meeting of Shareholders to
be held October 18, 2002, which is incorporated into this report by reference. 

For information with respect to compliance with Section 16(a) of the
Securities Exchange Act of 1934, see "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Proxy Statement for the Annual Meeting of
Shareholders to be held October 18, 2002, which is incorporated into this
report by reference. 


Item 11.  Executive Compensation

The information set forth under the captions "Compensation of Executive
Officers", "Stock Options","Retirement Income Plan", "Supplemental Retirement
Benefit Plan", "Compensation of Directors" and "Employment Contracts" in the
Proxy Statement for the Annual Meeting of Shareholders to be held on October
18, 2002 is incorporated into this report by reference.  Discussion in the
Proxy Statement under the captions "Board Executive Selection and Salary
Committee Report on Executive Compensation" and "Corporate Performance Graph"
is not incorporated by reference and shall not be deemed "filed" as part of
this report.


Item 12.  Security Ownership of Certain Beneficial Owners and Management

Security ownership of certain beneficial owners and management is set forth in
the Proxy Statement for the Annual Meeting of Shareholders to be held on
October 18, 2002 under the caption "Principal Shareholders, Directors and
Executive Officers" and incorporated into this report by reference.

There are no arrangements known to the Registrant, the operation of which may
at a subsequent date result in a change in control of the Registrant.

The following table summarizes certain information regarding the Company's
equity-based compensation plans:

<TABLE>
<CAPTION>
                            # of securities         Weighted average    # of
securities remaining
                          to be issued upon     price of outstanding        
available for future
                       exercise of options,        options, warrants       
issuance under equity 
                        warrants and rights               and rights          
compensation plans
                       --------------------     --------------------   
------------------------- 
Plan Category                            
<S>                        <C>                  <C>                   <C>
Equity Compensation Plans
 Approved by Shareholders  248,350              $20.63                $76,950
              
Equity Compensation Plans
  Not Approved By Shareholders   0                  N/A                     0
                           -------               ------               -------
TOTAL                      248,350               $20.63               $76,950

</TABLE>


Item 13.  Certain Relationships and Related Transactions

None.


PART IV


Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)(1) Consolidated Financial Statements

See "Index to Consolidated Financial Statements and Financial Statement
Schedule" on page 10, the Report of Independent Accountants on page 11 and the
Consolidated Financial Statements on pages 12 to 28, all of which are
incorporated by reference.

Individual financial statements of the 50% or less owned entities accounted
for by the equity method are not required because the 50% or less owned
entities do not constitute significant subsidiaries.

(a)(2) Consolidated Financial Statement Schedules


See "Index to Consolidated Financial Statements and Financial Statement
Schedule" on page 10, the Report of Independent Accountants on Financial
Statement Schedule on page 29 and the Consolidated Financial Statement
Schedule on page 29, all of which are incorporated by reference.

(a)(3) Exhibits.  See Exhibit Index included as the last page of this form,
which is incorporated by reference.

Copies of exhibits filed as a part of this Annual Report on Form 10-K may be
obtained by shareholders of record upon written request directed to the
Secretary, Twin Disc, Incorporated, 1328 Racine Street, Racine, Wisconsin
53403.

(b) No reports on Form 8-K were filed during the last quarter of fiscal 2002.
                INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
                         FINANCIAL STATEMENT SCHEDULE

                                                                     Page
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Accountants....................................... 11

Consolidated Balance Sheets as of June 30, 2002 and 2001................ 12

Consolidated Statements of Operations for the years
 ended June 30, 2002, 2001 and 2000..................................... 13

Consolidated Statements of Cash Flows for the years
 ended June 30, 2002, 2001 and 2000..................................... 14

Consolidated Statements of Changes in Shareholders' Equity and
 Comprehensive Income for the years ended June 30, 2002, 2001 and 2000.. 15

Notes to Consolidated Financial Statements........................... 16-28


INDEX TO FINANCIAL STATEMENT SCHEDULE

Report of Independent Accountants on Financial Statement Schedule...... 29

Schedule II - Valuation and Qualifying Accounts........................ 29


Schedules, other than those listed, are omitted for the reason that they are
inapplicable, are not required, or the information required is shown in the
financial statements or the related notes.


<PAGE> 13

                       REPORT OF INDEPENDENT ACCOUNTANTS



To the Shareholders
Twin Disc, Incorporated
Racine, Wisconsin

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, changes in shareholders' equity and
comprehensive income and cash flows present fairly, in all material respects,
the financial position of Twin Disc, Incorporated and Subsidiaries at June 30,
2002 and 2001, and the results of their operations and their cash flows for
each of the three years in the period ended June 30, 2002, in conformity with
accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these statements in accordance
with auditing standards generally accepted in the United States of America
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.


PricewaterhouseCoopers  LLP

Milwaukee, Wisconsin
July 19, 2002



<PAGE> 14  


<TABLE>
TWIN DISC, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2002 and 2001 
<CAPTION>
        (Dollars in thousands)                     2002          2001
                                                   ----          ----
ASSETS
<S>                                             <C>           <C>
Current assets:
  Cash and cash equivalents                     $  7,313      $  5,961
  Trade accounts receivable, net                  29,006        27,058
  Inventories, net                                44,504        46,492
  Deferred income taxes                            4,505         5,689
  Other                                            4,126         3,925 
                                                 -------       -------     
        Total current assets                      89,454        89,125

Property, plant and equipment, net                29,549        31,584
Investment in affiliate                            2,439         2,358
Goodwill, net                                     12,311        13,719
Deferred income taxes                             12,246         8,943
Intangible pension asset                           1,383         1,988
Other assets                                       9,898         9,017
                                                 -------       -------    
                                                $157,280      $156,734
                                                 =======       =======  
 
LIABILITIES and SHAREHOLDERS' EQUITY

Current liabilities:                              
  Notes payable                                 $  1,708      $  4,797

  Current maturities on long-term debt             2,857         2,857
  Accounts payable                                13,042        10,368
  Accrued liabilities                             22,312        23,428
                                                 -------       -------
        Total current liabilities                 39,919        41,450

Long-term debt                                    18,583        23,404
Accrued retirement benefits                       39,797        33,121
                                                 -------       -------
                                                  98,299        97,975

Minority interest                                    472           337

Shareholders' equity:
  Common shares authorized: 15,000,000;
    issued: 3,643,630; no par value               11,653        11,653
  Retained earnings                               87,524        87,431
  Accumulated other comprehensive loss           (23,187)      (23,181)
                                                 -------       -------
                                                  75,990        75,903
  Less treasury stock, at cost                    17,481        17,481
                                                 -------       -------
        Total shareholders' equity                58,509        58,422
                                                 -------       -------
                                                $157,280      $156,734
                                                 =======       =======
</TABLE>


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


<PAGE> 15


<TABLE>
TWIN DISC, INCORPORATED and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended June 30, 2002, 2001 and 2000
<CAPTION>

   (In thousands, except per share data)
                                          2002         2001         2000       
                                          ----         ----         ---- 
<S>                                    <C>          <C>          <C>
Net sales                              $179,385     $180,786     $177,987
Cost of goods sold                      139,146      137,091      136,629
                                        -------      -------      -------
         Gross profit                    40,239       43,695       41,358
Marketing, engineering and                       
  administrative expenses                34,638       31,716       31,476
Restructuring of operations                   -        1,453            -
                                        -------      -------      -------
         Earnings from operations         5,601       10,526        9,882

Other income (expense):      
  Interest income                           294          262          244
  Interest expense                       (1,700)      (2,194)      (2,979)
  Equity in net earnings
    (loss) of affiliate                     526          820          906
  Gain on sale of affiliate                   -        3,935            -
  Other, net                                422         (258)          14
                                        -------      -------      -------
                                           (458)       2,565       (1,815)
                                        -------      -------      -------
         Earnings before income
           taxes and minority interest    5,143       13,091        8,067

Income taxes                              2,950        6,922        4,294
                                        -------      -------      -------
         Earnings before
           minority interest              2,193        6,169        3,773

Minority interest                          (135)           -            -
                                        -------      -------      -------
         Net earnings                  $  2,058      $ 6,169     $  3,773
                                        =======       ======      =======


Earnings per share data:
  Basic earnings per share             $   0.73     $   2.20     $   1.34
  Diluted earnings per share               0.73         2.20         1.34

Weighted average shares outstanding data:
  Basic shares outstanding                2,808        2,808        2,821
  Dilutive stock options                      -            -            -
                                        -------      -------      -------
  Diluted shares outstanding              2,808        2,808        2,821
                                        =======      =======      =======
</TABLE>

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


<PAGE> 16


<TABLE>
TWIN DISC, INCORPORATED and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended June 30, 2002, 2001 and 2000
<CAPTION>
               (In thousands)               2002          2001          2000 
                                            ----          ----          ----  
<S>                                       <C>          <C>           <C>
Cash flows from operating activities:
  Net earnings                            $ 2,058      $  6,169      $  3,773
  Adjustments to reconcile to net cash
      provided by operating activities:
    Depreciation and amortization           5,709         6,392         6,980
    (Gain)loss on sale of plant assets         90            10            (3)
    Gain on sale of affiliate                   -        (3,935)            -
    Minority interest                         135             -             -
    (Gain)loss on restructuring
      of operations    (53)        1,262    -
    Equity in net earnings of affiliate      (526)         (820)         (906)
    Provision for deferred income taxes       378        (4,680)         (284)
    Dividends received from affiliate         400           632           600
    Changes in operating assets and
      liabilities:
      Trade accounts receivable, net       (1,082)          672        (2,922)
      Inventories, net                      3,724         1,483         3,211
      Other assets                            112         3,535          (770)
      Accounts payable                      2,456        (1,677)        2,402
      Accrued liabilities                  (3,702)        1,210           168
      Accrued/prepaid retirement benefits   3,375        (2,869)       (5,364)
                                           ------        ------        ------
Net cash provided by
  operating activities                     13,074         7,384         6,885
                                           ------        ------        ------
Cash flows from investing activities:
  Proceeds from sale of plant assets           25            52            92
  Proceeds from sale of affiliate               -         7,173             -
  Acquisitions of plant assets             (2,063)       (3,492)       (2,134)
  Investment in joint venture                   -          (654)            -
                                           ------        ------        ------
Net cash (used) provided by
  investing activities                     (2,038)        3,079        (2,042)
                                           ------        ------        ------
Cash flows from financing activities:
  Decreases in notes payable, net          (3,082)            -       (15,000)
  Proceeds from long-term debt                  -             -        18,000  
Payments of long-term debt                 (4,857)       (7,857)       (3,857)
  Acquisition of treasury stock                 -           (34)         (343)
  Proceeds from exercise of stock options       -             -             2
  Dividends paid                           (1,965)       (1,966)       (1,974)
                                           ------        ------        ------

Net cash used by financing activities      (9,904)       (9,857)       (3,172)
                                           ------        ------        ------
Effect of exchange rate changes on cash       220          (296)         (156)
                                           ------        ------        ------
Net change in cash and cash equivalents     1,352           310         1,515
Cash and cash equivalents:        
  Beginning of year                         5,961         5,651         4,136
                                           ------        ------        ------
  End of year                            $  7,313      $  5,961      $  5,651
                                           ======       =======       ======= 
Supplemental cash flow information:
  Cash paid during the year for:
     Interest                            $  1,882      $  2,078       $ 3,008
     Income taxes                           1,908         5,155         4,401

</TABLE>

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

<PAGE> 17


<TABLE>
TWIN DISC, INCORPORATED and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
for the years ended June 30, 2002, 2001 and 2000
<CAPTION>
               (In thousands)                    2002      2001      2000     
                                                 ----      ----      ----
<S>                                           <C>       <C>      <C>
Common stock
  Balance, June 30                            $ 11,653  $ 11,653 $  11,653 
                                               -------   -------   -------
Retained earnings
  Balance, July 1                               87,431    83,228    81,430
  Net earnings                                   2,058     6,169     3,773
  Cash dividends                                (1,965)   (1,966)   (1,974)
  Stock options exercised                            -         -        (1)
                                               -------   -------   -------
  Balance, June 30                              87,524    87,431    83,228
                                               -------   -------   -------

Accumulated other comprehensive (loss)income 
  Balance, July 1                              (23,181)      799    (8,516)
                                               -------   -------   -------
    Foreign currency translation adjustment
      Balance, July 1                           (5,420)      799     3,288
      Current adjustment                         3,900    (6,219)   (2,489)
                                               -------   -------   -------
      Balance, June 30                          (1,520)   (5,420)      799     
                                               -------   -------   -------
    Minimum pension liability adjustment, net
      Balance, July 1                          (17,761)        -  ( 11,804)
      Current adjustment, net of related income
       taxes ($2,497 in 2002, $11,356 in 2001
       and ($7,547) in 2000)                    (3,906)  (17,761)   11,804  
                                               -------   -------   -------
      Balance, June 30                         (21,667)  (17,761)        -  
                                               -------   -------   -------
Accumulated other comprehensive (loss)income 
  Balance, June 30                             (23,187)  (23,181)      799
                                               -------   -------   -------

Treasury stock, at cost
  Balance, July 1                              (17,481)  (17,447)  (17,107)
  Shares acquired                                    -       (34)     (343)
  Stock options exercised                            -         -         3
                                               -------   -------   -------
  Balance, June 30                             (17,481)  (17,481)  (17,447)
                                               -------   -------   -------
Shareholders' equity balance, June 30         $ 58,509  $ 58,422  $ 78,233
                                               =======   =======   =======

Comprehensive income (loss)
  Net earnings                                $  2,058 $   6,169  $  3,773
  Other comprehensive income (loss)
    Foreign currency translation adjustment      3,900    (6,219)   (2,489)
    Minimum pension liability adjustment        (3,906)  (17,761)   11,804
                                               -------   -------   -------
    Other comprehensive (loss)income                (6)  (23,980)    9,315
                                               -------   -------   -------
  Comprehensive income (loss)                $   2,052 $ (17,811) $ 13,088
                                              ========  ========   =======
</TABLE>

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



<PAGE> 18
                TWIN DISC, INCORPORATED AND SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A.  SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of the significant accounting policies followed in
the preparation of these financial statements:

Consolidation Principles--The consolidated financial statements include the
accounts of Twin Disc, Incorporated and its wholly and partially owned
domestic and foreign subsidiaries.  Certain foreign subsidiaries are included
based on fiscal years ending March 31 or May 31, to facilitate prompt
reporting of consolidated accounts. All significant intercompany transactions
have been eliminated.

Translation of Foreign Currencies--The financial statements of the Company's
non-U.S. subsidiaries are translated using the current exchange rate for
assets and liabilities and the weighted average exchange rate for the year for
revenues and expenses.  Foreign currency translation adjustments are recorded
as a component of shareholders' equity. Gains and losses from foreign currency
transactions are included in earnings. Included in other income (expense) of
the consolidated statement of operations are foreign currency transaction
(gains) losses of ($170,000), $145,000 and $144,000 in 2002, 2001 and 2000,
respectively.

Cash Equivalents--The Company considers all highly liquid marketable
securities purchased with a maturity date of three months or less to be cash
equivalents.

Receivables--Trade accounts receivable are stated net of an allowance for
doubtful accounts of $782,000 and $699,000 at June 30, 2002 and 2001,
respectively.

Fair Value of Financial Instruments--The carrying amount reported in the
consolidated balance sheets for cash and cash equivalents, accounts
receivable, accounts payable, notes payable and current maturities on
long-term debt approximate fair value because of the immediate short-term
maturity of these financial instruments.  The carrying amounts reported for
long-term debt approximate fair value because the underlying instruments bear
interest at, or near, a current market rate. 

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

In the first quarter of 2001, the Company adopted SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities", as amended by SFAS No. 137
and No. 138.  The statement requires all derivative instruments to be recorded
in the statement of financial position at fair value.  The change in the fair
value of a derivative is required to be recorded each period in current
earnings or other comprehensive income, depending on whether the derivative is
designed as part of a hedge transaction and if so, the type of hedge
transaction.  Initial adoption and subsequent application of SFAS No. 133 did
not have a material effect on the Company's statement of financial position or
results of operations.

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 income (expense), net in the 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 2002 was the Euro.  At
June 30, 2002, the Company had net outstanding forward exchange contracts to
purchase Euros in the value of $2,053,000 with a weighted average maturity of
40 days.  The fair value of the Company's contracts was approximately $0.2
million at June 30, 2002.  The primary currencies to which the Company was
exposed in 2001 were the Belgian Franc and the Italian Lira.  At June 30,
2001, the Company had outstanding forward foreign exchange contracts to
purchase $4,500,000 of Belgian Francs with a weighted average maturity of 48
days and contracts to sell $345,000 of Italian Lira with a weighted average
maturity of 21 days.  The fair value of the Company's contracts to purchase
Belgian Francs and sell Italian Lira was approximately $0.1 million and $0.0
million, respectively at June 30, 2001.


<PAGE> 19
Inventories--Inventories are valued at the lower of cost or market.  Cost has
been determined by the last-in, first-out (LIFO) method for parent company
inventories, and by the first-in, first-out (FIFO) method for all other
inventories.

Property, Plant and Equipment and Depreciation--Assets are stated at cost. 
Expenditures for maintenance, repairs and minor renewals are charged against
earnings as incurred.  Expenditures for major renewals and betterments are
capitalized and amortized by depreciation charges.  Depreciation is provided
on the straight-line method over the estimated useful lives of the assets for
financial reporting and on accelerated methods for income tax purposes.  The
lives assigned to buildings and related improvements range from 10 to 40
years, and the lives assigned to machinery and equipment range from 5 to 15
years.  Upon disposal of property, plant and equipment, the cost of the asset
and the related accumulated depreciation are removed from the accounts and the
resulting gain or loss is reflected in earnings.  Fully depreciated assets are
not removed from the accounts until physically disposed.

The Company reviews the carrying value of property, plant and equipment for
impairment whenever events and circumstances indicate that the carrying value
of an asset may not be recoverable from the estimated future cash flows
expected to result from its use and eventual disposition. In cases where
undiscounted expected future cash flows are less than the carrying value, an
impairment loss is recognized equal to an amount by which the carrying value
exceeds the fair value of assets.

Investments in Affiliates--The Company's investments in 20% to 50%-owned
affiliates in which they have significant influence are accounted for using
the equity method. Investments in less than 20%-owned affiliates are accounted
for using the cost method.

Revenue Recognition--Revenue is recognize by the Company when all of the
following criteria are met: persuasive evidence of an arrangement exists;
delivery has occurred and ownership has transferred to the customer; the price
to the customer is fixed or determinable; and collectability is reasonably
assured. In December 1999, the Securities and Exchange Commission (SEC)
released Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in
Financial Statements."  SAB 101 was effective for the Company in the fourth
quarter of 2001 and did not have a material effect on the Company's financial
statements.

Goodwill and Other Intangibles--In June 2001, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 142, "Goodwill and Other Intangible Assets," to establish
accounting and reporting standards for goodwill and intangible assets. 
According to SFAS No. 142, goodwill and intangible assets deemed to have
indefinite lives will no longer be amortized.  Other intangible assets will
continue to be amortized over their useful lives.  The Company adopted the new
rules for accounting for goodwill and other intangible assets on July 1, 2001. 

Under SFAS No. 142, goodwill will be tested for impairment at least annually
and more frequently if an event occurs which indicates the goodwill may be
impaired.  Impairment of goodwill is measured according to a two step
approach.  In the first step, the fair value of a reporting unit, as defined
by the statement, is compared to the carrying value of the reporting unit,
including goodwill.  If the carrying amount exceeds the fair value, the second
step of the goodwill impairment test is performed to measure the amount of the
impairment loss, if any.  In the second step the implied value of the goodwill
is estimated as the fair value of the reporting unit less the fair value of
all other tangible and intangible assets of the reporting unit.  If the
carrying amount of the goodwill exceeds the implied fair value of the
goodwill, an impairment loss is recognized in an amount equal to that excess,
not to exceed the carrying amount of the goodwill. 

Deferred Taxes--The Company recognizes deferred tax liabilities and assets for
the expected future income tax consequences of events that have been
recognized in the Company's financial statements.  Under this method, deferred
tax liabilities and assets are determined based on the temporary differences
between the financial statement carrying amounts and the tax bases of assets
and liabilities using enacted tax rates in effect in the years in which the
temporary differences are expected to reverse.  

The Company does not provide for taxes which would be payable if undistributed
earnings of its foreign subsidiaries or its foreign affiliate were remitted
because the Company either considers these earnings to be invested for an
indefinite period or anticipates that if such earnings were distributed,
the U.S. income taxes payable would be substantially offset by foreign tax
credits.


<PAGE> 20
Management Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the dates of the
financial statements and the reported amounts of revenues and expenses during
the reporting periods.  Actual amounts could differ from those estimates.

Shipping and Handling Fees and Costs--The Company adopted the provisions of
the Emerging Issues Task Force (EITF) Issue No. 00-10 "Accounting for Shipping
and Handling Fees and Costs". EITF 00-10 was effective for the Company in the
fourth quarter of 2001 and did not have a material effect on the Company's
financial statements.

Reclassification-Certain amounts in the 2001 financial statements have been
reclassified to conform to the presentation in the 2002 financial statements.

Recently Issued Accounting Standards-In August 2001, the FASB issued SFAS No.
143, "Accounting for Obligations Associated with the Retirement of Long-Lived
Assets" and SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets."  SFAS No. 143 establishes accounting standards for the
recognition and measurement of an asset retirement obligation.  SFAS No. 144
addresses accounting and reporting for the impairment or disposal of
long-lived assets, superceding SFAS No. 121 and Accounting Principles Board
Opinion No. 30. SFAS No. 143 and No. 144 are effective for the Company in the
first quarter of 2003.  The Company does not believe that the implementation
of these statements will have a material effect on its consolidated financial
statements.

In May 2002, the FASB issued SFAS No. 145 "Rescission of FAS Nos. 4,44 and 64,
Amendment of FAS 13 and Technical corrections as of April 2002."  This
Statement rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment
of Debt," and amends SFAS No. 64, "Extinguishments of Debt Made to Satisfy
Sinking-Fund Requirements."  This statement also rescinds SFAS No. 44
"Accounting for Intangible Assets of Motor Carriers."  This statement amends
SFAS No. 13, "Accounting for Leases," to eliminate an inconsistency between
the required accounting for sale-leaseback transactions and the required
accounting for certain lease modifications that have economic effects that are
similar to sale-leaseback transactions.  This statement also amends other
existing authoritative pronouncements to make various technical corrections,
clarify meanings, or describe their applicability under changed conditions. 
The provisions of this statement related to SFAS 13 are effective for
transactions occurring after May 15, 2002 with early application encouraged. 
All other provisions of this statement are effective for the Company in 2003
with early application encouraged.  The Company does not believe that the
implementation of this statement will have a material effect on its
consolidated financial statements.

On July 29, 2002, the FASB issued SFAS No. 146, "Accounting for Exit or
Disposal Activities."  SFAS 146 addresses significant issues regarding the
recognition, measurement, and reporting of costs that are associated with exit
and disposal activities, including restructuring activities that are currently
accounted for pursuant to the guidance that the Emerging Issues Task Force
(EITF) has set forth in EITF Issue No. 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring). SFAS 146 will be effective for
exit or disposal activities that are initiated after December 31, 2002. Early
application is encouraged.  The Company does not believe that the
implementation of this statement will have a material effect on its
consolidated financial statements.


<TABLE>
B.  INVENTORIES
<CAPTION>
The major classes of inventories at June 30 were as follows (in thousands):
  
                                              2002            2001             
                                              ----            ----
<S>                                         <C>             <C>
Finished parts                              $35,485         $37,711
Work-in-process                               5,668           4,931
Raw materials                                 3,351           3,850
                                             ------          ------
                                            $44,504         $46,492
                                             ======          ======
Inventories stated on a LIFO basis represent approximately 22% and 29% of
total inventories at June 30, 2002 and 2001, respectively.  The approximate
current cost of the LIFO inventories exceeded the LIFO cost by $20,776,000 and
$20,565,000 at June 30, 2002 and 2001, respectively. 
</TABLE>



<PAGE> 21

<TABLE>
C.  PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at June 30 were as follows (in thousands):
<CAPTION>
                                              2002            2001           
                                              ----            ----
<S>                                        <C>             <C>
Land                                       $  1,407        $  1,403
Buildings                                    23,428          22,407
Machinery and equipment                      89,086          91,773
                                             ------          ------
                                            113,921         115,583
Less accumulated depreciation                84,372          83,999
                                             ------          ------            
                                           $ 29,549        $ 31,584
                                             ======          ======
</TABLE>


D.  INVESTMENT IN AFFILIATE

In January of 2001, the Company sold its remaining 19.5% investment in Niigata
Converter Company, LTD., Japan (Niigata).  The total proceeds from the
transaction were $7.2 million, including the elimination of a $1.7 million
note receivable, resulting in a pre-tax gain of $3.9 million recognized in
2001.

The Company's investment in affiliate consists of a 25% interest in a domestic
distributor of Twin Disc products. Combined condensed financial data for the
investment in affiliate accounted for under the equity method of accounting
are summarized below (in thousands).  The statement of operations information
includes the results of operations of the domestic distributor from June 1
through May 31. 

<TABLE>
<CAPTION>
                                                 2002        2001         
                                                 ----        ----
<S>                                           <C>         <C>
Current assets                                $ 11,070    $ 11,485
Other assets                                     5,457       5,458
                                               -------     -------    
                                              $ 16,527    $ 16,943
                                               =======     =======

Current liabilities                           $  6,673    $  7,363
Other liabilities                                   97         149
Shareholders' equity                             9,757       9,431
                                               -------     -------
                                              $ 16,527    $ 16,943
                                               =======     =======
<CAPTION>  
                                      2002       2001       2000       
                                      ----       ----       ----
<S>                                <C>        <C>         <C>
Net sales                          $ 23,774   $ 27,516    $23,866
Gross profit                          8,300      9,832      9,813 
Net earnings                          1,925      3,281      3,624
</TABLE>


At June 30, 2002 and 2001, trade receivables from the 25% owned distributor
were $1,147,000 and $1,565,000, respectively.

Sales to the Company's 25% owned domestic distributor are the same terms and
conditions as sales to independent distributors.  Sales to this distributor
were $9,250,000, $11,259,000 and $11,159,000 in fiscal 2002, 2001 and 2000,
respectively.


<PAGE> 22
E. GOODWILL AND OTHER INTANGIBLES

In June 2001, the FASB issued SFAS 141, "Business Combinations", which
requires all business combinations initiated after June 30, 2001 to be
accounted for under the purchase method.  SFAS 141 also sets forth guidelines
for applying the purchase method of accounting in the determination of
intangible assets, including goodwill acquired in a business combination and
expands financial disclosures concerning business combinations consummated
after June 30, 2001.  On July 1, 2001, the Company transferred $1,600,000 of
finite lived intangible assets from goodwill to other assets in accordance
with the provisions of this statement.

Goodwill is tested for impairment at least annually and more frequently if an
event occurs which indicates the goodwill may be impaired.  The Company
performed impairment tests of its goodwill at July 1, 2001 and June 30, 2002
and determined that no impairment of the recorded goodwill existed.  Goodwill
at June 30, 2002 and 2001 of $12,311,000 and $13,719,000, respectively, is net
of accumulated amortization of $1,017,000 and $1,397,000, respectively.  There
were no other indefinite lived intangible assets identified by the Company at
June 30, 2002 or 2001.  Included in Other assets on the Company's Consolidated
Balance Sheet as of the end of June 30, 2002 and 2001, respectively, are the
following acquired intangible assets (in thousands):

<TABLE>
<CAPTION>

                                                         2002      2001
                                                         ----      ----
<S>                                                    <C>       <C>
Intangible assets with finite lives:
 Licensing agreements                                  $ 5,490   $ 5,490
 Other                                                   1,259     1,259
                                                        ------    ------
                                                         6,749     6,749

Accumulated amortization                                 3,611     2,885
                                                        ------    ------
Total                                                  $ 3,138   $ 3,864
                                                        ======    ======
<CAPTION>
Intangible amortization expense for the year ended June 30, 2002 was $726,000. 
Estimated intangible amortization expense for each of the subsequent five
fiscal years is as follows (in thousands):
                      Fiscal Year
                        <S>                               <C> 
                        2003                              $  726
                        2004                                 667
                        2005                                 482
                        2006                                 214
                        2007                                  60
                        Thereafter                           989
                                                           -----
                                                          $3,138
                                                           =====
<CAPTION>
The following proforma information reconciles the net income and earnings per
share reported for the fiscal year ended June 30, 2001 and June 30, 2000 to
adjusted net income and earnings per share to reflect the adoption of SFAS No.
142 (in thousands except earnings per share data):
                                                    2001             2000
                                                    ----             ----
<S>                                               <C>              <C>
Net income, as reported                           $6,169           $3,773
Goodwill amortization (net of tax)                   171              168
                                                   -----            -----
Net income, as adjusted                           $6,340           $3,941
                                                   =====            =====

Basic earnings per share, as reported             $ 2.20           $ 1.34
Goodwill amortization (net of tax)                   .06             0.06
                                                   -----            -----
Basic earnings per share, as adjusted             $ 2.26           $ 1.40 
                                                   =====            ===== 

Diluted earnings per share, as reported           $ 2.20           $ 1.34
Goodwill amortization (net of tax)                   .06             0.06
                                                   -----            -----
Diluted earnings per share, as adjusted           $ 2.26           $ 1.40
                                                   =====            =====
</TABLE>



<PAGE> 23
F. JOINT VENTURE

On April 2, 2001, the Company entered into a Joint Venture Agreement with
Niigata Engineering Co. LTD., Japan to form NICO Transmissions Co., Inc.
(NTC).  NTC is an engineering and marketing company supporting the Company's
expanding global marine product line as well as a distribution company for
Niigata's family of transmission products.

Pursuant to the terms of the Joint Venture Agreement, the Company contributed
$0.7 million in exchange for a controlling 66% ownership interest in NTC and
Niigata contributed $0.3 million for a 34% ownership interest.  NTC's balance
sheet and statement of operations as of and for the year ended March 31, 2002
is consolidated with the Company's balance sheet and statement of operations
as of and for the year ended June 30, 2002. 

In 2002, Niigata filed for creditor protection in Japan under the local
bankruptcy code.  The bankruptcy trustee is currently negotiating with another
company to assume the operations of Niigata.  Based upon current information,
management believes that Niigata will continue to participate in the joint
venture.  During 2002 the Company fully reserved for its receivable from
Niigata in the amount of $237,000 as a result of this filing.


G.  ACCRUED LIABILITIES

<TABLE>
<CAPTION>
Accrued liabilities at June 30 were as follows (in thousands):
                                                 2002        2001     
                                                 ----        ----
<S>                                           <C>         <C>
Salaries and wages                            $  4,875    $  4,533
Retirement benefits                              4,666       4,944
Warranty                                         5,582       4,604
Other                                            7,189       9,347
                                               -------     -------
                                              $ 22,312    $ 23,428
                                               =======     =======
</TABLE>


H.  DEBT

Notes payable consists of amounts borrowed under unsecured line of credit
agreements. Unused lines of credit total $23,195,000 at June 30, 2002.  These
lines of credit are available predominantly at the prime interest rate minus
0.5% and may be withdrawn at the option of the banks.  The weighted average
interest rate of the lines outstanding at June 30, 2002 and 2001 was 4.6% and
5.6%, respectively.

Included in long-term debt is $11,429,000 and $14,286,000 of 7.37% ten-year
unsecured notes at June 30, 2002 and 2001, respectively.  These notes contain
certain covenants, including the maintenance of a current ratio of not less
than 1.5 and consolidated net worth must be at least equal to the sum of
$61,810,000 plus 35% of consolidated net earnings for each quarter from July
1, 1996. As of June 30, 2002, the Company was in compliance with all debt
covenants.

During 2000, the Company entered into a $20,000,000 revolving loan agreement
which expires on September 30, 2003. This agreement contains certain
covenants, including restrictions on investments, acquisitions and
indebtedness. As of June 30, 2002, the Company was in compliance with all debt
covenants. The outstanding balance of $10,000,000 and $12,000,000 at June 30,
2002 and 2001, respectively, is classified as long-term debt.  Notes under
this agreement bear interest on a schedule determined by the Company's
leverage ratio and the LIBOR interest rate. The rate was 2.9% and 4.9% at June
30, 2002 and 2001, respectively.

<TABLE>
The aggregate scheduled maturities of outstanding long term debt obligations
in subsequent years are as follows:
<CAPTION>
                 Fiscal Year
                   <S>                         <C>
                   2003                        $ 2,857,000
                   2004                         12,869,000
                   2005                          2,857,000
                   2006                          2,857,000
                                                ---------- 
                                               $21,440,000
                                                ========== 
</TABLE>



<PAGE> 24
I.  LEASE COMMITMENTS

<TABLE>
Approximate future minimum rental commitments under noncancellable operating
leases are as follows (in thousands):
<CAPTION>
                 Fiscal Year
                   <S>                        <C>                
                   2003                       $2,605
                   2004                        1,912
                   2005                        1,069
                   2006                          653
                   2007                          499
                   Thereafter                  1,152
                                               -----
                                              $7,890
                                               =====
</TABLE>
       
Total rent expense for operating leases approximated $ 3,135,000, $3,444,000
and $3,023,000 in 2002, 2001 and 2000 respectively.


J.  SHAREHOLDERS' EQUITY
 
At June 30, 2002 and 2001, treasury stock consisted of 835,788 shares of
common stock.  The Company issued 150 shares of treasury stock in 2000 to
fulfill its obligations under stock option plans. The difference between the
cost of treasury shares issued and the option price is recorded in retained
earnings.  The Company acquired 2,058 shares of treasury stock in 2001. 

Cash dividends per share were $.70 in 2002, 2001 and 2000.   

In 1998, the Company's Board of Directors established a Shareholder Rights
Plan and distributed to shareholders one preferred stock purchase right for
each outstanding share of common stock.  Under certain circumstances, a right
may be exercised to purchase one one-hundredth of a share of Series A Junior
Preferred Stock at an exercise price of $160, subject to certain anti-dilution
adjustments.  The rights become exercisable ten (10) days after a public
announcement that a party or group has either acquired at least 15% (or at
least 25% in the case of existing holders who currently own 15% or more of the
common stock), or commenced a tender offer for at least 25% of the Company's
common stock.  Generally, after the rights become exercisable, if the Company
is a party to certain merger or business combination transactions, or
transfers 50% or more of its assets or earnings power, or certain other events
occur, each right will entitle its holders, other than the acquiring person,
to buy a number of shares of common stock of the Company, or of the other
party to the transaction, having a value of twice the exercise price of the
right.  The rights expire June 30, 2008, and may be redeemed by the Company
for $.05 per right at any time until ten (10) days following the stock
acquisition date.  The Company is authorized to issue 200,000 shares of
preferred stock, none of which have been issued.  The Company has designated
50,000 shares of the preferred stock for the purpose of the Shareholder Rights
Plan.


K.  BUSINESS SEGMENTS AND FOREIGN OPERATIONS

The Company and its subsidiaries are engaged in the manufacture and sale of
power transmission equipment. Principal products include industrial clutches,
hydraulic torque converters, fluid couplings, power-shift transmissions,
marine transmissions, universal joints, power take-offs and reduction gears. 
The Company sells to both domestic and foreign customers in a variety of
market areas, principally construction, industrial, energy and natural
resources and marine and agricultural.

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.

<TABLE>
Information about the Company's segments is summarized as follows (in
thousands):
<CAPTION>


<PAGE> 25
                                     Manufacturing   Distribution    Total
                                     -------------   ------------    ----- 
            2002
<S>                                  <C>             <C>           <C>  
Net sales                               $155,730       $61,848     $217,578  
Intra-segment sales                        6,696         1,870        8,566
Inter-segment sales                       22,784         6,843       29,627
Interest income                              468            43          511
Interest expense                           1,783           131        1,914
Income taxes                               1,940         1,362        3,302
Depreciation and amortization              5,409           210        5,619
Segment earnings                           2,247         2,366        4,613
Segment assets                           139,810        30,275      170,085
Expenditures for segment assets            1,851           212        2,063

<CAPTION>
            2001
<S>                                     <C>            <C>         <C>
Net sales                               $171,439       $45,337     $216,776  
Intra-segment sales                        7,953           304        8,257
Inter-segment sales                       27,009           724       27,733
Interest income                              393            76          469
Interest expense                           2,796           107        2,903
Income taxes                               4,072           851        4,923
Depreciation and amortization              5,997           269        6,266
Segment earnings                           5,562         1,365        6,927
Segment assets                           141,737        24,822      166,559
Expenditures for segment assets            3,245           247        3,492

<CAPTION>
            2000
<S>                                     <C>            <C>         <C> 
Net sales                               $166,067       $46,726     $212,793  
Intra-segment sales                        7,176           613        7,789
Inter-segment sales                       26,327           690       27,017  
Interest income                              321            73          394
Interest expense                           3,159           125        3,284
Income taxes                               3,904           916        4,820
Depreciation and amortization              6,589           264        6,853
Segment earnings                           3,464         1,587        5,051
Segment assets                           154,971        24,518      179,489
Expenditures for segment assets            1,766           368        2,134

<CAPTION>
The following is a reconciliation of reportable segment net sales, earnings
and assets, to the Company's consolidated totals (in thousands):

                                                2002        2001       2000 
Net sales                                       ----        ----       ----
<S>                                           <C>         <C>        <C>
 Total net sales from reportable segments     $217,578    $216,776   $212,793
 Elimination of inter-company sales            (38,193)    (35,990)   (34,806) 
                                               -------     -------    -------
  Total consolidated net sales                $179,385    $180,786   $177,987 
                                               =======     =======    =======
Earnings
 Total earnings from
  reportable segments                         $  4,613    $  6,927   $  5,051
 Other corporate expenses                       (2,555)       (758)    (1,278)
                                               -------     -------    -------
  Total consolidated net earnings             $  2,058    $  6,169   $  3,773
                                               =======     =======    =======
Assets
 Total assets for reportable segments         $170,085    $166,559  
 Elimination of inter-company assets           (18,831)    (16,802)  
 Corporate assets                                6,026       6,977    
                                               -------     -------   
  Total consolidated assets                   $157,280    $156,734  
                                               =======     =======   
<CAPTION>
Other significant items:
 
                                         Segment                 Consolidated
                                          Totals   Adjustments      Totals
             2002                        -------   -----------   ------------
<S>                                      <C>       <C>           <C>
Interest income                          $   511     $   (217)     $    294
Interest expense                           1,914         (214)        1,700
Income taxes                               3,302         (352)        2,950
Depreciation and amortization              5,619           90         5,709
Expenditures for segment assets            2,063            -         2,063


<PAGE> 26
<CAPTION>
             2001
<S>                                      <C>         <C>           <C>
Interest income                          $   469     $   (207)     $    262
Interest expense                           2,903         (709)        2,194
Income taxes                               4,923        1,999         6,922
Depreciation and amortization              6,266          126         6,392
Expenditures for segment assets            3,492            -         3,492

<CAPTION>
             2000
<S>                                      <C>         <C>           <C>
Interest income                          $   394     $   (150)     $    244
Interest expense                           3,284         (305)        2,979
Income taxes                               4,820         (526)        4,294
Depreciation and amortization              6,853          127         6,980
Expenditures for segment assets            2,134            -         2,134

All adjustments represent inter-company eliminations and corporate amounts.

<CAPTION>
Geographic information about the Company is summarized as follows (in
thousands):
                                                2002       2001       2000    
                                                ----       ----       ----
<S>                                           <C>        <C>        <C>
Net sales                           
 United States                                $108,288   $120,522   $113,377
 Other countries                                71,097     60,264     64,610
                                               -------    -------    -------
  Total                                       $179,385   $180,786   $177,987
                                               =======    =======    =======

Long-lived assets
 United States                                $ 59,530   $ 59,249  
 Belgium                                        10,596      8,221     
 Other countries                                 5,178      5,078     
 Elimination of inter-company assets            (7,478)    (4,939)   
                                               -------    -------   
  Total                                       $ 67,826   $ 67,609  
                                               =======    =======
</TABLE>

One customer accounted for approximately 11%, 11% and 10% of consolidated net
sales in 2002, 2001 and 2000, respectively.

L.   STOCK OPTION PLANS

During fiscal 1999, the Company adopted the Twin Disc, Incorporated 1998 Stock
Option Plan for Non-Employee Directors, a non-qualified plan for non-employee
directors to purchase up to 35,000 shares of common stock, and the Twin Disc,
Incorporated 1998 Incentive Compensation Plan, a plan where options are
determined to be non-qualified or incentive at the date of grant, for officers
and key employees to purchase up to 165,000 shares of common stock.  The plans
are administered by the Executive Selection and Compensation Committee of the
Board of Directors which has the authority to determine which officers and key
employees will be granted options. The grant of options to non-employee
directors is fixed at options to purchase 1,000 shares of common stock per
year or 600 at time of appointment.  Except as described in the following
sentence, all options allow for exercise prices not less than the grant date
fair market value, immediately vest and expire ten years after the date of
grant.  For options under the Incentive Compensation Plan, if the optionee
owns more than 10% of the total combined voting power of all classes of the
Company's stock, the price will be not less than 110% of the grant date fair
market value and the options expire five years after the grant date. In
addition, the Company has 69,550 incentive stock option plan options and
55,750 non-qualified stock option plan options outstanding at June 30, 2002
under the Twin Disc, Incorporated 1988 Incentive Stock Option plan and the
Twin Disc, Incorporated 1988 Non-Qualified Stock Option Plan for Officers, Key
Employees and Directors, respectively. The plans terminated during 1999.

Shares available for future options as of June 30 were as follows:

     
                                                           2002     2001 
                                                           ----     ----       
 1998 Stock Option Plan for Non-Employee Directors       14,650   20,650
 1998 Incentive Compensation Plan                        62,300  100,350

<TABLE>
Stock option transactions under the plans during 2002, 2001 and 2000 were
as follows:


<PAGE> 27
<CAPTION>
                                      Weighted         Weighted      Weighted
                                       Average          Average       Average
                                 2002   Price     2001   Price   2000  Price 
                                 ----  --------   ----  -------  ---- -------- 
<S>                            <C>     <C>       <C>    <C>      <C>   <C> 
Non-qualified stock options:                                  
  Options outstanding           
    at beginning of year        88,350  $21.31   83,600  $22.06  84,600 $22.55
  Granted                       14,500   15.05   15,750   17.47  12,000  19.94
  Canceled                        (500)  14.00  (11,000)  21.47 (13,000) 23.31
                               -------          -------          ------
  Options outstanding         
    at June 30                 102,350  $20.46   88,350  $21.31  83,600 $22.06
                               =======          =======          ======
<CAPTION>                           
  Options price range
   ($15.05 - $20.00)      
   <S>                                   <C>
    Number of shares                     66,650

    Weighted average price              $ 18.07

    Weighted average remaining life        6.25 years  

  Options price range
   ($21.875 - $28.75)      

    Number of shares                    35,700

    Weighted average price             $ 24.93

    Weighted average remaining life       5.84 years

<CAPTION>
                                      Weighted         Weighted      Weighted 
                                       Average          Average       Average 
                                2002    Price   2001     Price   2000  Price
                                ----  --------  ----    -------  ----  -------
<S>                          <C>      <C>      <C>      <C>     <C>    <C>
Incentive stock options:
  Options outstanding           
    at beginning of year      125,650  $22.29  119,400  $23.24  132,250 $23.70 
  Granted                      30,200   15.25   26,800   17.81   22,800  20.20 
  Canceled                     (9,850)  23.47  (20,550)  21.95  (35,500) 23.25
  Exercised                         -       -        -       -     (150) 14.00
                              -------          -------          -------
  Options outstanding   
    at June 30                146,000  $20.75  125,650  $22.29  119,400  23.24 
                              =======          =======          =======
<CAPTION>  
  Options price range
   ($15.05 - $20.00)      
    <S>                                 <C> 
    Number of shares                     92,700

    Weighted average price              $ 17.70 

    Weighted average remaining life        7.53 years


  Options price range
   ($21.875 - $31.625)      

    Number of shares                     53,300

    Weighted average price              $ 26.07

    Weighted average remaining life        6.05 years

The Company accounts for its stock option plans under the guidelines of
Accounting Principles Board Opinion No. 25.  Accordingly, no compensation cost
has been recognized in the statement of operations.  Had the Company
recognized compensation expense determined based on the fair value at the
grant date for awards under the plans, consistent with the method prescribed
by FAS 123, the net earnings and earnings per share would have been as follows
(in thousands, except per share amounts):
<CAPTION>

<PAGE> 28
                                            2002         2001         2000    
                                            ----         ----         ----
<S>                                       <C>          <C>          <C> 
         Net earnings
                As reported               $ 2,058      $ 6,169      $ 3,773
                Pro forma                   1,954        6,028        3,648

         Basic earnings per share
                As reported                $ 0.73       $ 2.20       $ 1.34
                Pro forma                    0.70         2.15         1.29

         Diluted earnings per share
                As reported                $ 0.73       $ 2.20       $ 1.34
                Pro forma                    0.70         2.15         1.29
</TABLE>
   
The above pro forma net earnings and earnings per share were computed using
the fair value of options at the date of grant (for options granted after June
1995) as calculated by the Black-Scholes option-pricing method and the
following assumptions: 23% volatility, 4.5% annual dividend yield, risk free
interest rate of 4.53%, a 5 year term and an exercise price equal to the fair
market value on the date of grant except for incentive options granted to
greater than 10% shareholders which are calculated using a 3 year term and an
exercise price equal to 110% of the fair market value on the date of grant.
For those options granted during 2002, 2001 and 2000 with exercise prices
equal to the grant date fair market value, the exercise prices and weighted
average fair values of the options were $15.05 and $2.37 in 2002, $17.54 and
$3.38 in 2001 and  $19.94 and $3.70 in 2000, respectively. For those options
granted with exercise prices greater than the grant date fair market value,
the exercise prices and weighted average fair values of the options were
$16.56 and $1.83 in 2002, $19.59 and $2.50 in 2001 and $21.93 and $2.43 in
2000, respectively.


M.  ENGINEERING AND DEVELOPMENT COSTS 

Engineering and development costs include research and development expenses
for new products, development and major improvements to existing products, and
other charges for ongoing efforts to refine existing products.  Research and
development costs charged to operations totaled $1,887,000, $1,929,000 and
$1,852,000 in 2002, 2001 and 2000 respectively.  Total engineering and
development costs were $6,569,000, $5,791,000 and $6,322,000 in 2002, 2001 and
2000 respectively.


N.  RETIREMENT PLANS

The Company has non-contributory, qualified defined benefit pension plans
covering substantially all domestic employees and certain foreign employees. 
Domestic plan benefits are based on years of service, and, for salaried
employees, on average compensation for benefits earned prior to January 1,
1997 and on a cash balance plan for benefits earned after January 1, 1997. 
The Company's funding policy for the plans covering domestic employees is to
contribute an actuarially determined amount which falls between the minimum
and maximum amount that can be contributed for federal income tax purposes. 
Domestic plan assets consist principally of listed equity and fixed income
securities.

In addition, the Company has unfunded, non-qualified retirement plans for
certain management employees and directors.  Benefits are based on final
average compensation and vest upon retirement from the Company.

In addition to providing pension benefits, the Company provides health care
and life insurance benefits for certain domestic retirees.  All employees
retiring after December 31, 1992, and electing to continue coverage through
the Company's group plan, are required to pay 100% of the premium cost. 


<PAGE> 29
The following table sets forth the Company's defined benefit pension plans'
and other postretirement benefit plan's funded status and the amounts
recognized in the Company's balance sheets and income statements as of June 30
(dollars in thousands):

<TABLE>
<CAPTION>                                                                      
                                                              Other 
                                                                    Post
                                                 Pension         Retirement
                                                 Benefits         Benefits
                                             ----------------  -------------- 
                                             2002     2001     2002     2001
                                             ----     ----     ----     ----  
<S>                                       <C>      <C>      <C>      <C>
Change in benefit obligation: 
  Benefit obligation, beginning of year   $114,025 $109,087 $ 31,967 $ 30,227
  Service cost                               1,361    1,284       17       16
  Interest cost                              8,203    8,333    2,281    2,298
  Actuarial loss                               908    4,094    2,277    3,110
  Benefits paid                             (9,350)  (8,773)  (3,543)  (3,684) 
                                           -------  -------   ------   ------ 
  Benefit obligation, end of year         $115,147 $114,025 $ 32,999 $ 31,967 
                                           =======  =======   ======  =======
Change in plan assets:
  Fair value of assets, beginning of year $ 98,352 $112,689 $     -   $     -
  Actual return on plan assets               1,209  (11,560)      -         - 
  Employer contribution                      2,194    5,996   3,543     3,684  
  Benefits paid                             (9,350)  (8,773) (3,543)   (3,684) 
                                           -------  -------  ------    ------  
  Fair value of assets, end of year       $ 92,405 $ 98,352 $     -  $      -
                                           =======  ======= ======    =======

Funded status                             $(22,742)$(15,673)$(32,999)$(31,967)
  Unrecognized net transition obligation       388      375        -        - 
  Unrecognized actuarial loss               36,339   30,008   11,279    9,582
  Unrecognized prior service cost            1,178    1,823        -        -
                                            ------   ------   ------  -------
Net amount recognized                     $ 15,163 $ 16,533 $(21,720)$(22,385)
                                            ======  =======  =======  ======= 

Amounts recognized in the balance sheet
 consist of:
  Prepaid benefit cost                    $      - $      6 $      - $      -
  Accrued benefit liability                (21,739) (14,578) (21,720) (22,385)
  Intangible asset                           1,383    1,988        -        -
  Deferred tax asset                        13,852   11,356        -        -
  Minimum pension liability adjustment      21,667   17,761        -        -
                                           -------   ------  -------  -------
Net amount recognized                     $ 15,163 $ 16,533 $(21,720)$(22,385)
                                           =======  =======  =======  =======
 
Weighted average assumptions as of June 30:
  Discount rate                               7.50%   7.50%    7.50%    7.50% 
  Expected return on plan assets              9.00%   9.00%
  Rate of compensation increase               5.00%   5.00%

<CAPTION>
                                                     Pension Benefits
                                                --------------------------
                                                 2002      2001      2000     
                                                 ----      ----      ----
<S>                                            <C>       <C>       <C>
Service cost                                   $ 1,361   $ 1,284   $ 1,518
Interest cost                                    8,203     8,333     8,028
Expected return on plan assets                  (8,476)   (9,837)   (8,532)
Amortization of prior service cost                 124       151       672
Amortization of transition obligation               49       181       179
Unrecognized net loss                            1,802         -         -
Recognized net actuarial loss                      501       456       699
                                                ------    ------    ------ 
Net periodic benefit cost                      $ 3,564   $   568   $ 2,564
                                                ======    ======    ======


<PAGE> 30
                                                 Postretirement Benefits
                                                --------------------------
                                                 2002      2001      2000      
                                                 ----      ----      ----
Service cost                                   $    17   $    16   $    19
Interest cost                                    2,281     2,298     2,265
Recognized net actuarial loss                      580       345       457
                                                ------    ------    ------
Net periodic benefit cost                      $ 2,878   $ 2,659   $ 2,741 
                                                ======    ======    ======
</TABLE>


The pension plans held 62,402 shares of Company stock with a fair market value
of $873,000 and $989,000 at June 30, 2002 and 2001, respectively.

The assumed weighted average health care cost trend rate was 10% in 2002,
declining to 6% in 2006.  A 1% increase in the assumed health care cost trend
would increase the accumulated postretirement benefit obligation by
approximately $2.2 million and the service and interest cost by approximately
$160,000. A 1% decrease in the assumed health care cost trend would decrease
the accumulated postretirement benefit obligation by approximately $2.0
million and the service and interest cost by approximately $150,000.

The Company sponsors defined contribution plans covering substantially all
domestic employees and certain foreign employees. These plans provide for
employer contributions based primarily on employee participation.  The total
expense under the plans was $1,780,000, $1,591,000 and $1,699,000 in 2002,
2001, and 2000 respectively.


O.  INCOME TAXES

<TABLE>
<CAPTION>
United States and foreign earnings before income taxes were as follows (in
thousands):

                                        2002      2001      2000     
                                        ----      ----      ----
     <S>                              <C>      <C>        <C>
     United States                    $   568   $ 3,457   $   367
     Foreign                            4,440     9,634     7,700
                                       ------    ------    ------ 
                                      $ 5,008   $13,091   $ 8,067
                                       ======    ======    ======
<CAPTION>
The provision (credit) for income taxes is comprised of the following (in
thousands):

                                        2002      2001      2000      
                                        ----      ----      ----
     <S>                              <C>       <C>       <C>
     Currently payable:
       Federal                        $   168   $ 2,552   $   664
       State                               70       101         6
       Foreign                          2,334     4,455     3,908
                                       ------    ------    ------
                                        2,572     7,108     4,578
                                       ------    ------    ------

     Deferred:
       Federal                            441      (564)     (137) 
       State                              (83)      494       220
       Foreign                             20      (116)     (367)
                                       ------    ------    ------
                                          378      (186)     (284)             
                                     ------    ------    ------
                                     $  2,950   $ 6,922   $ 4,294
                                       ======    ======    ======              
<CAPTION>
The components of the net deferred tax asset as of June 30 are summarized in
the table below (in thousands). 


<PAGE> 31
                                                2002             2001         
                                                ----             ----
<S>                                           <C>              <C>
Deferred tax assets:
  Retirement plans and employee benefits      $16,371          $13,241
  Alternative minimum tax credit
    carryforwards                                 690            1,453
  Foreign tax credit carryforwards                920            2,414
  State net operating loss and other
    state credit carryforwards                    519              531
  Other                                         3,791            4,124
                                               ------           ------
                                               22,291           21,763
                                               ------           ------
Deferred tax liabilities:
  Property, plant and equipment                 4,620            5,631
  Other                                             -                -
                                               ------           ------
                                                4,620            5,631
                                               ------           ------
Valuation allowance                              (920)          (1,500) 
                                               ------           ------
Total net deferred tax assets                 $16,751          $14,632
                                               ======           ======
<CAPTION>
Management believes that it is more likely than not that the results of future
operations will generate sufficient taxable income to realize deferred tax
assets except for certain foreign tax credit carryforwards.  Of the $920 in
foreign tax credit carryforwards at June 30, 2002, $146 will expire in 2003,
$258 will expire in 2005, $223 will expire in 2006 and $293 will expire in
2007.  The alternative minimum tax credit carryforwards will be carried
forward indefinitely.  Of the $467 of state net operating loss carryforwards
at June 30, 2002, $444 will expire in 2014 and $23 will expire in 2015.  Of
the $52 of state credit carryforwards, $18 will expire in 2014, $17 will
expire in 2015 and $17 will expire in 2016.  


Following is a reconciliation of the applicable U.S. federal income taxes to
the actual income taxes reflected in the statements of operations:

                                                 2002      2001      2000    
                                                 ----      ----      ----
   <S>                                         <C>       <C>        <C>
   U.S. federal income tax at 34%              $ 1,749   $ 4,451    $2,743   
   Increases (reductions)
       in tax resulting from:
     Foreign tax items                             144       234     1,387     
     State taxes                                  (298)      351       149
     Valuation allowance                           920     1,500         - 
     Disposition of investment in subsidiary       522       286         -
     Other, net                                    (87)      100        15     
                                                 -----     -----     -----
                                               $ 2,950   $ 6,922    $4,294
                                                 =====     =====     =====
</TABLE>

The Company has not recorded deferred income taxes applicable to undistributed
earnings of foreign subsidiaries that are indefinitely reinvested in foreign
operations.  The undistributed earnings amount to approximately $16.8 million
at June 30, 2002.  If these earnings were remitted to the U.S., they would be
subject to U.S. income tax.  However this tax would be substantially less than
the U.S. statutory income tax because of available foreign tax credits.


P.  CONTINGENCIES

The Company is involved in various stages of investigation relative to
hazardous waste sites, two of which are on the United States EPA National
Priorities List (Superfund sites).  The Company's assigned responsibility at
each of the Superfund sites is less than 3%. The Company has also been
requested to provide administrative information related to two other potential
Superfund sites but has not yet been identified as a potentially responsible
party.  Additionally, the Company is subject to certain product liability
matters in the normal course of business.

At June 30, 2002 and June 30, 2001, the Company has accrued approximately
$632,000 and $1,050,000, respectively which represents management's best
estimate available for possible losses related to these contingencies.  This
amount has been provided over the past several years.  Based on the
information available, the Company does not expect that any unrecorded
liability related to these matters would materially affect the consolidated
financial position, results of operations or cash flows.


<PAGE> 32

Q.  RESTRUCTURING OF OPERATIONS

During the fourth quarter of 2001, the Company recorded a pre-tax
restructuring charge of $1.5 million in connection with the reduction of its
workforce and consolidation of facilities.  These actions were taken in an
effort to streamline the Company's cost structure and utilization of available
capacity at other locations.  The charge included $1.0 million in employee
termination and severance benefits, $0.3 million for remaining costs related
to pre-existing leases, $0.1 million for the estimated loss on fixed assets
which were held for disposal, and $0.1 million in miscellaneous costs.
Approximately $0.7 million of the charge for employee termination and
severance benefits was classified to cost of goods sold with the remaining
$0.3 million charged to marketing, engineering and administrative expenses.  A
total of 46 employees were terminated; 22 production employees and 24 salaried
employees.  In 2001, the Company made cash payments of $0.1 million and also
charged the $0.1 million loss on fixed assets against the reserve. As of June
30, 2001, the reserve had a balance of $1.3 million.  In 2002, cash payments
of $1.1 million were charged against the reserve and $0.1 million was reversed
against cost of goods sold.  As of June 30, 2002, a balance of $0.1 million
remains, consisting primarily of reserves for idle leased facilities. 


<PAGE> 33
 
     REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT
SCHEDULE





To the Board of Directors
Twin Disc, Incorporated
Racine, Wisconsin

Our audits of the consolidated financial statements referred to in our report
dated July 19, 2002 appearing on page 11 of this form 10-K also included an
audit of the information set forth in the Financial Statement Schedule listed
in Item 14(a)(2)of this Form 10-K. In our opinion, this Financial Statement
Schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.


/s/ PricewaterhouseCoopers LLP
------------------------------ 
PricewaterhouseCoopers LLP



Milwaukee, Wisconsin
July 19, 2002




<TABLE>
TWIN DISC, INCORPORATED AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
for the years ended June 30, 2002, 2001 and 2000
(In thousands)
<CAPTION>
                                        Additions
                            Balance at  Charged to                  Balance at
                            Beginning   Costs and                    end of
Description                 of Period   Expenses    Deductions<F1>  of Period  
-----------------------     ---------   ----------  --------------  ---------
2002:
<S>                         <C>          <C>        <C>             <C>
Allowance for losses on
  accounts receivable         $ 699       $ 336       $ 253          $  782

Reserve for inventory
  obsolescence                3,346       2,178         931           4,593
                                  
<CAPTION>
2001:
<S>                         <C>          <C>        <C>              <C>
Allowance for losses on
  accounts receivable         $ 704       $ 157       $ 162          $  699

Reserve for inventory
  obsolescence                1,371       2,470         495           3,346

<CAPTION>
2000:
<S>                          <C>          <C>        <C>             <C>
Allowance for losses on
 accounts receivable          $ 534       $ 371       $ 201          $  704

Reserve for inventory  
  obsolescence                1,161       1,212       1,002           1,371
<FN>
<F1>
Accounts receivable written-off and inventory disposed of during the year and
other adjustments (primarily foreign currency translation adjustments.
</FN>
</TABLE>



<PAGE> 34

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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




                                      By /s/ FRED H. TIMM 
                                         Fred H. Timm, Vice President -
                                         Administration and Secretary
                                         (Chief Accounting Officer)

September 18, 2002

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.




                                   (  By   /s/ MICHAEL E. BATTEN  
                                   (      Michael E. Batten, Chairman,
                                   (      Chief Executive Officer and Director
                                   (
                                   (
                                   (
September 18, 2002                 (  By  /s/ MICHAEL H. JOYCE   
                                   (     Michael H. Joyce, President,
                                   (     Chief Operating Officer and Director
                                   (
                                   (
                                   (
                                   ( By   /s/ JAMES O. PARRISH   
                                   (     James O. Parrish, Vice President-
                                   (     Finance, Treasurer and Director
                                   (     Chief Financial Officer)



                                   (     Paul J. Powers, Director
September 18, 2002                 (     David L. Swift, Director
                                   (     John A. Mellowes, Director
                                   (     George E. Wardeberg, Director
                                   (     David R. Zimmer, Director
                                   (     David B. Rayburn, Director
                                   (
                                   (
                                   ( By   /s/ JAMES O. PARRISH   
                                   (     James O. Parrish, Attorney in Fact


<PAGE> 35


CERTIFICATIONS

I, Michael E. Batten, certify that:

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

2.Based on my knowledge, this annual 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 annual report; and

3.Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report.



September 18, 2002                       /s/ MICHAEL E. BATTEN  
                                         Michael E. Batten, Chairman,
                                         Chief Executive Officer and Director

I, James O. Parrish, certify that:

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

2.Based on my knowledge, this annual 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 annual report; and

3.Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report.



September 18, 2002                       /s/ JAMES O. PARRISH   
                                         James O. Parrish, Vice President-     
                                         Finance, Treasurer and Director       
                                         Chief Financial Officer


<PAGE> 36

EXHIBIT INDEX
TWIN DISC, INCORPORATED
10-K for Year Ended June 30, 2002

Exhibit   Description                                           Filed Herewith

    3a)   Articles of Incorporation, as restated October 21, 1988
          (Incorporated by reference to Exhibit 3(a) of the 
          Company's Form 10-K for the year ended June 30, 1989).

     b)   Corporate Bylaws, as amended through June 22, 1998
          (Incorporated by reference to Exhibit 3(b) of the
          Company's Form 10-K for the year ended June 30, 1998).

    4a)   Form of Rights Agreement dated as of April 17, 1998 by
          and between the Company and the Firstar Trust Company, 
          as Rights Agent, with Form of Rights Certificate
          (Incorporated by reference to Exhibits 1 and 2 of the
          Company's Form 8-A dated May 4, 1998).

     b)   Announcement of Shareholder Rights Plan per news release
          dated April 17, 1998 (Incorporated by reference to Exhibit
          6(a), of the Company's Form 10-Q dated May 4, 1998).

Material Contracts
   10a)   The 1988 Incentive Stock Option Plan (Incorporated by
          reference to Exhibit B of the Proxy Statement for the
          Annual Meeting of Shareholders held on October 21, 1988).

     b)   The 1988 Non-Qualified Stock Option Plan for Officers,
          Key Employees and Directors (Incorporated by reference
          to Exhibit C of the Proxy Statement for the Annual Meeting
          of Shareholders held on October 21,1988).

     c)   Amendment to 1988 Incentive Stock Option Plan of Twin Disc,
          Incorporated (Incorporated by reference to Exhibit A of the
          Proxy Statement for the Annual Meeting of Shareholders held
          on October 15, 1993).

     d)   Amendment to 1988 Non-Qualified Incentive Stock Option Plan
          for Officers, Key Employees and Directors of Twin Disc,
          Incorporated (Incorporated by reference to Exhibit B of the
          Proxy Statement for the Annual Meeting of Shareholders
          held on October 15, 1993).

     e)   Form of Severance Agreement for Senior Officers and form of
          Severance Agreement for Other Officers (Incorporated by
          reference to Exhibit 10(c) and (d), respectively, of the
          Company's Form 10-K for the year ended June 30, 1989).

     f)   Supplemental Retirement Plan (Incorporated by reference to
          Exhibit 10(f) of the Company's Form 10-K for the year ended
          June 30, 1998).

     g)   Director Tenure and Retirement Policy (Incorporated by
          reference to Exhibit 10(f) of the Company's Form 10-K for
          the year ended June 30, 1993).

   10h)   Form of Twin Disc, Incorporated Corporate Short Term
          Incentive Plan (Incorporated by reference to Exhibit
          10(g) of the Company's Form 10-K for the year ended
          June 30, 1993).

     i)   The 1998 Incentive Compensation Plan (Incorporated by
          reference to Exhibit A of the Proxy Statement for the
          Annual Meeting of Shareholders held on October 16, 1998).

     j)   The 1998 Stock Option Plan for Non-Employee Directors
          (Incorporated by reference to Exhibit B of the Proxy 
          Statement for the Annual Meeting of Shareholders held
          on October 16, 1998).

     21   Subsidiaries of the Registrant                                 X

     23   Consent of Independent Accountants                             X

     24   Power of Attorney                                              X

    99a   Certification pursuant to 18 U.S.C. Section 1350               X

    99b   Certification pursuant to 18 U.S.C. Section 1350               X
































<PAGE> 1
                                  EXHIBIT 21


                        SUBSIDIARIES OF THE REGISTRANT

Twin Disc, Incorporated, the registrant (a Wisconsin Corporation) owns
directly or indirectly 100% of the following subsidiaries:

     1.     Twin Disc International, S.A. (a Belgian corporation)

     2.     Twin Disc Technodrive Srl  (an Italian corporation)

     3.     Twin Disc Srl (an Italian corporation)

     4.     Twin Disc (Pacific) Pty. Ltd. (an Australian corporation)

     5.     Twin Disc (Far East) Ltd. (a Delaware corporation operating in
            Singapore and Hong Kong)

     6.     TD Electronics, Inc. (a Wisconsin corporation, dissolved as of     
            July 1, 2002; now operating as a division of the Company.)

     7.     Mill-Log Equipment Co., Inc. (an Oregon corporation)

     8.     Twin Disc South East, Inc. (a Florida corporation)

     9.     Technodrive SARL (A French corporation)

Twin Disc, Incorporated also owns 66% of NICO Transmissions Co., Inc.

The registrant has no parent nor any other subsidiaries.  All of the above
subsidiaries are included in the consolidated financial statements.





<PAGE> 1
                                  EXHIBIT 23



                      CONSENT OF INDEPENDENT ACCOUNTANTS


We consent to the incorporation by reference in the registration statements of
Twin Disc, Incorporated on Form S-8 (Twin Disc, Incorporated 1988 Incentive
Stock Option Plan , Twin Disc, Incorporated 1988 Non-Qualified Stock Option
Plan for Officers, Key Employees and Directors, Twin Disc, Incorporated 1998
Incentive Compensation Plan and Twin Disc, Incorporated 1998 Stock Option Plan
for Non-Employee Directors, Twin Disc, Incorporated - The Accelerator 401K
Savings Plan) of our reports dated July 19, 2002, on our audits of the
consolidated financial statements and Financial Statement Schedule of Twin
Disc, Incorporated as of June 30, 2002 and 2001 and for the years ended June
30, 2002, 2001 and 2000, which reports are included in this Annual Report on
Form 10-K.


PricewaterhouseCoopers  LLP


Milwaukee, Wisconsin
September 18, 2002




<PAGE> 1
                                  EXHIBIT 24



                               POWER OF ATTORNEY



The undersigned directors of Twin Disc, Incorporated hereby severally
constitute Michael E. Batten and James O. Parrish , and each of them singly,
true and lawful attorneys with full power to them, and each of them, singly,
to sign for us and in our names as directors the Form 10-K Annual Report for
the fiscal year ended June 30, 2002 pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, and generally do all such things in our names
and behalf as directors to enable Twin Disc, Incorporated to comply with the
provisions  of the Securities and Exchange Act of 1934 and all requirements of
the Securities and Exchange Commission, hereby ratifying and confirming our
signatures so they may be signed by our attorneys, or either of them, as set
forth below.



 /s/ JOHN A. MELLOWES                     )
John A. Mellowes, Director                )
                                          )
                                          )
 /s/ PAUL J. POWER                        )
Paul J. Powers, Director                  )
                                          )
                                          )
 /s/ DAVID B. RAYBURN                     )
David B. Rayburn, Director                )                                    
                                          )
                                          )             July 26, 2002
 /s/ DAVID L. SWIFT                       )
David L. Swift, Director                  )
                                          )
                                          )
 /s/ GEORGE E. WARDEBERG                  )
George E. Wardeberg, Director             )
                                          )
                                          )
 /s/ DAVID R. ZIMMER                      )
David R. Zimmer, Director                 )







<PAGE> 1

EXHIBIT 99a



CERTIFICATION PURSUANT TO 
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO 
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Twin Disc, Incorporated (the
"Company") on Form 10-K for the fiscal year ending June 30, 2002, as filed
with the Securities and Exchange Commission as of the date hereof (the
"Report"), I, Michael E. Batten, Chairman and Chief Executive Officer of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my
knowledge:

(1) the Report fully complies with Section 13(a) of the Securities Exchange  
Act of 1934, and 

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


September 18, 2002                        /s/ Michael E. Batten
                                          Michael E. Batten
                                          Chairman, Chief Executive Officer


     






<PAGE> 1


EXHIBIT 99b



CERTIFICATION PURSUANT TO 
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO 
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Twin Disc, Incorporated (the
"Company") on Form 10-K for the fiscal year ending June 30, 2002, as filed
with the Securities and Exchange Commission as of the date hereof (the
"Report"), I, James O. Parrish, Vice President B Finance, Treasurer and Chief
Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to
the best of my knowledge:

(1) the Report fully complies with Section 13(a) of the Securities Exchange  
Act of 1934, and 

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


September 18, 2002                      /s/ James O. Parrish
                                        James O. Parrish
                                        Vice President--Finance/Treasurer
                                        Chief Financial Officer