Note G - Stock-based Compensation

3 Months Ended

Sep. 26, 2025

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

G. Stock-Based Compensation

In the first quarter of fiscal 2025, the Company adopted the Twin Disc, Incorporated Amended and Restated 2021 Omnibus Incentive Plan (the “Omnibus Plan”), which was subsequently approved by the Company’s shareholders.  The Omnibus Plan amended and restated the Twin Disc, Incorporated 2021 Long-Term Incentive Plan (the “2021 LTI Plan”), and effectively replaced the Twin Disc, Incorporated 2020 Stock Incentive Plan for Non-Employee Directors (the “2020 Directors' Plan”).  Benefits under the Omnibus Plan may be granted, awarded or paid in any one or a combination of stock options, stock appreciation rights, restricted stock awards, restricted stock units, cash-settled restricted stock units, performance stock awards, performance stock unit awards, performance unit awards, and dividend equivalent awards.  The Omnibus Plan is designed to benefit key employees (including officers) of the Company and its subsidiaries, as well as non-employee directors of the Company.

There is reserved for issuance under the Plan an aggregate of 1,636,550 shares of the Company’s common stock, which consists of the previously-approved 715,000 shares of common stock reserved for issuance under the 2021 LTI Plan prior to its amendment and restatement to become the Omnibus Plan; 521,550 shares of common stock that remained available for issuance under the 2020 Directors' Plan; and 400,000 newly authorized shares of common stock. Shares issued under the Omnibus Plan may be authorized and unissued shares or shares reacquired by the Company in the open market or a combination of both. The aggregate amount is subject to proportionate adjustments for stock dividends, stock splits and similar changes.

Performance Stock Awards (“PSA”)

During the first quarter of fiscal 2026 and 2025, the Company granted a target number of 166.5 and 116.1 PSAs, respectively, to various employees of the Company, including executive officers.

The fiscal 2026 PSAs will vest if the Company achieves performance-based target objectives relating to average return on invested capital and cumulative EBITDA (as defined in the PSA Grant Agreement), in the cumulative three fiscal year period ending June 30, 2028. These PSAs are subject to adjustment if the Company’s return on invested capital and cumulative EBITDA falls below or exceeds the specified target objective, and the maximum number of performance shares that can be awarded if the target objective is exceeded is 333.1. Based upon actual results to date, the Company is currently not accruing compensation expense for these PSAs.

The fiscal 2025 PSAs will vest if the Company achieves performance-based target objectives relating to average return on invested capital and cumulative EBITDA (as defined in the PSA Grant Agreement), in the cumulative three fiscal year period ending June 30, 2027. These PSAs are subject to adjustment if the Company’s return on invested capital and cumulative EBITDA falls below or exceeds the specified target objective, and the maximum number of performance shares that can be awarded if the target objective is exceeded is 232.2.

There were 396.4 and 350.0 unvested PSAs outstanding at September 26, 2025 and September 27, 2024, 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 $378 and $659 was recognized for the quarters ended September 26, 2025 and September 27, 2024, respectively, related to PSAs. The weighted average grant date fair value of the unvested awards at September 26, 2025 was $11.12. At September 26, 2025, the Company had $2,736 of unrecognized compensation expense related to the unvested shares that would vest if the specified target objective was achieved for the fiscal 2026 and 2025 awards. The total fair value of PSAs vested as of September 26, 2025 and September 27, 2024 was $0.

Performance Stock Unit Awards (“PSUA”)

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

There were 8.0 and 10.5 unvested PSUAs outstanding at September 26, 2025 and September 27, 2024, respectively. The fair value of the PSUAs (on the date of grant) is expensed over the performance period for the shares that are expected to ultimately vest. Compensation expense of $8 and $11 was recognized for the quarters ended September 26, 2025 and September 27, 2024, respectively, related to PSUAs. The weighted average grant date fair value of the unvested awards at September 26, 2025 was $12.15. At September 26, 2025, the Company had $25 of unrecognized compensation expense related to the unvested shares that would vest if the specified target objective was achieved for the fiscal 2025 awards. The total fair value of PSUAs vested as of September 26, 2025 and September 27, 2024 was $0.

Restricted Stock Awards (“RS”)

The Company has unvested RS awards outstanding that will vest if certain service conditions are fulfilled. The fair value of the RS grants is recorded as compensation expense over the vesting period, which is generally 1 to 3 years. During the first quarter of fiscal 2026 and 2025, the Company granted 113.2 and 1.8 service based restricted shares, respectively. There were 233.2 and 244.4 unvested shares outstanding at September 26, 2025 and September 27, 2024, respectively. A total of 2.2 and 0 shares of restricted stock were forfeited during the quarters ended September 26, 2025 and September 27, 2024, respectively. Compensation expense of $305 and $311 was recognized for the quarters ended September 26, 2025 and September 27, 2024, respectively. The total fair value of restricted stock grants vested as of September 26, 2025 and September 27, 2024 was $1,156 and $27, respectively. As of September 26, 2025, the Company had $1,269 of unrecognized compensation expense related to restricted stock which will be recognized over the next three years.

Restricted Stock Unit Awards (“RSU”)

The RSUs entitles an individual to shares of common stock of the Company or cash in lieu of shares of Company common stock if specific terms and conditions or restrictions are met through a specified date, generally three years from the date of grant or when performance conditions have been met. The fair value of the RSUs (on the date of grant) is recorded as compensation expense over the vesting period. During the first quarter of fiscal 2026 and 2025, the Company granted 0 and 77.4 of employment based RSUs, respectively. There were 79.2 and 156.9 unvested RSUs outstanding at September 26, 2025 and September 27, 2024, respectively. Compensation expense of $171 and $43 was recognized for the quarters ended September 26, 2025 and September 27, 2024, respectively. The total fair value of restricted stock units vested as of September 26, 2025 and September 27, 2024 was $33 and $0, respectively. The weighted average grant date fair value of the unvested awards at September 26, 2025 was $12.84. As of September 26, 2025, the Company had $605 of unrecognized compensation expense related to restricted stock which will be recognized over the next three years.