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Significant Accounting Policies [Text Block]

A.	Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared by Twin Disc, Incorporated (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of the Company, include all adjustments, consisting only of normal recurring items, necessary for a fair statement of results for each period. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules and regulations. The Company believes that the disclosures made are adequate to make the information presented

not

misleading. It is suggested that these financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report filed on Form

-K for

June 30, 2018.

The year-end condensed balance sheet data was derived from audited financial statements, but does

not

include all disclosures required by accounting principles generally accepted in the United States.

The unaudited condensed consolidated financial statements and information included in this Quarterly Report on Form

-Q (“Form

-Q”) includes the financial results of Veth Propulsion Holding BV (“Veth Propulsion”) for the period beginning

July 2, 2018

through

September 28, 2018.

The financial results included in this Form

-Q related to the acquisition method of accounting for the Veth Propulsion acquisition are subject to change as the acquisition method accounting is

not

yet finalized and dependent upon the finalization of management’s review of certain independent valuations and studies that are still in process. See Note B, “Acquisition of Veth Propulsion Holding BV” for further information about the acquisition and related transactions and the acquisition accounting.

Recently Adopted Accounting Standards

a.	In May 2014, the Financial Accounting Standards Board (“FASB”) issued updated guidance (ASU 2014 - 09 ) on revenue from contracts with customers. This revenue recognition guidance supersedes existing guidance, including industry-specific guidance. The core principle is that an entity should recognize revenue to depict the transfer of control over promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance identifies steps to apply in achieving this principle. The Company adopted this guidance effective July 1, 2018, using the modified retrospective method and applied the cumulative effect to its retained earnings balance as of that date. Prior periods presented were not retrospectively adjusted for this change. The Company has applied the new revenue recognition standard only to contracts that were not completed as of July 1, 2018.

	The Company determined that deferral of revenue is appropriate for certain agreements where the performance of services after product delivery is required. Such services primarily pertain to technical commissioning services by its distribution entities in its marine business, whereby the Company’s technicians calibrate the controls and transmission to ensure proper performance for the customer’s specific application. This service helps identify issues with the ship's design or performance that need to be remediated by the ship builder or other component suppliers prior to the ship being officially accepted into service by the ship buyer. The cumulative effect adjustment of adopting the new standard is not significant to the Company’s results of operations and financial condition.

b.	In February 2016, the FASB issued guidance (ASU 2016 - 02 ) which replaces the existing guidance for leases. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. The Company elected to early adopt the standard effective July 1, 2018 concurrent with the adoption of ASU 2014 - 09, Revenue from Contracts with Customers, using the modified retrospective approach at the beginning of the earliest comparative period presented in the financial statements, which required the Company to restate each prior reporting period presented.

	For operating leases in which the Company is a lessee, the Company concluded that all existing operating leases under the old guidance continue to be classified as operating leases under the new guidance, and all existing capital leases under the old guidance are classified as finance leases under the new guidance. The Company excluded any lease contracts with terms of twelve months or less as of the adoption date. The Company has lease agreements with lease and non-lease components, which are generally accounted for as separate lease components. The Company accounts for short-term leases on a straight-line basis over the lease term.

The following table presents the effect of the adoption of ASU

2016

on the Company’s condensed consolidated balance sheet as of

June 30, 2018:

	June 30, 2018		Adoption		June 30, 2018
	As Reported		Impact		Restated
Property, plant and equipment, net	$	48,940	$	6,527	$	55,467
Lease obligations		-		6,527		6,527

	The adoption of ASU 2014 - 09 and ASU 2016 - 02 did not have an impact on the Company’s condensed consolidated statement of operations and comprehensive income or condensed consolidated statement of cash flows for the quarter ended September 29, 2017.

c.	In March 2017, the FASB issued guidance (ASU 2017 - 07 ) intended to improve the presentation of net periodic pension cost and net periodic postretirement cost. This guidance requires that an employer report the service costs component in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the statement of operations separately from the service cost component and outside the subtotal of income from operations. The Company adopted this guidance effective July 1, 2018 on a retrospective basis, which resulted in the reclassification of certain amounts from cost of goods sold and marketing, engineering and administrative expenses to other expense (income), net in the condensed consolidated statements of operations and comprehensive income. As a result, prior period amounts impacted have been revised accordingly.

	The following table presents the effect of the adoption of ASU 2017 - 07 on the Company’s condensed consolidated statements of operations and comprehensive income for the quarter ended September 29, 2017:

	September 29, 2017			Adoption			September 29, 2017
	As Reported			Impact			Restated
Cost of goods sold	$	31,169		$	(97	)	$	31,072
Gross profit		13,895			97			13,992
Marketing, engineering and administrative expenses		13,668			(274	)		13,394
Income (loss) from operations		(991	)		371			(620	)
Other expense (income), net		198			371			569

February 2018,

the FASB issued guidance (ASU

2018

) intended to eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act by allowing a reclassification from accumulated other comprehensive income to retained earnings. The Company elected to early adopt this guidance effective

July 1, 2018

by making a reclassification of

$6,903

from accumulated other comprehensive loss to retained earnings.

October 2016,

the FASB issued updated guidance (ASU

2016

) that changes the recognition of income tax consequences of an intra-entity transfer of an asset other than inventory. The Company adopted this guidance effective

July 1, 2018.

The adoption of this guidance did

not

have a material impact on the Company’s financial statements and disclosures.

August 2016,

the FASB issued updated guidance (ASU

2016

) that addresses

eight

specific cash flow issues with the objective of reducing the existing diversity in practice. The Company adopted this guidance effective

July 1, 2018.

The adoption of this guidance did

not

have a material impact on the Company’s financial statements and disclosures.

New Accounting Releases

August 2018,

the FASB issued updated guidance (ASU

2018

) as part of the disclosure framework project, which focuses on improving the effectiveness of disclosures in the notes to the financial statements. The amendments in this update modify the disclosure requirements on fair value measurements in Topic

820,

Fair Value Measurement. The amendments in this guidance are effective for fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2019 (

the Company’s fiscal

2021

), with early adoption permitted. The Company is currently evaluating the potential impact of this guidance on the Company’s disclosures.

August 2018,

the FASB issued updated guidance (ASU

2018

) intended to modify the disclosure requirements for employers that sponsor defined pension or postretirement plans. The amendments in this guidance are effective for fiscal years ending after

December 15, 2020 (

the Company’s fiscal

2021

), with early adoption permitted. The Company is currently evaluating the potential impact of this guidance on the Company’s disclosures.

August 2018,

the SEC issued Release

No.

10532,

Disclosure Update and Simplification. In addition to eliminating certain disclosure requirements, this release also amends the interim financial statement requirements to require provision of the information required by Regulation S-

Rule

for the current and comparative year-to-date periods, with subtotals for each interim period. Rule

requires a reconciliation of stockholders’ equity beginning and ending balances for each period for which a statement of comprehensive income is required to be filed. The release is effective on

November 5, 2018,

the Company’s

second

fiscal quarter of fiscal year

2019.

Special Note Regarding Smaller Reporting Company Status

June 2018,

the SEC issued Release

10513;

83550,

Amendments to Smaller Reporting Company Definition, which changes the definition of a smaller reporting company in Rule

12b

of the Securities Exchange Act of

1934,

as amended. Under this release, the new thresholds for qualifying are (

) public float of less than

$250

million or (

) annual revenue of less than

$100

million in annual revenue and public float of less than

$700

million (including

public float). The rule change is effective on

September 10, 2018,

the Company’s

first

fiscal quarter of fiscal year

2019.

Under this release, the Company currently qualifies as a smaller reporting company based on its public float as of the last business day of its

second

fiscal quarter of fiscal year

2018.

A smaller reporting company

may

choose to comply with scaled or non-scaled financial and non-financial disclosure requirements on an item-by-item basis. The Company has

not

scaled its disclosures of financial and non-financial information in this Quarterly Report. The Company

may

determine to provide scaled disclosures of financial or non-financial information in future quarterly reports, annual reports and/or proxy statements if it remains a smaller reporting company under SEC rules.

Note B - Acquisition of Veth Propulsion Holding BV

3 Months Ended

Sep. 28, 2018

Business Combination Disclosure [Text Block]

B.	Acquisition of Veth Propulsion Holding BV

July 2, 2018,

the Company completed the acquisition of

100%

of the outstanding common stock of Veth Propulsion. Veth Propulsion is a global manufacturer of highly-engineered primary and auxiliary propulsions and propulsion machinery for maritime vessels, including rudder propellers, bow thrusters, generator sets and engine service and repair, based in the Netherlands. These products are complementary to and expand the Company’s current product offerings in the marine and propulsion markets. Prior to the acquisition, the Company was a distributor of Veth products in North America and Asia. This acquisition was pursuant to a Share Purchase Agreement (“Purchase Agreement”) entered into by Twin Disc NL Holding B.V., a wholly-owned subsidiary of the Company, with Het Komt Vast Goed B.V., the parent of Veth Propulsion, on

June 13, 2018.

Under the terms of the Purchase Agreement, the Company paid an aggregate of approximately

$60,729

in cash at closing, which included a base payment plus adjustments for net cash and working capital. This amount is subject to a final determination of working capital adjustments and an earn-out. The maximum earn-out is approximately

$4,000.

The earn-out will be paid if the earnings before interest, tax, depreciation and amortization of Veth Propulsion’s fiscal

2018

as defined in the Purchase Agreement (“EBITDA”) exceeds the agreed upon threshold amount. The earn-out is payable in the form of Company stock or cash, and will be determined by

April 2019.

The Company financed the payment of the cash consideration through borrowings of

$60,729

under a new credit agreement entered into on

June 29, 2018

with BMO Harris Bank N.A. (the “Credit Agreement”). The Credit Agreement is further discussed in Note L, Debt.

Consideration Transferred

The following table summarizes the consideration transferred at the acquisition date:

Cash (a)	$	60,729
Fair value of contingent consideration (b)		2,927
Total	$	63,656

In the statement of cash flows, the cash used in the acquisition of Veth Propulsion in the amount of

$59,649

is net of the cash, including restricted cash, acquired in the transaction, of

$1,080

(see below for fair value of assets acquired and liabilities assumed).

This pertains to the fair value of the earn-out, which was estimated based on a probability-weighted approach.

Fair Value Estimate of Assets Acquired and Liabilities Assumed

The Company is continuing its review of the fair value estimate of assets acquired and liabilities assumed during the measurement period, which will conclude as soon as the necessary information regarding the facts and circumstances that existed as of the acquisition date is obtained, or otherwise

not

available. This measurement period will

not

exceed

one

year from the acquisition date. At the effective date of the acquisition, the assets acquired and liabilities assumed are required to be measured at fair value. The fair value estimates are pending completion of several elements, including the finalization of an independent appraisal and final review by the Company. Accordingly, until the fair values are final, there could be material adjustments to the Company’s consolidated financial statements, including changes to depreciation and amortization expense related to the valuation of property and equipment and intangible assets acquired and their respective useful lives, among other adjustments.

Upon the final determination of the fair value of assets acquired and liabilities assumed, the excess of the purchase price over such fair values is allocated to goodwill. The final determination of the purchase price, fair values and resulting goodwill

may

differ significantly from what is reflected in these consolidated financial statements.

The following summarizes the preliminary estimate of fair value of the assets acquired and liabilities assumed at the acquisition date:

Cash, including restricted cash	$	1,080		(a)
Accounts receivable		10,032		(b)
Inventories		27,641		(c)
Property, plant and equipment		1,537		(d)
Intangibles		23,700		(e)
Other assets		259
Accounts payable and customer deposits		(17,297	)
Other current liabilities		(861	)
Deferred tax liability		(7,104	)	(f)
Total net assets acquired		38,987
Goodwill		24,669		(g)
Total consideration	$	63,656

The following information provides further details about the estimated net step-up in fair value and/or the estimated fair value at the acquisition date for some key balance sheet items.

(a) Included in cash is restricted cash in the amount of

$435.

This amount is restricted and

not

available for general business use in order to guarantee performance obligations by Veth Propulsion under certain customer contracts. A significant majority of these arrangements are set to expire in

days after

September 28, 2018

and they are

not

expected to be renewed.

(b) Accounts receivable represents contractual amounts receivable from customers less an allowance for doubtful accounts. This amount approximates fair value.

Raw materials	$	13,297
Projects work in progress at fair value		14,344
Inventories at fair value		27,641
Inventories at book value		22,926
Step-up	$	4,715

As of the effective date of the acquisition, inventory is required to be measured at fair value. Raw materials are typically utilized in operations within

one

year of purchase and therefore book values approximate fair value. Projects work in progress are estimated to be approximately

70%

complete, and the step to fair value less estimated costs to complete and sell resulted in a step up value of approximately

$4,715.

(d) The determination of property, plant and equipment is currently in progress. This preliminary amount assumes book value approximates fair value.

(e) Intangible assets consist of:

	Estimated fair value		Estimated average useful lives		Annual amortization
Customer relationships	$	13,600		12	$	1,133
Technology and know-how		8,300		7		1,186
Tradename		1,800		10		180
Total	$	23,700			$	2,499

The preliminary fair values were determined primarily using an income method, which utilizes financial forecasts of expected future cash flows. Some of the more significant assumptions used in the development of intangible asset values include: the amount and timing of projected future cash flows, the discount rate selected to measure the risks inherent in future cash flows, and the assessment of the asset’s life cycle and competitive trends impacting the asset, as well as other factors.

(f) This represents the net deferred tax liability associated with the fair value of assets acquired and liabilities assumed.

(g) The Company is

not

able to deduct any of the goodwill for tax purposes.

The fair values presented above are preliminary until the Company completes its work with the use of a

third

party valuation firm, and are subject to change. Any changes to the initial estimates of the fair value of assets and liabilities will impact residual goodwill and

may

affect future earnings.

As part of the acquisition, the Company entered into a

fifteen

-year lease with the Het Komt Vast Goed B.V., the owner of the real property where Veth Propulsion’s operations are located. Under this lease, the Company pays an annual rent of

$1,168,

with provisions for increasing rent based on the prevailing consumer price index.

Summary Financial Information

The following table presents financial information for Veth Propulsion that is included in the Company’s consolidated statement of operations for the

first

quarter ended

September 28, 2018:

Net sales	$	13,353
Gross profit (a)		2,186
Operating loss (b)		(720	)
Net loss attributable to Twin Disc	$	(950	)

	(a)	Gross profit includes the non-recurring charge for the step-up of inventories acquired of $1,171 for the quarter.

	(b)	In addition to (a), operating loss includes the amortization of intangible assets acquired of $621 for the quarter, and non-recurring charges related to the acquisition of $204.

The following table presents unaudited supplemental pro forma information as if the acquisition of Veth Propulsion had occurred on

July 1, 2017.

	Quarter Ended
	September 29, 2017
Net sales	$	59,709
Gross profit (a)		17,189
Net income attributable to Twin Disc (b)	$	2,715
Basic income per share attributable to Twin Disc	$	0.24
Diluted income per share attributable to Twin Disc	$	0.24

Weighted average number of common shares outstanding:
Basic		11,256
Diluted		11,259


	(a)	Gross profit includes the amortization of the step-up of inventories of $1,171 for the quarter.

(b)

In addition to (a), this includes the amortization of intangible assets acquired and interest expense on borrowings under the Credit Agreement net of other expenses, amounting to

$1,136,

before tax.

Note C - Revenue Recognition

3 Months Ended

Sep. 28, 2018

Revenue from Contract with Customer [Text Block]

Revenue

Recognition

Revenue from contracts with customers is recognized using a

five

-step model consisting of the following: (

) identify the contract with a customer; (

) identify the performance obligations in the contract; (

) determine the transaction price; (

) allocate the transaction price to the performance obligations in the contract; and (

) recognize revenue when (or as) the Company satisfies a performance obligation. Performance obligations are satisfied when the Company transfers control of a good or service to a customer, which can occur over time or at a point in time. The amount of revenue recognized is based on the consideration to which the Company expects to be entitled in exchange for those goods or services, including the expected value of variable consideration. The customer’s ability and intent to pay the transaction price is assessed in determining whether a contract exists with the customer. If collectibility of substantially all of the consideration in a contract is

not

probable, consideration received is

not

recognized as revenue unless the consideration is nonrefundable and the Company

longer has an obligation to transfer additional goods or services to the customer or collectibility becomes probable.

The Company designs, manufactures and sells marine and heavy duty off highway power transmission equipment. Products offered include: marine transmissions, azimuth drives, surface drives, propellers and boat management systems as well as power-shift transmissions, hydraulic torque converters, power take-offs, industrial clutches and controls systems. The Company sells its products to customers primarily in the commercial, pleasure craft, and military marine markets as well as in the energy and natural resources, government and industrial markets. The Company's worldwide sales to both domestic and foreign customers are transacted through a direct sales force and a distributor network

Identify contract with customer:

The Company gathered customer contracts and representative customer purchase orders of its various locations. The Company’s customers consist of distributors and direct end-users. With regard to distributors, the Company generally has written distribution agreements which describe the terms of the distribution arrangement, such as the product range, the sales territory, product pricing, sales support, payment and returns policy, etc. Customer contracts are generally in the form of acknowledged purchase orders. Services to be rendered, as part of the delivery of those products, are also generally specified. Such services include installation reviews and technical commissioning.

Performance obligations:

The Company’s performance obligation as it relates to the delivery of goods is straightforward; the recognition of revenue is generally driven by shipment date and the terms of sale. As it relates to the Company’s service obligations, the Company determined that installation reviews, shift development and technical commissioning are separate and distinct performance obligations.

Transaction price:

The Company considers the invoice price as the transaction price.

Allocation of transaction price:

The Company determined that the most relevant allocation method for its service obligations is to apply the expected cost plus appropriate margin. This is the Company’s current practice of billing for repairs, overhaul, and other product service related time incurred by its technicians.

Recognize revenue:

Revenue is recognized upon transfer of control of the products to the customer. For installation review, shift development, and technical commissioning services, revenue is recognized upon completion of the service.

Disaggregated revenue:

The following table presents details deemed most relevant to the users of the financial statements for the quarter ended

September 28, 2018.

Net sales by product group is summarized as follows:

					Elimination of
	Manufacturing		Distribution		Intercompany Sales			Total
Industrial	$	6,481	$	1,396	$	(832	)	$	7,045
Land-based transmissions		29,432		5,611		(5,407	)		29,636
Marine and propulsion systems		32,976		14,156		(10,857	)		36,275
Other		23		1,757		(47	)		1,733
Total	$	68,912	$	22,920	$	(17,143	)	$	74,689

Contract assets

/liabiliies

There are

significant balances of contract assets or liabilities as of

September 28, 2018.

Note D - Inventories

3 Months Ended

Sep. 28, 2018

Inventory Disclosure [Text Block]

D .	Inventor ies

The major classes of inventories were as follows:

	September 28, 2018		June 30, 2018
Inventories:
Finished parts	$	53,313	$	49,332
Work in process		27,716		13,183
Raw materials		42,410		21,486
	$	123,439	$	84,001

Note E - Warranty

3 Months Ended

Sep. 28, 2018

Product Warranty Disclosure [Text Block]

Warranty

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

September 28, 2018

and

September 29, 2017:

	For the Quarter Ended
	September 28, 2018			September 29, 2017
Reserve balance, beginning of period	$	4,407		$	2,062
Current period expense and adjustments		729			658
Payments or credits to customers		(1,020	)		(433	)
Acquisition		557			-
Translation		(6	)		39
Reserve balance, end of period	$	4,667		$	2,326

The current portion of the warranty accrual (

$4,139

and

$1,968

as of

September 28, 2018

and

September 29, 2017,

respectively) is reflected in accrued liabilities, while the long-term portion (

$528

and

$358

as of

September 28, 2018

and

September 29, 2017,

respectively) is included in other long-term liabilities on the consolidated balance sheets.

Note F - Contingencies

3 Months Ended

Sep. 28, 2018

Commitments and Contingencies Disclosure [Text Block]

F .	Contingencies

The Company is involved in litigation of which the ultimate outcome and liability to the Company, if any, is

not

presently determinable. Management believes that final disposition of such litigation will

not

have a material impact on the Company’s results of operations, financial position or cash flows.

Note G - Business Segments

3 Months Ended

Sep. 28, 2018

Segment Reporting Disclosure [Text Block]

G .	Business Segments

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

The Company has

two

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

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

	For the Quarter Ended
	September 28, 2018			September 29, 2017
Net sales
Manufacturing segment sales	$	68,912		$	39,872
Distribution segment sales		22,920			17,662
Inter/Intra segment elimination – manufacturing		(14,749	)		(10,332	)
Inter/Intra segment elimination – distribution		(2,394	)		(2,138	)
	$	74,689		$	45,064
Net income attributable to Twin Disc
Manufacturing segment net income	$	7,235		$	5,067
Distribution segment net income		865			669
Corporate and eliminations		(5,238	)		(2,344	)
	$	2,862		$	3,392

Assets	September 28, 2018			June 30, 2018
Manufacturing segment assets	$	367,376		$	266,417
Distribution segment assets		54,544			52,230
Corporate assets and elimination of intercompany assets		(81,163	)		(77,407	)
	$	340,757		$	241,240

Note H - Stock-based Compensation

3 Months Ended

Sep. 28, 2018

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

H .	Stock-Based Compensation

Performance Stock Awards (“PSA”)

During the

first

quarter of fiscal

2019

and

2018,

the Company granted a target number of

37.0

and

54.9

PSAs, respectively, to various employees of the Company, including executive officers. The fiscal

2019

PSAs will vest if the Company achieves performance-based target objectives relating to average return on invested capital, average annual sales and average annual Earnings Per Share (“EPS”) (as defined in the PSA Grant Agreement), in the cumulative

three

fiscal year period ending

June 30, 2021.

These PSAs are subject to adjustment if the Company’s return on invested capital, net sales, and EPS for the period falls below or exceeds the specified target objective, and the maximum number of performance shares that can be awarded if the target objective is exceeded is

55.4.

Based upon favorable actual results to date, the Company is currently accruing compensation expense for these PSAs.

The fiscal

2018

PSAs will vest if the Company achieves performance-based target objectives relating to average return on invested capital, average annual sales and average annual EPS (as defined in the PSA Grant Agreement), in the cumulative

three

fiscal year period ending

June 30, 2020.

69.2.

Based upon favorable actual results to date, the Company is currently accruing compensation expense for these PSAs.

There were

182.7

and

224.9

unvested PSAs outstanding at

September 28, 2018

and

September 29, 2017,

respectively. The fair value of the PSAs (on the date of grant) is expensed over the performance period for the shares that are expected to ultimately vest. Compensation expense of

$546

and

$15

was recognized for the quarters ended

September 28, 2018

and

September 29, 2017,

respectively, related to PSAs. The weighted average grant date fair value of the unvested awards at

September 28, 2018

was

$15.02.

September 28, 2018,

the Company had

$1,683

of unrecognized compensation expense related to the unvested shares that would vest if the specified target objective was achieved for the fiscal

2019,

2018

and

2017

awards. The total fair value of PSAs vested as of

September 28, 2018

and

September 29, 2017

was

Restricted Stock Awards (“RS”)

The Company has unvested RS awards outstanding that will vest if certain service conditions are fulfilled. The fair value of the RS grants is recorded as compensation expense over the vesting period, which is generally

years. During the

first

quarter of fiscal

2019

and

2018,

the Company granted

4.0

and

65.8

service based restricted shares, respectively, to employees and non-employee directors. There were

170.4

and

309.5

unvested shares outstanding at

September 28, 2018

and

September 29, 2017,

respectively. A total of

2.8

shares of restricted stock were forfeited during the quarter ended

September 28, 2018.

There were

shares of restricted stock forfeited during the quarter ended

September 29, 2017.

Compensation expense of

$250

and

$463

was recognized for the quarters ended

September 28, 2018

and

September 29, 2017,

respectively. The total fair value of restricted stock grants vested as of

September 28, 2018

and

September 29, 2017

was

$1,785

and

$444,

respectively. As of

September 28, 2018,

the Company had

$927

of unrecognized compensation expense related to restricted stock which will be recognized over the next

three

years.

Restricted Stock

Unit

Awards (“RS

”)

Under the

2018

Long Term Incentive Plan, the Company has been authorized to issue RSUs. The RSUs entitle the employee to shares of common stock of the Company if the employee remains employed by the Company through a specified date, generally

three

years from the date of grant. During the

first

quarter of fiscal

2019,

the Company granted

38.0

RSUs to various employees of the Company, including executive officers. The fair value of the RSUs (on the date of grant) is recorded as compensation expense over the vesting period. There were

38.0

unvested RSUs outstanding at

September 28, 2018.

Compensation expense of

$54

was recognized for the quarter ended

September 28, 2018.

The weighted average grant date fair value of the unvested awards at

September 28, 2018

was

$25.77.

As of

September 28, 2018,

the Company had

$924

of unrecognized compensation expense related to restricted stock which will be recognized over the next

three

years.

Note I - Pension and Other Postretirement Benefit Plans

3 Months Ended

Sep. 28, 2018

Pension and Other Postretirement Benefits Disclosure [Text Block]

I .	Pension and Other Postretirement Benefit Plans

The Company has non-contributory, qualified defined benefit plans covering substantially all domestic employees hired prior to

October 1, 2003

and certain foreign employees. Additionally, the Company provides health care and life insurance benefits for certain domestic retirees. The components of the net periodic benefit cost for the defined benefit pension plans and the other postretirement benefit plan are as follows:

	For the Quarter Ended
	September 28, 2018			September 29, 2017
Pension Benefits:
Service cost	$	246		$	262
Interest cost		1,092			1,074
Expected return on plan assets		(1,331	)		(1,525	)
Amortization of transition obligation		9			9
Amortization of prior service cost		1			1
Amortization of actuarial net loss		678			759
Net periodic benefit cost	$	695		$	580

Postretirement Benefits:
Service cost	$	5		$	5
Interest cost		76			92
Amortization of actuarial net loss		(69	)		3
Net periodic benefit cost	$	12		$	100

The Company expects to contribute approximately

$2,382

to its pension plans in fiscal

2019.

As of

September 28, 2018,

the amount of

$1,054

in contributions has been made.

The Company has reclassified

$471

(net of

$146

in taxes) of benefit plan adjustments from accumulated other comprehensive loss during the quarter ended

September 28, 2018,

and

$474

(net of

$278

in taxes) during the quarter ended

September 29, 2017.

These reclassifications are included in the computation of net periodic benefit cost.

Note J - Income Taxes

3 Months Ended

Sep. 28, 2018

Income Tax Disclosure [Text Block]

J .	Income Taxes

December 22, 2017,

the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law in the United States. The Tax Act, among other provisions, introduces changes in the U.S corporate tax rate, business related exclusions and deductions and credits, and has tax consequences for companies that operate internationally. Most of the changes introduced in the Tax Act are effective beginning on

January 1, 2018;

however, as the Company has a fiscal year end of

June 30,

the effective dates for the Company are various and different.

For the quarter ended

September 28, 2018

and

September 29, 2017,

the Company’s effective income tax rate was

23.4%

and

371.7%

respectively. In the prior year, increased and sustained profitability in a foreign jurisdiction resulted in the release of a

$3,803

valuation allowance which increased the effective tax rate by

303.5%.

The Tax Act reduced the US corporate income tax rate from

35%

21%.

As a fiscal

June 30

filer, this rate change has reduced the company’s effective tax rate by

13%.

The mix of earnings by jurisdiction reduced the effective tax rate by

29.9%.

Consistent preference items, coupled with increased profitability resulted in additional benefit to the rate.

Within the calculation of the Company’s annual effective tax rate the Company has used assumptions and estimates that

may

change as a result of future guidance, interpretation, and rule-making from the Internal Revenue Service, the SEC, and the FASB and/or various other taxing jurisdictions. Further, the Company anticipates that the state jurisdictions will continue to determine and announce their conformity to the Tax Act, which could have an impact on the annual effective tax rate.

The permanent reduction to the U.S. federal corporate income tax rate from

35%

21%

is effective

January 1, 2018.

The effective tax rate in the

first

quarter of fiscal

2019

reflects the reduction in the statutory federal income tax rate to

21%.

The deemed repatriation transition tax is a tax on previously untaxed accumulated and current earnings and profits of certain foreign subsidiaries. To determine the amount of the transition tax, the Company calculated the amount of post-

1986

earnings and profits for all foreign subsidiaries as well as the amount of non-U.S. income taxes paid on such earnings. The Company calculated the amount of the transition tax and determined it to be

zero

based on overall net historical negative earnings and profits.

new material information nor material interpretational changes have developed during the

first

quarter of fiscal

2019,

the Company’s previous calculation reflected in fiscal

2018

has

not

changed. With the enactment of the transition tax, any future dividends repatriated would benefit from the

100%

Dividends Received Deduction. The company reaffirms its positon that the earnings of certain foreign subsidiaries remain permanently reinvested. An analysis was also completed to verify the future utilization of tax attributes and it was determined that full utilization would be realized and

valuation allowance was required. The company has completed a provisional analysis of the global intangible low taxed income (“GILTI”) provisions and anticipates

impact to the financial statements due to the offset of the inclusion with the associated foreign tax credits. A provisional foreign-derived intangible income (“FDII) calculation was completed and the benefit has been reflected in the quarterly provision. The Company has provisionally elected to treat GILTI as a period expense; however, the Company has

not

made a final accounting policy decision with respect to this item. A provisional analysis of the new base erosion anti-abuse tax (“BEAT”) rules has been completed and the Company does

not

meet the minimum thresholds at this time and is therefore

not

subject to this tax. These estimates

may

be impacted by actual future data, additional guidance or other unforeseen circumstances.

Under ASC Topic

740,

Income Taxes ("ASC

740"

), a company is generally required to recognize the effect of changes in tax laws in its financial statements in the period in which the legislation is enacted. U.S. income tax laws are deemed to be effective on the date the president signs tax legislation. The president signed the Tax Act legislation on

December 22, 2017.

As such, the Company is required to recognize the related impacts to the financial statements in the quarter ended

December 29, 2017.

In acknowledgment of the substantial changes incorporated in the Tax Act, in conjunction with the timing of the enactment being just weeks before the majority of the provisions became effective, the SEC staff issued Staff Accounting Bulletin ("SAB")

118

to provide certain guidance in determining the accounting for income tax effects of the legislation in the accounting period of enactment as well as provide a measurement period (similar to that used when accounting for business combinations) within which to finalize and reflect such final effects associated with the Tax Act. Further, SAB

118

summarizes a

three

-step approach to be applied each reporting period within the overall measurement period: (

) amounts should be reflected in the period including the date of enactment for those items which are deemed to be complete (i.e. all information is available and appropriately analyzed to determine the applicable financial statement impact), (

) to the extent the effects of certain changes due to the Tax Act for which the accounting is

not

deemed complete but for which a reasonable estimate can be determined, such provisional amount(s) should be reflected in the period so determined and adjusted in subsequent periods as such effects are finalized and (

) to the extent a reasonable estimate cannot be determined for a specific effect of the tax law change associated with the Tax Act,

provisional amount should be recorded but rather, continue to apply ASC

740

based upon the tax law in effect prior to the enactment of the Tax Act. Such measurement period is deemed to end when all necessary information has been obtained, prepared and analyzed such that a final accounting determination can be concluded, but in

event should the period extend beyond

one

year. If a company does

not

have the necessary information available, prepared or analyzed for certain income tax effects of the Tax Act, SAB

118

allows a company to report provisional numbers and adjust those amounts during the measurement period

not

to extend beyond

one

year. For the quarter ended

September 28, 2018,

the Company has recorded all known and estimable impacts of the Tax Act that are effective for fiscal year

2019.

Future adjustments to the provisional numbers will be recorded as discrete adjustments to income tax expense in the period in which those adjustments become estimable and/or are finalized.

The Company maintains valuation allowances when it is more likely than

not

that all or a portion of a deferred tax asset will

not

be realized. Changes in valuation allowances from period to period are included in the tax provision in the period of change. In determining whether a valuation allowance is required, the Company takes into account such factors as prior earnings history, expected future earnings, carry-back and carry-forward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. The Company has evaluated the realizability of the net deferred tax assets related to its operations and based on this evaluation management has concluded that

valuation allowances are required.

Accounting policies for interim reporting require the Company to adjust its effective tax rate each quarter to be consistent with the estimated annual effective tax rate. Under this effective tax rate methodology, the Company applies an estimated annual income tax rate to its year-to-date ordinary earnings to derive its income tax provision each quarter.

The Company has approximately

$990

of unrecognized tax benefits, including related interest and penalties, as of

September 28, 2018,

which, if recognized, would favorably impact the effective tax rate. There was

significant change in the total unrecognized tax benefits due to the settlement of audits, the expiration of statutes of limitations or for other items during the quarter ended

September 28, 2018.

It appears possible that the amount of unrecognized tax benefits could change in the next

twelve

months due to on-going audit activity.

Annually, the Company files income tax returns in various taxing jurisdictions inside and outside the United States. In general, the tax years that remain subject to examination are

2011

through

2018

for the major operations in Italy, Canada, Belgium, and Japan. The tax years open to examination in the U.S. are for years subsequent to fiscal

2015.

The state of Wisconsin income tax audit remains ongoing for the fiscal years

2010

through

2013.

It is reasonably possible that other audit cycles will be completed during fiscal

2019.

Note K - Goodwill and Other Intangibles

3 Months Ended

Sep. 28, 2018

Goodwill and Intangible Assets Disclosure [Text Block]

K .	Goodwill and Other Intangibles

Goodwill represents the excess of the consideration transferred net of the acquisition-date fair values of the identifiable assets acquired and the liabilities assumed.

The Company reviews goodwill for impairment on a reporting unit basis annually as of the end of the fiscal year, and whenever events or circumstances (“triggering events”) indicate that the carrying value of goodwill

may

not

be recoverable. The Company monitors for interim triggering events on an ongoing basis. Such triggering events include unfavorable operating results and macroeconomic trends.

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

may

need to be performed and

may

result in a non-cash goodwill impairment charge.

July 2, 2018,

as discussed in Note B, the Company acquired goodwill in the estimated amount of

$24,669

and intangible assets in the estimated amount of

$23,700

as part of the acquisition of Veth Propulsion Holding BV. These estimates are preliminary and are pending completion of several elements, including the finalization of an independent valuation of fair value of the assets acquired and liabilities assumed and final review by the Company’s management. The final determination of the purchase price, fair values and resulting goodwill

may

differ significantly from what is currently reflected.

As of

September 28, 2018,

changes in the carrying amount of goodwill is summarized as follows:

	Net Book Value Rollforward									By Reporting Unit
	Gross Carrying Amount			Accumulated Amortization / Impairment			Net Book Value			European Industrial			European Propulsion
Balance at June 30, 2018	$	16,514		$	(13,822	)	$	2,692		$	2,692		$	-
Acquisition		24,669			-			24,669			-			24,669
Translation adjustment		(96	)		-			(96	)		(9	)		(87	)
Balance at Septmeber 28, 2018	$	41,087		$	(13,822	)	$	27,265		$	2,683		$	24,582

For the quarter ended

September 28, 2018,

the Company performed a review of potential triggering events, and concluded there were

triggering events that indicated that the fair value of its European Industrial reporting unit had

not

more likely than

not

declined to below its carrying value at

September 28, 2018.

The Company will perform its annual impairment test for this reporting unit as of

June 30, 2019.

As of

September 28, 2018,

the following acquired intangible assets have definite useful lives and are subject to amortization:

	Net Book Value Rollforward									Net Book Value By Asset Type
	Gross Carrying Amount			Accumulated Amortization / Impairment			Net Book Value			Trade Name			Customer Relationships			Technology Know-how			Other
Balance at June 30, 2018	$	13,485		$	(11,781	)	$	1,704		$	1,288		$	-		$	-		$	416
Acquisition		23,700			-			23,700			1,800			13,600			8,300			-
Other additions		4			-			4			-			-			-			4
Amortization		-			(665	)		(665	)		(66	)		(281	)		(295	)		(23	)
Translation adjustment		(163	)		-			(163	)		(17	)		(91	)		(55	)		-
Balance at Septmeber 28, 2018	$	37,026		$	(12,446	)	$	24,580		$	3,005		$	13,228		$	7,950		$	397

Other intangibles consist of certain amortizable acquisition costs, proprietary technology, computer software, licensing agreements and certain customer relationships.

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

years.

Intangible amortization expense was

$665

and

$44

for the quarters ended

September 28, 2018,

and

September 29, 2017,

respectively. Estimated intangible amortization expense for the remainder of fiscal

2019

and each of the next

five

fiscal years is as follows:

Fiscal Year
2019	$	1,996
2020		2,662
2021		2,647
2022		2,631
2023		2,628
2024		2,598

The gross carrying amount of the Company’s intangible assets that have indefinite lives and are

not

subject to amortization as of

September 28, 2018

and

June 30, 2018

was

$206

and

$202,

respectively. These assets are comprised of acquired trade names.

Note L - Long-term Debt

3 Months Ended

Sep. 28, 2018

Debt Disclosure [Text Block]

L.	Long-term Debt

June 29, 2018,

the Company entered into a new credit agreement (the “Credit Agreement”) with BMO Harris Bank N.A. (“BMO”) that provided for the assignment and assumption of the previously existing loans between the Company and Bank of Montreal and subsequent amendments (the

“2016

Credit Agreement”), into a term loan (the “Term Loan”) and revolving credit loans (each a “Revolving Loan” and, collectively, the “Revolving Loans,” and, together with the Term Loan, the “Loans”). Pursuant to the Credit Agreement, BMO agreed to make the Term Loan to the Company in a principal amount

not

to exceed

$35,000

and the Company

may,

from time to time prior to the maturity date, enter into Revolving Loans in amounts

not

to exceed, in the aggregate,

$50,000

(the “Revolving Credit Commitment”). The Credit Agreement also allows the Company to obtain Letters of Credit from BMO, which if drawn upon by the beneficiary thereof and paid by BMO, would become Revolving Loans.

Borrowings under the Credit Agreement are secured by substantially all of the Company’s personal property, including accounts receivable, inventory, machinery and equipment, and intellectual property, and the personal property of Mill-Log Equipment Co., Inc. (“Mill-Log”), a wholly-owned domestic subsidiary of the Company. The Company has also pledged

100%

of its equity interests in certain domestic subsidiaries and

65%

of its equity interests in certain foreign subsidiaries. To effect these security interests, the Company and Mill-Log entered into various amendments and assignment agreements that consent to the assignment to BMO of certain agreements previously entered into between the Company and Mill-Log with Bank of Montreal in connection with the

2016

Credit Agreement. The Company also entered into a Collateral Assignment of Rights under Purchase Agreement for its acquisition of Veth Propulsions described in Note B.

July 2, 2018,

in connection with the acquisition of Veth Propulsion, as described in Note B, the Company drew a total of

$60,729

of additional borrowings on the new credit facility, consisting of a

$35,000

Term Loan payable and revolver borrowings of

$25,729.

September 25, 2018,

the Company used the proceeds of a stock offering (see Note M) of

$32,310

to partially pay down the Term Loan and Revolving Loans.

Long-term debt at

September 28, 2018

and

June 30, 2018

consisted of the following:

	September 28, 2018		June 30, 2018
Revolving loans	$	26,581	$	4,787
Term loan		10,830		-
Other		35		37
Total long-term debt	$	37,446	$	4,824

During the quarter, the average interest rates paid on loans were as follows:

5.1%

on the Term Loan,

2.25%

on the euro revolver, and

4.35%

on the USD revolver.

As of

September 28, 2018,

the Company’s borrowing capacity under the terms of the Credit Agreement was

$50,000,

and the Company had approximately

$23,419

of available borrowings. In addition to the Credit Agreement, the Company has established unsecured lines of credit that are used from time to time to secure certain performance obligations by the Company.

The Company’s borrowings described above approximates fair value at

September 28, 2018

and

June 30, 2018.

If measured at fair value in the financial statements, long-term debt (including the current portion) would be classified as Level

in the fair value hierarchy.

Note M - Shareholders' Equity

3 Months Ended

Sep. 28, 2018

Stockholders' Equity Note Disclosure [Text Block]

M.	Shareholders’ Equity

The Company completed the sale of

1,533.3

shares of its common stock through a registered offering which closed on

September 25, 2018,

at a price to the public of

$22.50

per share. The net proceeds received by the Company and after underwriting expenses of

$2,070

and offering expenses of

$220,

were

$32,210

and were recorded as paid-in capital as of

September 28, 2018.

The proceeds were used to partially pay down the Term Loan and Revolving Loans (see Note L).

The Company, from time to time, makes open market purchases of its common stock under authorizations given to it by the Board of Directors, of which

315.0

shares as of

September 28, 2018

remain authorized for purchase. The Company did

not

make any open market purchases of its shares during the quarters ended

September 28, 2018

and

September 29, 2017.

The following is a reconciliation of the Company’s equity balances for the

first

fiscal quarter of

2019

and

2018:

	Twin Disc, Inc. Shareholders’ Equity
						Accumulated
						Other						Non-
	Common			Retained		Comprehensive			Treasury			Controlling			Total
	Stock			Earnings		Income (Loss)			Stock			Interest			Equity
Balance, June 30, 2018	$	11,570		$	178,896	$	(23,792	)	$	(23,677	)	$	619		$	143,616
Net income					2,862								41			2,903
Translation adjustments							(536	)					(25	)		(561	)
Benefit plan adjustments, net of tax							471									471
Release stranded tax effects					6,903		(6,903	)								-
Cash dividends													(115	)		(115	)
Compensation expense		850														850
Common stock issued, net		32,210														32,210
Shares acquired, net		(586	)							(328	)					(914	)
Balance, September 28, 2018	$	44,044		$	188,661	$	(30,760	)	$	(24,005	)	$	520		$	178,460

	Twin Disc, Inc. Shareholders’ Equity
						Accumulated
						Other						Non-
	Common			Retained		Comprehensive			Treasury			Controlling			Total
	Stock			Earnings		Income (Loss)			Stock			Interest			Equity
Balance, June 30, 2017	$	10,429		$	169,368	$	(32,671	)	$	(24,205	)	$	646		$	123,567
Net income					3,392								13			3,405
Translation adjustments							2,547						(6	)		2,541
Benefit plan adjustments, net of tax							474									474
Cash dividends													(172	)		(172	)
Compensation expense		479														479
Shares (acquired) issued, net		(1,030	)							817						(213	)
Balance, September 29, 2017	$	9,878		$	172,760	$	(29,650	)	$	(23,388	)	$	481		$	130,081

Reconciliations for the changes in accumulated other comprehensive income (loss), net of tax, by component for the quarters ended

September 28, 2018,

and

September 29, 2017

are as follows:

	Translation			Benefit Plan
	Adjustment			Adjustment
Balance at June 30, 2018	$	7,085		$	(30,877	)
Translation adjustment during the quarter		(536	)		-
Release stranded tax effects		-			(6,903	)
Amounts reclassified from accumulated other comprehensive income		-			471
Net current period other comprehensive income		(536	)		(6,432	)
Balance at September 28, 2018	$	6,549		$	(37,309	)

	Translation		Benefit Plan
	Adjustment		Adjustment
Balance at June 30, 2017	$	6,130	$	(38,801	)
Translation adjustment during the quarter		2,547		-
Amounts reclassified from accumulated other comprehensive income		-		474
Net current period other comprehensive income		2,547		474
Balance at September 29, 2017	$	8,677	$	(38,327	)

Reconciliation for the changes in benefit plan adjustments, net of tax for the quarter ended

September 28, 2018

are as follows:

	Amount Reclassified
	Quarter Ended
	September 28, 2018
Changes in benefit plan items
Actuarial losses	$	607	(a)
Transition asset and prior service benefit		10	(a)
Total amortization		617
Income taxes		146
Total reclassification net of tax	$	471

Reconciliation for the changes in benefit plan adjustments, net of tax for the quarter ended

September 29, 2017

is as follows:

	Amount Reclassified
	Quarter Ended
	September 29, 2017
Changes in benefit plan items
Actuarial losses	$	742	(a)
Transition asset and prior service benefit		10	(a)
Total amortization		752
Income taxes		278
Total reclassification net of tax	$	474

(a)

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

Note N - Restructuring of Operations

3 Months Ended

Sep. 28, 2018

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

N.	Restructuring of Operations

The Company has implemented various restructuring programs in response to unfavorable macroeconomic trends in certain of the Company’s markets since the

fourth

quarter of fiscal

2015.

These programs primarily involved the reduction of workforce in several of the Company’s manufacturing locations, under a combination of voluntary and involuntary programs.

During the current year, the Company implemented continued actions to reduce personnel costs in its Belgian operations and reorganize for productivity in its European operations. These actions resulted in a restructuring charge of

$173

in the quarter ended

September 28, 2018.

For the quarter ended

September 29, 2017,

restructuring charges of

$1,218

pertained to similar actions to reduce personnel costs in the Company’s Belgian operations, as well as costs associated with the India manufacturing operations exit.

Restructuring activities since

June 2015

have resulted in the elimination of

172

full-time employees in the manufacturing segment. Accumulated costs to date under these programs within the manufacturing segment through

September 28, 2018

were

$9,446.

The following is a rollforward of restructuring activity:

Accrued restructuring liability, June 30, 2018	$	90
Additions during the year		173
Payments and adjustments during the year		(177	)
Accrued restructuring liability, September 28, 2018	$	86

Note O - Earnings Per Share

3 Months Ended

Sep. 28, 2018

Earnings Per Share [Text Block]

O.	Earnings Per Share

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

two

-class method.

The components of basic and diluted earnings per share were as follows:

	For the Quarter Ended
	September 28, 2018			September 29, 2017
Basic:
Net income	$	2,903		$	3,405
Less: Net earnings attributable to noncontrolling interest		(41	)		(13	)
Less: Undistributed earnings attributable to unvested shares		(49	)		(85	)
Net income available to Twin Disc shareholders		2,813			3,307

Weighted average shares outstanding - basic		11,722			11,256

Basic Income Per Share:
Net income per share - basic	$	0.24		$	0.29

Diluted:
Net income	$	2,903		$	3,405
Less: Net earnings attributable to noncontrolling interest		(41	)		(13	)
Less: Undistributed earnings attributable to unvested shares		(49	)		(85	)
Net income available to Twin Disc shareholders		2,813			3,307

Weighted average shares outstanding - basic		11,722			11,256
Effect of dilutive stock awards		77			3
Weighted average shares outstanding - diluted		11,799			11,259

Diluted Income Per Share:
Net income per share - diluted	$	0.24		$	0.29

The following potential common shares were excluded from diluted EPS for the quarter ended

September 28, 2018

because they were anti-dilutive:

180.6

related to the Company’s unvested PSAs,

170.4

related to the Company’s unvested RS awards,

28.2

related to the Company’s unvested RSUs, and

3.3

related to outstanding stock options.

The following potential common shares were excluded from diluted EPS for the quarter ended

September 29, 2017

because they were anti-dilutive:

224.9

related to the Company’s unvested PSAs,

309.5

related to the Company’s unvested RS awards, and

9.9

related to outstanding stock options.

Note P - Lease Liabilities

3 Months Ended

Sep. 28, 2018

Leases of Lessee Disclosure [Text Block]

P.	Lease Liabilities

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

The components of lease expense were as follows:

	For the Quarter Ended
	September 28, 2018			September 29, 2017
Finance lease cost:
Amortization of right-of-use assets	$	1		$	1
Operating lease cost		880			633
Short-term lease cost		11			33
Variable lease cost		8			3
Total lease cost	$	900		$	670
Less: Sublease income		(16	)		(53	)
Net lease cost	$	884		$	617

Other information related to leases was as follows:

	For the Quarter Ended
	September 28, 2018			September 29, 2017
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	871		$	579
Operating cash flows from finance leases		1			1
Right-of-use-assets obtained in exchange for lease obligations:
Operating leases		12,127			280
Weighted average remaining lease term (years):
Operating leases		11.4			5.7
Finance lease		3.8			4.8
Weighted average discount rate:
Operating leases		7.6	%		6.5	%
Finance leases		4.0	%		4.0	%

Approximate future minimum rental commitments under non-cancellable lease as of

September 28, 2018

were as follows:

	Operating Leases			Finance Leases
2019	$	2,684		$	2
2020		3,115			3
2021		2,467			3
2022		1,969			3
2023		1,790			-
Thereafter		13,212			-
Total future lease payments		25,237			11
Less: Amount representing interest		(8,167	)		(1	)
Present value of future payments	$	17,070		$	10

The Company had

$17,071

and

$6,527

of operating lease right-of-use assets recorded in property, plant and equipment, net as of

September 28, 2018

and

June 30, 2018,

respectively. The Company had

$17,070

and

$6,527

of operating lease liabilities recorded in lease obligations as of

September 28, 2018

and

June 30, 2018,

respectively.

Significant Accounting Policies (Policies)

3 Months Ended

Sep. 28, 2018

Accounting Policies [Abstract]

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Adopted Accounting Standards

a.	In May 2014, the Financial Accounting Standards Board (“FASB”) issued updated guidance (ASU 2014 - 09 ) on revenue from contracts with customers. This revenue recognition guidance supersedes existing guidance, including industry-specific guidance. The core principle is that an entity should recognize revenue to depict the transfer of control over promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance identifies steps to apply in achieving this principle. The Company adopted this guidance effective July 1, 2018, using the modified retrospective method and applied the cumulative effect to its retained earnings balance as of that date. Prior periods presented were not retrospectively adjusted for this change. The Company has applied the new revenue recognition standard only to contracts that were not completed as of July 1, 2018.

	The Company determined that deferral of revenue is appropriate for certain agreements where the performance of services after product delivery is required. Such services primarily pertain to technical commissioning services by its distribution entities in its marine business, whereby the Company’s technicians calibrate the controls and transmission to ensure proper performance for the customer’s specific application. This service helps identify issues with the ship's design or performance that need to be remediated by the ship builder or other component suppliers prior to the ship being officially accepted into service by the ship buyer. The cumulative effect adjustment of adopting the new standard is not significant to the Company’s results of operations and financial condition.

b.	In February 2016, the FASB issued guidance (ASU 2016 - 02 ) which replaces the existing guidance for leases. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. The Company elected to early adopt the standard effective July 1, 2018 concurrent with the adoption of ASU 2014 - 09, Revenue from Contracts with Customers, using the modified retrospective approach at the beginning of the earliest comparative period presented in the financial statements, which required the Company to restate each prior reporting period presented.

	For operating leases in which the Company is a lessee, the Company concluded that all existing operating leases under the old guidance continue to be classified as operating leases under the new guidance, and all existing capital leases under the old guidance are classified as finance leases under the new guidance. The Company excluded any lease contracts with terms of twelve months or less as of the adoption date. The Company has lease agreements with lease and non-lease components, which are generally accounted for as separate lease components. The Company accounts for short-term leases on a straight-line basis over the lease term.

The following table presents the effect of the adoption of ASU

2016

on the Company’s condensed consolidated balance sheet as of

June 30, 2018:

	June 30, 2018		Adoption		June 30, 2018
	As Reported		Impact		Restated
Property, plant and equipment, net	$	48,940	$	6,527	$	55,467
Lease obligations		-		6,527		6,527

	The adoption of ASU 2014 - 09 and ASU 2016 - 02 did not have an impact on the Company’s condensed consolidated statement of operations and comprehensive income or condensed consolidated statement of cash flows for the quarter ended September 29, 2017.

c.	In March 2017, the FASB issued guidance (ASU 2017 - 07 ) intended to improve the presentation of net periodic pension cost and net periodic postretirement cost. This guidance requires that an employer report the service costs component in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the statement of operations separately from the service cost component and outside the subtotal of income from operations. The Company adopted this guidance effective July 1, 2018 on a retrospective basis, which resulted in the reclassification of certain amounts from cost of goods sold and marketing, engineering and administrative expenses to other expense (income), net in the condensed consolidated statements of operations and comprehensive income. As a result, prior period amounts impacted have been revised accordingly.

	The following table presents the effect of the adoption of ASU 2017 - 07 on the Company’s condensed consolidated statements of operations and comprehensive income for the quarter ended September 29, 2017:

	September 29, 2017			Adoption			September 29, 2017
	As Reported			Impact			Restated
Cost of goods sold	$	31,169		$	(97	)	$	31,072
Gross profit		13,895			97			13,992
Marketing, engineering and administrative expenses		13,668			(274	)		13,394
Income (loss) from operations		(991	)		371			(620	)
Other expense (income), net		198			371			569

February 2018,

the FASB issued guidance (ASU

2018

July 1, 2018

by making a reclassification of

$6,903

from accumulated other comprehensive loss to retained earnings.

October 2016,

the FASB issued updated guidance (ASU

2016

) that changes the recognition of income tax consequences of an intra-entity transfer of an asset other than inventory. The Company adopted this guidance effective

July 1, 2018.

The adoption of this guidance did

not

have a material impact on the Company’s financial statements and disclosures.

August 2016,

the FASB issued updated guidance (ASU

2016

) that addresses

eight

specific cash flow issues with the objective of reducing the existing diversity in practice. The Company adopted this guidance effective

July 1, 2018.

The adoption of this guidance did

not

have a material impact on the Company’s financial statements and disclosures.

New Accounting Releases

August 2018,

the FASB issued updated guidance (ASU

2018

820,

Fair Value Measurement. The amendments in this guidance are effective for fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2019 (

the Company’s fiscal

2021

), with early adoption permitted. The Company is currently evaluating the potential impact of this guidance on the Company’s disclosures.

August 2018,

the FASB issued updated guidance (ASU

2018

) intended to modify the disclosure requirements for employers that sponsor defined pension or postretirement plans. The amendments in this guidance are effective for fiscal years ending after

December 15, 2020 (

the Company’s fiscal

2021

), with early adoption permitted. The Company is currently evaluating the potential impact of this guidance on the Company’s disclosures.

August 2018,

the SEC issued Release

No.

10532,

Rule

for the current and comparative year-to-date periods, with subtotals for each interim period. Rule

requires a reconciliation of stockholders’ equity beginning and ending balances for each period for which a statement of comprehensive income is required to be filed. The release is effective on

November 5, 2018,

the Company’s

second

fiscal quarter of fiscal year

2019.

Special Note Regarding Smaller Reporting Company Status

June 2018,

the SEC issued Release

10513;

83550,

Amendments to Smaller Reporting Company Definition, which changes the definition of a smaller reporting company in Rule

12b

of the Securities Exchange Act of

1934,

as amended. Under this release, the new thresholds for qualifying are (

) public float of less than

$250

million or (

) annual revenue of less than

$100

million in annual revenue and public float of less than

$700

million (including

public float). The rule change is effective on

September 10, 2018,

the Company’s

first

fiscal quarter of fiscal year

2019.

Under this release, the Company currently qualifies as a smaller reporting company based on its public float as of the last business day of its

second

fiscal quarter of fiscal year

2018.

A smaller reporting company

may

choose to comply with scaled or non-scaled financial and non-financial disclosure requirements on an item-by-item basis. The Company has

not

scaled its disclosures of financial and non-financial information in this Quarterly Report. The Company

may

Note A - Basis of Presentation (Tables)

3 Months Ended

Sep. 28, 2018

Accounting Standards Update 2017-07 [Member]

Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block]

	September 29, 2017			Adoption			September 29, 2017
	As Reported			Impact			Restated
Cost of goods sold	$	31,169		$	(97	)	$	31,072
Gross profit		13,895			97			13,992
Marketing, engineering and administrative expenses		13,668			(274	)		13,394
Income (loss) from operations		(991	)		371			(620	)
Other expense (income), net		198			371			569

Accounting Standards Update 2016-02 [Member]

Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block]

	June 30, 2018		Adoption		June 30, 2018
	As Reported		Impact		Restated
Property, plant and equipment, net	$	48,940	$	6,527	$	55,467
Lease obligations		-		6,527		6,527

Note B - Acquisition of Veth Propulsion Holding BV (Tables)

3 Months Ended

Sep. 28, 2018

Schedule of Business Acquisitions by Acquisition, Consideration Transferred [Table Text Block]

Cash (a)	$	60,729
Fair value of contingent consideration (b)		2,927
Total	$	63,656

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

Cash, including restricted cash	$	1,080		(a)
Accounts receivable		10,032		(b)
Inventories		27,641		(c)
Property, plant and equipment		1,537		(d)
Intangibles		23,700		(e)
Other assets		259
Accounts payable and customer deposits		(17,297	)
Other current liabilities		(861	)
Deferred tax liability		(7,104	)	(f)
Total net assets acquired		38,987
Goodwill		24,669		(g)
Total consideration	$	63,656

Schedule of Inventory Acquired, Measured at Fair Value [Table Text Block]

Raw materials	$	13,297
Projects work in progress at fair value		14,344
Inventories at fair value		27,641
Inventories at book value		22,926
Step-up	$	4,715

Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination [Table Text Block]

	Estimated fair value		Estimated average useful lives		Annual amortization
Customer relationships	$	13,600		12	$	1,133
Technology and know-how		8,300		7		1,186
Tradename		1,800		10		180
Total	$	23,700			$	2,499

Business Acquisition, Pro Forma Information, Actual [Table Text Block]

Net sales	$	13,353
Gross profit (a)		2,186
Operating loss (b)		(720	)
Net loss attributable to Twin Disc	$	(950	)

Business Acquisition, Pro Forma Information [Table Text Block]

	Quarter Ended
	September 29, 2017
Net sales	$	59,709
Gross profit (a)		17,189
Net income attributable to Twin Disc (b)	$	2,715
Basic income per share attributable to Twin Disc	$	0.24
Diluted income per share attributable to Twin Disc	$	0.24

Weighted average number of common shares outstanding:
Basic		11,256
Diluted		11,259

Note C - Revenue Recognition (Tables)

3 Months Ended

Sep. 28, 2018

Disaggregation of Revenue [Table Text Block]

					Elimination of
	Manufacturing		Distribution		Intercompany Sales			Total
Industrial	$	6,481	$	1,396	$	(832	)	$	7,045
Land-based transmissions		29,432		5,611		(5,407	)		29,636
Marine and propulsion systems		32,976		14,156		(10,857	)		36,275
Other		23		1,757		(47	)		1,733
Total	$	68,912	$	22,920	$	(17,143	)	$	74,689

Note D - Inventories (Tables)

3 Months Ended

Sep. 28, 2018

Schedule of Inventory, Current [Table Text Block]

	September 28, 2018		June 30, 2018
Inventories:
Finished parts	$	53,313	$	49,332
Work in process		27,716		13,183
Raw materials		42,410		21,486
	$	123,439	$	84,001

Note E - Warranty (Tables)

3 Months Ended

Sep. 28, 2018

Schedule of Product Warranty Liability [Table Text Block]

	For the Quarter Ended
	September 28, 2018			September 29, 2017
Reserve balance, beginning of period	$	4,407		$	2,062
Current period expense and adjustments		729			658
Payments or credits to customers		(1,020	)		(433	)
Acquisition		557			-
Translation		(6	)		39
Reserve balance, end of period	$	4,667		$	2,326

Note G - Business Segments (Tables)

3 Months Ended

Sep. 28, 2018

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

	For the Quarter Ended
	September 28, 2018			September 29, 2017
Net sales
Manufacturing segment sales	$	68,912		$	39,872
Distribution segment sales		22,920			17,662
Inter/Intra segment elimination – manufacturing		(14,749	)		(10,332	)
Inter/Intra segment elimination – distribution		(2,394	)		(2,138	)
	$	74,689		$	45,064
Net income attributable to Twin Disc
Manufacturing segment net income	$	7,235		$	5,067
Distribution segment net income		865			669
Corporate and eliminations		(5,238	)		(2,344	)
	$	2,862		$	3,392

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

Assets	September 28, 2018			June 30, 2018
Manufacturing segment assets	$	367,376		$	266,417
Distribution segment assets		54,544			52,230
Corporate assets and elimination of intercompany assets		(81,163	)		(77,407	)
	$	340,757		$	241,240

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

3 Months Ended

Sep. 28, 2018

Schedule of Net Funded Status [Table Text Block]

	For the Quarter Ended
	September 28, 2018			September 29, 2017
Pension Benefits:
Service cost	$	246		$	262
Interest cost		1,092			1,074
Expected return on plan assets		(1,331	)		(1,525	)
Amortization of transition obligation		9			9
Amortization of prior service cost		1			1
Amortization of actuarial net loss		678			759
Net periodic benefit cost	$	695		$	580

Postretirement Benefits:
Service cost	$	5		$	5
Interest cost		76			92
Amortization of actuarial net loss		(69	)		3
Net periodic benefit cost	$	12		$	100

Note K - Goodwill and Other Intangibles (Tables)

3 Months Ended

Sep. 28, 2018

Schedule of Goodwill [Table Text Block]

	Net Book Value Rollforward									By Reporting Unit
	Gross Carrying Amount			Accumulated Amortization / Impairment			Net Book Value			European Industrial			European Propulsion
Balance at June 30, 2018	$	16,514		$	(13,822	)	$	2,692		$	2,692		$	-
Acquisition		24,669			-			24,669			-			24,669
Translation adjustment		(96	)		-			(96	)		(9	)		(87	)
Balance at Septmeber 28, 2018	$	41,087		$	(13,822	)	$	27,265		$	2,683		$	24,582

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

	Net Book Value Rollforward									Net Book Value By Asset Type
	Gross Carrying Amount			Accumulated Amortization / Impairment			Net Book Value			Trade Name			Customer Relationships			Technology Know-how			Other
Balance at June 30, 2018	$	13,485		$	(11,781	)	$	1,704		$	1,288		$	-		$	-		$	416
Acquisition		23,700			-			23,700			1,800			13,600			8,300			-
Other additions		4			-			4			-			-			-			4
Amortization		-			(665	)		(665	)		(66	)		(281	)		(295	)		(23	)
Translation adjustment		(163	)		-			(163	)		(17	)		(91	)		(55	)		-
Balance at Septmeber 28, 2018	$	37,026		$	(12,446	)	$	24,580		$	3,005		$	13,228		$	7,950		$	397

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

Fiscal Year
2019	$	1,996
2020		2,662
2021		2,647
2022		2,631
2023		2,628
2024		2,598

Note L - Long-term Debt (Tables)

3 Months Ended

Sep. 28, 2018

Schedule of Debt [Table Text Block]

	September 28, 2018		June 30, 2018
Revolving loans	$	26,581	$	4,787
Term loan		10,830		-
Other		35		37
Total long-term debt	$	37,446	$	4,824

Note M - Shareholders' Equity (Tables)

3 Months Ended

Sep. 28, 2018

Schedule of Stockholders Equity [Table Text Block]

	Twin Disc, Inc. Shareholders’ Equity
						Accumulated
						Other						Non-
	Common			Retained		Comprehensive			Treasury			Controlling			Total
	Stock			Earnings		Income (Loss)			Stock			Interest			Equity
Balance, June 30, 2018	$	11,570		$	178,896	$	(23,792	)	$	(23,677	)	$	619		$	143,616
Net income					2,862								41			2,903
Translation adjustments							(536	)					(25	)		(561	)
Benefit plan adjustments, net of tax							471									471
Release stranded tax effects					6,903		(6,903	)								-
Cash dividends													(115	)		(115	)
Compensation expense		850														850
Common stock issued, net		32,210														32,210
Shares acquired, net		(586	)							(328	)					(914	)
Balance, September 28, 2018	$	44,044		$	188,661	$	(30,760	)	$	(24,005	)	$	520		$	178,460

	Twin Disc, Inc. Shareholders’ Equity
						Accumulated
						Other						Non-
	Common			Retained		Comprehensive			Treasury			Controlling			Total
	Stock			Earnings		Income (Loss)			Stock			Interest			Equity
Balance, June 30, 2017	$	10,429		$	169,368	$	(32,671	)	$	(24,205	)	$	646		$	123,567
Net income					3,392								13			3,405
Translation adjustments							2,547						(6	)		2,541
Benefit plan adjustments, net of tax							474									474
Cash dividends													(172	)		(172	)
Compensation expense		479														479
Shares (acquired) issued, net		(1,030	)							817						(213	)
Balance, September 29, 2017	$	9,878		$	172,760	$	(29,650	)	$	(23,388	)	$	481		$	130,081

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

	Translation			Benefit Plan
	Adjustment			Adjustment
Balance at June 30, 2018	$	7,085		$	(30,877	)
Translation adjustment during the quarter		(536	)		-
Release stranded tax effects		-			(6,903	)
Amounts reclassified from accumulated other comprehensive income		-			471
Net current period other comprehensive income		(536	)		(6,432	)
Balance at September 28, 2018	$	6,549		$	(37,309	)

	Translation		Benefit Plan
	Adjustment		Adjustment
Balance at June 30, 2017	$	6,130	$	(38,801	)
Translation adjustment during the quarter		2,547		-
Amounts reclassified from accumulated other comprehensive income		-		474
Net current period other comprehensive income		2,547		474
Balance at September 29, 2017	$	8,677	$	(38,327	)

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

	Amount Reclassified
	Quarter Ended
	September 28, 2018
Changes in benefit plan items
Actuarial losses	$	607	(a)
Transition asset and prior service benefit		10	(a)
Total amortization		617
Income taxes		146
Total reclassification net of tax	$	471

	Amount Reclassified
	Quarter Ended
	September 29, 2017
Changes in benefit plan items
Actuarial losses	$	742	(a)
Transition asset and prior service benefit		10	(a)
Total amortization		752
Income taxes		278
Total reclassification net of tax	$	474

Note N - Restructuring of Operations (Tables)

3 Months Ended

Sep. 28, 2018

Restructuring and Related Costs [Table Text Block]

Accrued restructuring liability, June 30, 2018	$	90
Additions during the year		173
Payments and adjustments during the year		(177	)
Accrued restructuring liability, September 28, 2018	$	86

Note O - Earnings Per Share (Tables)

3 Months Ended

Sep. 28, 2018

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	For the Quarter Ended
	September 28, 2018			September 29, 2017
Basic:
Net income	$	2,903		$	3,405
Less: Net earnings attributable to noncontrolling interest		(41	)		(13	)
Less: Undistributed earnings attributable to unvested shares		(49	)		(85	)
Net income available to Twin Disc shareholders		2,813			3,307

Weighted average shares outstanding - basic		11,722			11,256

Basic Income Per Share:
Net income per share - basic	$	0.24		$	0.29

Diluted:
Net income	$	2,903		$	3,405
Less: Net earnings attributable to noncontrolling interest		(41	)		(13	)
Less: Undistributed earnings attributable to unvested shares		(49	)		(85	)
Net income available to Twin Disc shareholders		2,813			3,307

Weighted average shares outstanding - basic		11,722			11,256
Effect of dilutive stock awards		77			3
Weighted average shares outstanding - diluted		11,799			11,259

Diluted Income Per Share:
Net income per share - diluted	$	0.24		$	0.29

Note P - Lease Liabilities (Tables)

3 Months Ended

Sep. 28, 2018

Lease, Cost [Table Text Block]

	For the Quarter Ended
	September 28, 2018			September 29, 2017
Finance lease cost:
Amortization of right-of-use assets	$	1		$	1
Operating lease cost		880			633
Short-term lease cost		11			33
Variable lease cost		8			3
Total lease cost	$	900		$	670
Less: Sublease income		(16	)		(53	)
Net lease cost	$	884		$	617

Operating and Finance Leases, Other Disclosures [Table Text Block]

	For the Quarter Ended
	September 28, 2018			September 29, 2017
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	871		$	579
Operating cash flows from finance leases		1			1
Right-of-use-assets obtained in exchange for lease obligations:
Operating leases		12,127			280
Weighted average remaining lease term (years):
Operating leases		11.4			5.7
Finance lease		3.8			4.8
Weighted average discount rate:
Operating leases		7.6	%		6.5	%
Finance leases		4.0	%		4.0	%

Schedule of Future Minimum Rental Payments for Operating Leases and Finance Lease, Liability, Maturity [Table Text Block]

	Operating Leases			Finance Leases
2019	$	2,684		$	2
2020		3,115			3
2021		2,467			3
2022		1,969			3
2023		1,790			-
Thereafter		13,212			-
Total future lease payments		25,237			11
Less: Amount representing interest		(8,167	)		(1	)
Present value of future payments	$	17,070		$	10

Note A - Basis of Presentation (Details Textual) $ in Thousands	3 Months Ended
	Sep. 28, 2018 USD ($)
Tax Cuts and Jobs Act, Reclassification from AOCI to Retained Earnings, Tax Effect
Retained Earnings [Member]
Tax Cuts and Jobs Act, Reclassification from AOCI to Retained Earnings, Tax Effect	6,903
AOCI Attributable to Parent [Member]
Tax Cuts and Jobs Act, Reclassification from AOCI to Retained Earnings, Tax Effect	$ (6,903)

Note A - Basis of Presentation - Summary of Effect of Adopting ASU 2016-02 on the Condensed Consolidated Balance Sheet (Details) - USD ($) $ in Thousands	Sep. 28, 2018	Jun. 30, 2018
Property, plant and equipment, net	$ 68,302	$ 55,467
Lease obligations	$ 17,070	6,527
Previously Reported [Member]
Property, plant and equipment, net		48,940
Lease obligations
Restatement Adjustment [Member] \| Accounting Standards Update 2016-02 [Member]
Property, plant and equipment, net		6,527
Lease obligations		$ 6,527

Note A - Basis of Presentation - Summary of Effects of Adopting ASU 2017-07 on the Condensed Statements of Operations and Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 28, 2018	Sep. 29, 2017
Cost of goods sold	$ 50,704	$ 31,072
Gross profit	23,985	13,992
Marketing, engineering and administrative expenses	18,986	13,394
Income (loss) from operations	4,826	(620)
Other expense (income), net	$ 319	569
Previously Reported [Member]
Cost of goods sold		31,169
Gross profit		13,895
Marketing, engineering and administrative expenses		13,668
Income (loss) from operations		(991)
Other expense (income), net		198
Restatement Adjustment [Member] \| Accounting Standards Update 2017-07 [Member]
Cost of goods sold		(97)
Gross profit		97
Marketing, engineering and administrative expenses		(274)
Income (loss) from operations		371
Other expense (income), net		$ 371

Note B - Acquisition of Veth Propulsion Holding BV (Details Textual) - USD ($)
$ in Thousands

3 Months Ended

Jul. 02, 2018

Sep. 28, 2018

Sep. 29, 2017

Sep. 28, 2017

Proceeds from Issuance of Long-term Debt, Total

$ 35,000

Payments to Acquire Businesses, Net of Cash Acquired, Total

59,649

Amortization of Inventory Fair Value Step-up

1,171

The 2018 Credit Agreement [Member]

$ 665

$ 44

Proceeds from Issuance of Long-term Debt, Total

$ 60,729

Veth Propulsion [Member]

Business Acquisition, Percentage of Voting Interests Acquired

100.00%

Payments to Acquire Businesses, Gross

^[1]

$ 60,729

Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High

4,000

Payments to Acquire Businesses, Net of Cash Acquired, Total

59,649

Cash Acquired from Acquisition

1,080

Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Restricted Cash

$ 435

Business Acquisition, Expiration Period for Arrangements

45 days

Percentage of Work in Process of Inventory Completed

70.00%

Inventory, Net, Step-up Value Amount

$ 4,715

Amortization of Inventory Fair Value Step-up

$ 1,171

Business Combination, Acquisition Related Costs

621

$ 204

Amortization of Intangible Assets and Interest Expense of Long-term Debt, Total, Before Tax

$ 1,136

Veth Propulsion [Member] | Het Komt Vast Goed B.V. [Member]

Lessee, Operating Lease, Term of Contract

15 years

Lessee, Operating Lease, Annual Rent Payments

$ 1,168

[1]	In the statement of cash flows, the cash used in the acquisition of Veth Propulsion in the amount of $59,649 is net of the cash, including restricted cash, acquired in the transaction, of $1,080 (see below for fair value of assets acquired and liabilities assumed).

Note B - Acquisition of Veth Propulsion Holding BV - Consideration Transferred (Details) - Veth Propulsion [Member]
$ in Thousands

Jul. 02, 2018

USD ($)

Payments to Acquire Businesses, Gross

$ 60,729

^[1]

Fair value of contingent consideration (b)

2,927

^[2]

Total

$ 63,656

[1]	In the statement of cash flows, the cash used in the acquisition of Veth Propulsion in the amount of $59,649 is net of the cash, including restricted cash, acquired in the transaction, of $1,080 (see below for fair value of assets acquired and liabilities assumed).
[2]	This pertains to the fair value of the earn-out, which was estimated based on a probability-weighted approach.

Note B - Acquisition of Veth Propulsion Holding BV - Summary of Preliminary Fair Value of Assets Acquired and Liabilities Assumed (Details) - USD ($)
$ in Thousands

Sep. 28, 2018

Jul. 02, 2018

Jun. 30, 2018

Cash, including restricted cash

$ 27,265

$ 2,692

Veth Propulsion [Member]

^[1]

$ 1,080

Accounts receivable

^[2]

10,032

Inventories

^[3]

27,641

Property, plant and equipment

^[4]

1,537

Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles

^[5]

23,700

Other assets

259

Accounts payable and customer deposits

(17,297)

Other current liabilities

(861)

Deferred tax liability

^[6]

(7,104)

Total net assets acquired

38,987

Projects work in progress at fair value

^[7]

24,669

Total consideration

$ 63,656

[1]	Included in cash is restricted cash in the amount of $435. This amount is restricted and not available for general business use in order to guarantee performance obligations by Veth Propulsion under certain customer contracts. A significant majority of these arrangements are set to expire in 45 days after September 28, 2018 and they are not expected to be renewed.
[2]	Accounts receivable represents contractual amounts receivable from customers less an allowance for doubtful accounts. This amount approximates fair value.
[3]	Inventories This consists of: Raw materials $ 13,297 Projects work in progress at fair value 14,344 Inventories at fair value 27,641 Inventories at book value 22,926 Step-up $ 4,715 As of the effective date of the acquisition, inventory is required to be measured at fair value. Raw materials are typically utilized in operations within one year of purchase and therefore book values approximate fair value. Projects work in progress are estimated to be approximately 70% complete, and the step to fair value less estimated costs to complete and sell resulted in a step up value of approximately $4,715.
[4]	The determination of property, plant and equipment is currently in progress. This preliminary amount assumes book value approximates fair value.
[5]	Intangible assets This consists of: Estimated fair value Estimated average useful lives Annual amortization Customer relationships $ 13,600 12 $ 1,133 Technology and know-how 8,300 7 1,186 Tradename 1,800 10 180 Total $ 23,700 $ 2,499 The preliminary fair values were determined primarily using an income method, which utilizes financial forecasts of expected future cash flows. Some of the more significant assumptions used in the development of intangible asset values include: the amount and timing of projected future cash flows, the discount rate selected to measure the risks inherent in future cash flows, and the assessment of the asset's life cycle and competitive trends impacting the asset, as well as other factors.
[6]	This represents the net deferred tax liability associated with the fair value of assets acquired and liabilities assumed.
[7]	The Company is not able to deduct any of the goodwill for tax purposes.

Note B - Acquisition of Veth Propulsion Holding BV - Inventories (Details) - Veth Propulsion [Member]
$ in Thousands

Jul. 02, 2018

USD ($)

Raw materials

$ 13,297

14,344

Inventories at fair value

27,641

^[1]

Inventories at book value

22,926

Step-up

$ 4,715

[1]

Inventories This consists of: Raw materials $ 13,297 Projects work in progress at fair value 14,344 Inventories at fair value 27,641 Inventories at book value 22,926 Step-up $ 4,715 As of the effective date of the acquisition, inventory is required to be measured at fair value. Raw materials are typically utilized in operations within one year of purchase and therefore book values approximate fair value. Projects work in progress are estimated to be approximately 70% complete, and the step to fair value less estimated costs to complete and sell resulted in a step up value of approximately $4,715.

Note B - Acquisition of Veth Propulsion Holding BV - Intangible Assets (Details) - USD ($) $ in Thousands		3 Months Ended
	Jul. 02, 2018	Sep. 28, 2018
Intangible assets, estimated fair value		$ 23,700
Intangible assets, estimated average useful lives (Year)		10 years
Customer Relationships [Member]
Intangible assets, estimated fair value		$ 13,600
Technology-Based Intangible Assets [Member]
Intangible assets, estimated fair value		8,300
Trade Names [Member]
Intangible assets, estimated fair value		$ 1,800
Veth Propulsion [Member]
Intangible assets, estimated fair value	$ 23,700
Intangible assets, estimated average useful lives (Year)
Intangible assets, annual amortization	$ 2,499
Veth Propulsion [Member] \| Customer Relationships [Member]
Intangible assets, estimated fair value	$ 13,600
Intangible assets, estimated average useful lives (Year)	12 years
Intangible assets, annual amortization	$ 1,133
Veth Propulsion [Member] \| Technology-Based Intangible Assets [Member]
Intangible assets, estimated fair value	$ 8,300
Intangible assets, estimated average useful lives (Year)	7 years
Intangible assets, annual amortization	$ 1,186
Veth Propulsion [Member] \| Trade Names [Member]
Intangible assets, estimated fair value	$ 1,800
Intangible assets, estimated average useful lives (Year)	10 years
Intangible assets, annual amortization	$ 180

Note B - Acquisition of Veth Propulsion Holding BV - Financial Information from Veth Propulsion Included in the Consolidated Statements of Operations (Details) - Veth Propulsion [Member]
$ in Thousands

3 Months Ended

Sep. 28, 2018

USD ($)

Net sales

$ 13,353

Gross profit (a)

2,186

^[1]

Operating loss

(720)

^[2]

Net loss attributable to Twin Disc

$ (950)

[1]	Gross profit includes the non-recurring charge for the step-up of inventories acquired of $1,171 for the quarter.
[2]	In addition to (a), operating loss includes the amortization of intangible assets acquired of $621 for the quarter, and non-recurring charges related to the acquisition of $204.

Note B - Acquisition of Veth Propulsion Holding BV - Unaudited Supplemental Pro Forma Information (Details) - Veth Propulsion [Member]
$ / shares in Units, shares in Thousands, $ in Thousands

3 Months Ended

Sep. 29, 2017

USD ($)

$ / shares

Net sales

$ 59,709

Gross profit (a)

17,189

^[1]

Net income attributable to Twin Disc (b)

$ 2,715

^[2]

Basic income per share attributable to Twin Disc (in dollars per share) | $ / shares

$ 0.24

Diluted income per share attributable to Twin Disc (in dollars per share) | $ / shares

$ 0.24

Basic (in shares) | shares

11,256

Diluted (in shares) | shares

11,259

[1]	Gross profit includes the amortization of the step-up of inventories of $1,171 for the quarter.
[2]	In addition to (a), this includes the amortization of intangible assets acquired and interest expense on borrowings under the Credit Agreement net of other expenses, amounting to $1,136, before tax.

Note C - Revenue Recognition - Net Sales by Product Group (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 28, 2018	Sep. 29, 2017
Net Sales	$ 74,689	$ 45,064
Operating Segments [Member] \| Manufacturing Segment [Member]
Net Sales	68,912	39,872
Operating Segments [Member] \| Distribution Segment [Member]
Net Sales	22,920	17,662
Intersegment Eliminations [Member]
Net Sales	(17,143)
Intersegment Eliminations [Member] \| Manufacturing Segment [Member]
Net Sales	(14,749)	(10,332)
Intersegment Eliminations [Member] \| Distribution Segment [Member]
Net Sales	(2,394)	$ (2,138)
Industrial [Member]
Net Sales	7,045
Industrial [Member] \| Operating Segments [Member] \| Manufacturing Segment [Member]
Net Sales	6,481
Industrial [Member] \| Operating Segments [Member] \| Distribution Segment [Member]
Net Sales	1,396
Industrial [Member] \| Intersegment Eliminations [Member]
Net Sales	(832)
Land Based Transmissions [Member]
Net Sales	29,636
Land Based Transmissions [Member] \| Operating Segments [Member] \| Manufacturing Segment [Member]
Net Sales	29,432
Land Based Transmissions [Member] \| Operating Segments [Member] \| Distribution Segment [Member]
Net Sales	5,611
Land Based Transmissions [Member] \| Intersegment Eliminations [Member]
Net Sales	(5,407)
Marine and Propulsion Systems [Member]
Net Sales	36,275
Marine and Propulsion Systems [Member] \| Operating Segments [Member] \| Manufacturing Segment [Member]
Net Sales	32,976
Marine and Propulsion Systems [Member] \| Operating Segments [Member] \| Distribution Segment [Member]
Net Sales	14,156
Marine and Propulsion Systems [Member] \| Intersegment Eliminations [Member]
Net Sales	(10,857)
Other [Member]
Net Sales	1,733
Other [Member] \| Operating Segments [Member] \| Manufacturing Segment [Member]
Net Sales	23
Other [Member] \| Operating Segments [Member] \| Distribution Segment [Member]
Net Sales	1,757
Other [Member] \| Intersegment Eliminations [Member]
Net Sales	$ (47)

Note D - Inventories - Inventories (Details) - USD ($) $ in Thousands	Sep. 28, 2018	Jun. 30, 2018
Finished parts	$ 53,313	$ 49,332
Work in process	27,716	13,183
Raw materials	42,410	21,486
Total inventories	$ 123,439	$ 84,001

Note E - Warranty (Details Textual) - USD ($) $ in Thousands	Sep. 28, 2018	Sep. 29, 2017
Product Warranty Accrual, Current	$ 4,139	$ 1,968
Product Warranty Accrual, Noncurrent	$ 528	$ 358

Note E - Warranty - Warranty (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 28, 2018	Sep. 29, 2017
Reserve balance	$ 4,407	$ 2,062
Current period expense and adjustments	729	658
Payments or credits to customers	(1,020)	(433)
Acquisition, Warranty	557
Translation	(6)	39
Reserve balance	$ 4,667	$ 2,326

Note G - Business Segments (Details Textual)	3 Months Ended
Note G - Business Segments (Details Textual)	Sep. 28, 2018
Number of Reportable Segments	2

Note G - Business Segments - Revenues by Segment (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 28, 2018	Sep. 29, 2017
Net sales	$ 74,689	$ 45,064
Net income (loss)	2,862	3,392
Intersegment Eliminations [Member]
Net sales	(17,143)
Corporate, Non-Segment [Member]
Net income (loss)	(5,238)	(2,344)
Manufacturing Segment [Member] \| Operating Segments [Member]
Net sales	68,912	39,872
Net income (loss)	7,235	5,067
Manufacturing Segment [Member] \| Intersegment Eliminations [Member]
Net sales	(14,749)	(10,332)
Distribution Segment [Member] \| Operating Segments [Member]
Net sales	22,920	17,662
Net income (loss)	865	669
Distribution Segment [Member] \| Intersegment Eliminations [Member]
Net sales	$ (2,394)	$ (2,138)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Note G - Business Segments - Assets by Segment (Details) - USD ($) $ in Thousands	Sep. 28, 2018	Jun. 30, 2018
Segment Assets	$ 340,757	$ 241,240
Operating Segments [Member] \| Manufacturing Segment [Member]
Segment Assets	367,376	266,417
Operating Segments [Member] \| Distribution Segment [Member]
Segment Assets	54,544	52,230
Corporate, Non-Segment [Member]
Segment Assets	$ (81,163)	$ (77,407)

Note H - Stock-based Compensation (Details Textual) - USD ($)	3 Months Ended
	Sep. 28, 2018	Sep. 29, 2017
Performance Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	37,000	54,900
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years	3 years
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	55,400	69,200
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number, Ending Balance	182,700	224,900
Allocated Share-based Compensation Expense, Total	$ 546,000	$ 15,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value, Ending Balance	$ 15.02
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Total	$ 1,683,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Fair Value	$ 0	$ 0
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	4,000	65,800
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number, Ending Balance	170,400	309,500
Allocated Share-based Compensation Expense, Total	$ 250,000	$ 463,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Total	927,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Fair Value	$ 1,785,000	$ 444,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period	2,800	0
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	3 years
Restricted Stock [Member] \| Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	1 year
Restricted Stock [Member] \| Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	38,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number, Ending Balance	38,000
Allocated Share-based Compensation Expense, Total	$ 54,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value, Ending Balance	$ 25.77
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Total	$ 924,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	3 years

Note I - Pension and Other Postretirement Benefit Plans (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Sep. 28, 2018	Sep. 29, 2017
Other Comprehensive (Income) Loss, Defined Benefit Plan, Prior Service Cost (Credit), Reclassification Adjustment from AOCI, after Tax	$ 471	$ 474
Other Comprehensive (Income) Loss, Defined Benefit Plan, Prior Service Cost (Credit), Reclassification Adjustment from AOCI, Tax	146	$ 278
Pension Plan [Member]
Defined Benefit Plan, Expected Future Employer Contributions, Current Fiscal Year	2,382
Defined Benefit Plan, Plan Assets, Contributions by Employer	$ 1,054

Note I - Pension and Other Postretirement Benefit Plans - Net Funded Status of Pension and Postretirement Plans (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 28, 2018	Sep. 29, 2017
Pension Plan [Member]
Service cost	$ 246	$ 262
Interest cost	1,092	1,074
Expected return on plan assets	1,331	1,525
Amortization of transition obligation	(9)	(9)
Amortization of prior service cost	1	1
Amortization of actuarial net loss	(678)	(759)
Net periodic benefit cost	695	580
Service cost	246	262
Interest cost	1,092	1,074
Amortization of actuarial net loss	678	759
Other Postretirement Benefits Plan [Member]
Service cost	5	5
Interest cost	76	92
Amortization of actuarial net loss	69	(3)
Net periodic benefit cost	12	100
Service cost	5	5
Interest cost	76	92
Amortization of actuarial net loss	$ (69)	$ 3

Note J - Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended			12 Months Ended
	Sep. 28, 2018	Sep. 29, 2017	Sep. 28, 2017	Jun. 30, 2018
Effective Income Tax Rate Reconciliation, Percent, Total	23.40%	371.70%
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%			35.00%
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Percent	(13.00%)
Transitional Income Tax , Amount	$ 0
Unrecognized Tax Benefits that Would Impact Effective Tax Rate	$ 990
Mix of Jurisdictions [Member]
Effective Income Tax Rate Reconciliation, Other Reconciling Items, Percent, Total	(29.90%)
Foreign Tax Authority [Member]
Effective Income Tax Rate Reconciliation, Change in Deferred Tax Assets Valuation Allowance, Amount			$ 3,803
Effective Income Tax Rate Reconciliation, Change in Deferred Tax Assets Valuation Allowance, Percent			303.50%
Foreign Tax Authority [Member] \| Earliest Tax Year [Member]
Open Tax Year	2011
Foreign Tax Authority [Member] \| Latest Tax Year [Member]
Open Tax Year	2018
State and Local Jurisdiction [Member] \| Earliest Tax Year [Member]
Open Tax Year	2015
State and Local Jurisdiction [Member] \| Earliest Tax Year [Member] \| Wisconsin Department of Revenue [Member]
Open Tax Year	2010
State and Local Jurisdiction [Member] \| Latest Tax Year [Member] \| Wisconsin Department of Revenue [Member]
Open Tax Year	2013

Note K - Goodwill and Other Intangibles (Details Textual) - USD ($)
$ in Thousands

3 Months Ended

Jul. 02, 2018

Sep. 28, 2018

Sep. 29, 2017

Jun. 30, 2018

Acquired Finite-lived Intangible Assets, Weighted Average Useful Life

$ 27,265

$ 2,692

10 years

Indefinite-lived Intangible Assets (Excluding Goodwill), Ending Balance

$ 665

$ 44

206

202

European Industrial [Member]

Goodwill, Impairment Loss

2,683

$ 2,692

Veth Propulsion [Member]

Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles

^[1]

$ 24,669

^[2]

$ 23,700

Acquired Finite-lived Intangible Assets, Weighted Average Useful Life