1
TWIN DISC, INCORPORATED
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2002 Commission File Number 1-7635
TWIN DISC, INCORPORATED
(Exact name of registrant as specified in its charter)
Wisconsin 39-0667110
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
1328 Racine Street, Racine, Wisconsin 53403
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (262) 638-4000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
At September 30 2002, the registrant had 2,807,832 shares of its common stock
outstanding.
2
PART 1 FINANCIAL INFORMATION
Item 1. Financial Statements
TWIN DISC, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30 June 30
2002 2002
---- ----
Assets
Current assets:
Cash and cash equivalents $ 8,683 $ 7,313
Trade accounts receivable, net 26,954 29,006
Inventories, net 45,187 44,504
Deferred income taxes 4,505 4,505
Other 4,650 4,126
-------- --------
Total current assets 89,979 89,454
Property, plant and equipment, net 29,148 29,549
Investment in affiliate 2,491 2,439
Goodwill 12,427 12,311
Deferred income taxes 12,438 12,246
Prepaid pension asset 1,383 1,383
Other assets 8,935 9,898
-------- --------
$156,801 $157,280
-------- --------
-------- --------
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 1,998 $ 1,708
Current maturities on long-term debt 11,397 2,857
Accounts payable 13,782 13,042
Accrued liabilities 21,942 22,312
-------- --------
Total current liabilities 49,119 39,919
Long-term debt 10,045 18,583
Accrued retirement benefits 40,945 39,797
-------- --------
100,109 98,299
Minority Interest 442 472
Shareholders' Equity:
Common stock 11,653 11,653
Retained earnings 85,302 87,524
Accumulated other comprehensive loss (23,224) (23,187)
-------- --------
73,731 75,990
Less treasury stock, at cost 17,481 17,481
-------- --------
Total shareholders' equity 56,250 58,509
-------- --------
$156,801 $157,280
-------- --------
-------- --------
The notes to consolidated financial statements are an integral part of this
statement. Amounts in thousands.
3
TWIN DISC, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
September 30
2002 2001
---- ----
Net sales $36,521 $40,631
Cost of goods sold 30,591 32,085
------- -------
5,930 8,546
Marketing, engineering and
administrative expenses 8,319 7,848
Interest expense 308 488
Other income, net (41) (305)
------- -------
8,586 8,031
------- -------
Earnings before income taxes
and minority interest (2,656) 515
Income taxes (895) 220
------- -------
Earnings before minority interest (1,761) 295
Minority Interest 30 (23)
------- -------
Net (loss) earnings ($ 1,731) $ 272
------- -------
------- -------
Dividends per share $ 0.175 $ 0.175
Earnings per share data:
Basic earnings (loss) per share ($ 0.62) $ 0.10
Diluted earnings (loss) per share ($ 0.62) $ 0.10
Shares outstanding data:
Average shares outstanding 2,808 2,808
Dilutive stock options - -
------- -------
Diluted shares outstanding 2,808 2,808
------- -------
------- -------
Comprehensive income (loss):
Net earnings (loss) ($ 1,731) $ 272
Other comprehensive income (loss):
Foreign currency translation adjustment (37) 1,817
------- -------
Comprehensive income (loss): ($ 1,768) $ 2,089
------- -------
------- -------
In thousands of dollars except per share statistics. Per share figures are
based on shares outstanding data.
The notes to consolidated financial statements are an integral part of this
statement.
4
TWIN DISC, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
September 30
2002 2001
---- ----
Cash flows from operating activities:
Net earnings (loss) ($1,731) $ 272
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 1,354 1,381
Equity in earnings of affiliates (147) (200)
Dividends received from affiliate 95 -
Net change in working capital,
excluding cash and debt, and other 2,571 4,491
------ ------
2,142 5,944
------ ------
Cash flows from investing activities:
Acquisitions of fixed assets (703) (339)
------ ------
(703) (339)
------ ------
Cash flows from financing activities:
Short Term Borrowing 350 -
Increase in notes payable, net (139) (694)
Treasury stock activity - -
Dividends paid (491) (491)
------ ------
(280) (1,185)
------ ------
Effect of exchange rate changes on cash 211 223
------ ------
Net change in cash and cash equivalents 1,370 4,643
Cash and cash equivalents:
Beginning of period 7,313 5,961
------ ------
End of period $ 8,683 $10,604
------ ------
------ ------
The notes to consolidated financial statements are an integral part of
this statement. Amounts in thousands.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
A. Basis of Presentation
The unaudited financial statements have been prepared by 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 financial statements and the
notes thereto included in the Company's latest Annual Report. The year end
condensed balance sheet data was derived from audited financial statements but
does not include all disclosures required by generally accepted accounting
principles.
Certain amounts in the prior year financial statements have been reclassified
to conform to the current year presentation.
B. Inventory
The major classes of inventories were as follows (in thousands):
September 30, June 30
2002 2002
---------- ---------
Inventories:
Finished parts $34,426 $35,485
Work in process 6,645 5,668
Raw materials 4,116 3,351
------- -------
$45,187 $44,504
------- -------
------- -------
C. Debt
At September 30, 2002, the Company had debt, excluding the short-term notes
payable, consisting of $10 million borrowed under a $20 million revolving line
of credit facility and $11.4 million of senior notes with a final maturity of
June 2006. Both loan agreements require compliance with certain restrictive
covenants including a specified ratio of earnings to fixed charges (fixed
charge coverage ratio). Compliance is determined quarterly based on the
trailing four quarters ending on each determination date. For the four
quarters ending September 30, 2002, the Company was not in compliance with the
fixed charge coverage ratio primarily due to operating losses incurred in the
most recently completed quarter. The Company is currently in discussions with
the senior note holder to obtain a waiver and amend future covenants. Until
the waiver and amendment are obtained, the Company has reflected the entire
$11.4 million as a current liability. The violation under the line of credit
has been waived and a new facility is being negotiated to provide a $20
million, three-year revolving line of credit. An interim facility for up to
$12 million with a final maturity of October 31, 2003 is in place pending
completion of those negotiations.
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D. Contingencies
The Company is involved in various stages of investigation relative to
hazardous waste sites, two of which are on the United States EPA National
Priorities List (Superfund sites). The Company's assigned responsibility at
each of the Superfund sites is less than 3%. The Company has also been
requested to provide administrative information related to two other potential
Superfund sites but has not yet been identified as a potentially responsible
party. Additionally, the Company is subject to certain product liability
matters in the normal course of business.
At September 30, 2002 the Company has accrued approximately $632,000, which
represents management's best estimate available for possible losses related to
these contingencies. This amount has been provided over the past several
years. Based on the information available, the Company does not expect that
any unrecorded liability related to these matters would materially affect the
consolidated financial position, results of operations or cash flows.
E. BUSINESS SEGMENTS
Information about the Company's segments is summarized as follows (in
thousands):
September 30, September 30,
2002 2001
------------- -------------
Manufacturing segment sales $ 30,464 $ 34,758
Distribution segment sales 13,849 14,135
Inter/Intra segment sales (7,792) (8,262)
--------- ---------
Net sales $ 36,521 $ 40,631
--------- ---------
--------- ---------
Manufacturing segment earnings $ (2,477) $ 113
Distribution segment earnings 455 1,019
Inter/Intra segment loss (634) (617)
--------- ---------
Earnings before income taxes
and minority interest $ (2,656) $ 515
--------- ---------
--------- ---------
Assets September 30, June 30,
2002 2002
------------- ------------
Manufacturing segment assets $ 137,380 $ 139,810
Distribution segment assets 28,978 30,275
Corporate assets and elimination
of inter-company assets (9,557) (12,805)
-------- --------
$ 156,801 $ 157,280
-------- --------
-------- --------
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F. RECENTLY ISSUED ACCOUNTING STANDARDS
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
143, Accounting for Obligations Associated with the Retirement of Long-Lived
Assets and SFAS No. 144, Accounting for the Impairment or Disposal of Long-
Lived Assets as of the beginning of the fiscal year. On review, it was
determined that there were no asset retirement obligations or impairment of
these assets and thus no losses were recorded in the first fiscal quarter or
anticipated for the fiscal year.
In April 2002, the FASB issued SFAS No. 145, "Recission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections,"
related to accounting for debt extinguishments, leases, and intangible assets
of motor carriers. The provisions of SFAS No. 145 are effective for the
Company on July 1, 2002, however the adoption of this Statement did not have a
significant impact on the Company's results of operations or its financial
position.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This Statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring)." The
provisions of this Statement are effective for exit or disposal activities
that are initiated after December 31, 2002, accordingly management anticipates
that the adoption of SFAS No. 146 will not have a significant effect on the
Company's results of operations or its financial position.
8
Item 2. MANAGEMENT DISCUSSION AND ANALYSIS
Net revenues for the first fiscal quarter were 10 percent below year-ago
levels due to weak market demand and supplier quality problems at the domestic
manufacturing operation. As a result, the Company incurred a net loss of $1.7
million versus modest profit reported in last year's first fiscal quarter.
The primary reasons for the poor results - reduced sales volume and the
additional manufacturing cost incurred - stem from the aforementioned quality
issues, discussed in greater detail below.
The general weakness in global economic activity experienced in the last six
months of fiscal 2002 continued into the first quarter of fiscal 2003. Almost
all of our operations have been affected by the worldwide slowdown. The
weakness in pleasure craft activity continues to be the largest single factor
adversely affecting sales and that impact was felt most by our Belgian
manufacturing operation. Sales from our domestic manufacturing plants dropped
due primarily to non-conforming parts received from two of our key subcontract
suppliers early in the period. Resolution of those problems resulted in
reduced production efficiency and delayed shipments, primarily of marine and
powershift transmission products. Sales of Arneson surface drives, for which
demand has remained relatively stable, were slightly above those reported a
year ago. On the other hand, shipments of industrial products and marine
transmissions for commercial boats were well off the pace of the first quarter
last year. With few exceptions, sales from our distribution subsidiaries
throughout the world were lower than in the comparable period last year.
The reduction in profitability from last year's first quarter was traceable
mainly to a decline in the gross margin. The supplier quality problem cited
earlier added approximately $0.7 million of direct cost to the domestic
manufacturing operation. At least as important, however, were the production
hours lost and the disruption of workflows that were necessary to serve the
critical delivery requirements of our customers. Claims against the vendors
to recover some of the losses will be recorded as an offset when they are
received, but the impact of that recovery is not expected to be significant in
any one quarter. The flow of high-quality production parts has been restored,
and we expect to reduce our past-due backlog and return to normal shipping
schedules during the second fiscal quarter.
Marketing, engineering, and administrative (ME&A) expenses increased by six
percent from last year's first fiscal quarter with the majority of the
increase due to engineering development of the new marine transmission line.
With slightly lower interest rates and debt dropping by about 25 percent from
a year ago, interest expense continued to decline. The average income tax
rate was lower than a year ago due to a greater proportion of domestic losses
incurred versus overseas earnings, which are taxed at a higher rate.
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
143, Accounting for Obligations Associated with the Retirement of Long-Lived
Assets and SFAS No. 144, Accounting for the Impairment or Disposal of Long-
Lived Assets as of the beginning of the fiscal year. On review, it was
determined that there were no asset retirement obligations or impairment of
these assets and thus no losses were recorded in the first fiscal quarter or
anticipated for the fiscal year.
9
Financial Condition, Liquidity and Capital Resources
Working capital and the current ratio closely approximated those of the
previous quarter-end. Reduced sales volume was accompanied by a decline in
accounts receivable of $2 million, which was about equal to the total net cash
flows from operations. That cash flow provided for our financing and
investing needs and an increase in the cash balance. The Company=s balance
sheet is strong, there are no off-balance-sheet arrangements, and we continue
to have sufficient liquidity for near-term needs.
At September 30, 2002, the Company had debt, excluding the short-term notes
payable, consisting of $10 million borrowed under a $20 million revolving line
of credit facility and $11.4 million of senior notes with a final maturity of
June 2006. Both loan agreements require compliance with certain restrictive
covenants including a specified ratio of earnings to fixed charges (fixed
charge coverage ratio). Compliance is determined quarterly based on the
trailing four quarters ending on each determination date. For the four
quarters ending September 30, 2002, the Company was not in compliance with the
fixed charge coverage ratio primarily due to operating losses incurred in the
most recently completed quarter. The Company is currently in discussions with
the senior note holder to obtain a waiver and amend future covenants. Until
the waiver and amendment are obtained, the Company has reflected the entire
$11.4 million as a current liability. The violation under the line of credit
has been waived and a new facility is being negotiated to provide a $20
million, three-year revolving line of credit. An interim facility for up to
$12 million with a final maturity of October 31, 2003 is in place pending
completion of those negotiations.
The Company has obligations under non-cancellable operating lease contracts
and a senior note agreement for certain future payments. A summary of those
commitments follows (in thousands):
Contractual Obligations Total Less than 1-3 4-5 After 5
1 year Years Years Years
Short-term debt $ 1,998 $ 1,998
Current maturities on
Long-term debt $11,397 $11,397
Revolver borrowing $10,000 $10,000
Long-term debt $ 45 $ 45
Operating leases $ 7,890 $ 2,605 $ 2,981 $ 1,152 $ 1,152
Total obligations $31,330 $16,000 $13,026 $ 1,152 $ 1,152
10
New Accounting Releases
In April 2002, the FASB issued SFAS No. 145, "Recission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections,"
related to accounting for debt extinguishments, leases, and intangible assets
of motor carriers. The provisions of SFAS No. 145 are effective for the
Company on July 1, 2002, however the adoption of this Statement did not have a
significant impact on the Company's results of operations or its financial
position.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This Statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring)." The
provisions of this Statement are effective for exit or disposal activities
that are initiated after December 31, 2002, accordingly management anticipates
that the adoption of SFAS No. 146 will not have a significant effect on the
Company's results of operations or its financial position.
Critical Accounting Policies
The preparation of this Quarterly Report requires management's judgment to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the dates of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. There can be no assurance that actual results
will not differ from those estimates.
Twin Disc's significant and critical accounting policies are described in Note
A in the Notes to Consolidated Financial Statements and Management Discussion
and Analysis, respectively, in the Annual Report for June 30, 2002. There
have been no significant changes to those accounting policies subsequent to
June 30, 2002.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
The Company is exposed to market risks from changes in interest rates,
commodities and foreign exchange. To reduce such risks, the Company
selectively uses financial instruments and other pro-active management
techniques. All hedging transactions are authorized and executed pursuant to
clearly defined policies and procedures, which prohibit the use of financial
instruments for trading or speculative purposes.
Interest rate risk - The Company=s earnings exposure related to adverse
movements of interest rates is primarily derived from outstanding floating
rate debt instruments that are indexed to the prime and LIBOR interest rates.
Those debt facilities bear interest predominantly at the prime interest rate
minus .5% or LIBOR plus 1%. Due to the relative stability of interest rates,
the Company did not utilize any financial instruments at September 30, 2002 to
manage interest rate risk exposure. A 10 percent increase or decrease in the
applicable interest rate would result in a change in pretax interest expense
of approximately $30,000.
11
Commodity price risk - The Company is exposed to fluctuation in market prices
for such commodities as steel and aluminum. Due to the relative stability of
these commodities, the Company does not utilize commodity price hedges to
manage commodity price risk exposure.
Currency risk - The Company has exposure to foreign currency exchange
fluctuations. Approximately one-third of the Company=s revenues in the three
months ended September 30, 2002 and 2001 were denominated in currencies other
than the U.S. dollar. Of that total, approximately two-thirds was denominated
in euros with the balance composed of Japanese yen and the Australian and
Singapore dollars. The Company does not hedge the translation exposure
represented by the net assets of its foreign subsidiaries. Foreign currency
translation adjustments are recorded as a component of shareholders= equity.
Forward foreign exchange contracts are used to hedge the currency fluctuations
on significant transactions denominated in foreign currencies.
Derivative Financial Instruments - The Company has written policies and
procedures that place all financial instruments under the direction of the
company corporate treasury and restrict derivative transactions to those
intended for hedging purposes. The use of financial instruments for trading
purposes is prohibited. The Company uses financial instruments to manage the
market risk from changes in foreign exchange rates.
The Company primarily enters into forward exchange contracts to reduce the
earnings and cash flow impact of non-functional currency denominated
receivables and payables. These contracts are highly effective in hedging the
cash flows attributable to changes in currency exchange rates. Gains and
losses resulting from these contracts offset the foreign exchange gains or
losses on the underlying assets and liabilities being hedged. The maturities
of the forward exchange contracts generally coincide with the settlement dates
of the related transactions. Gains and losses on these contracts are recorded
in Other income (expense), net in the Consolidated Statement of Operations as
the changes in the fair value of the contracts are recognized and generally
offset the gains and losses on the hedged items in the same period. The
primary currency to which the Company was exposed in 2002 and 2001 was the
Euro. At September 30, 2002 the Company had net outstanding forward exchange
contracts to purchase Euros in the value of $1,304,000 with a weighted average
maturity of 28 days. The fair value of the Company=s contracts was
approximately $0.0 million at September 30, 2002. At June 30, 2002 the
Company had net outstanding forward exchange contracts to purchase Euros in
the value of $2,053,000 with a weighted average maturity of 40 days. The fair
value of the Company=s contracts was approximately $0.2 million at June 30,
2002.
Item 4. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures.
As required by new Rules 13a-15 and 15d-15 of the Securities Exchange Act of
1934, within the 90-day period prior to the filing of this report and under
the supervision and with the participation of management, including the Chief
Executive Officer and the Chief Financial Officer, the Company has evaluated
the effectiveness of the design and operation of its disclosure controls and
procedures. Based on such evaluation, the Chief Executive Officer and Chief
Financial Officer have concluded that such disclosure controls and procedures
are effective in ensuring that material information relating to the Company,
including its consolidated subsidiaries, is made known to the certifying
officers by others within the Company and its consolidated subsidiaries during
the period covered by this report.
12
(b) Changes in Internal Controls.
There were no significant changes in the Company's internal controls for
financial reporting or in other factors that could significantly affect such
internal controls subsequent to the date of such evaluation. However, in
connection with the new rules, the Company has been engaged in the process of
further reviewing and documenting its disclosure controls and procedures,
including its internal accounting controls. The Company may from time to time
make changes aimed at enhancing the effectiveness of its disclosure controls
and procedures, including its internal controls, to ensure that the Company's
systems evolve with its business.
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Part II. OTHER INFORMATION
Item 1. Legal Proceedings.
Twin Disc is a defendant in several product liability or related claims
considered either adequately covered by appropriate liability insurance or
involving amounts not deemed material to the business or financial condition
of the Company.
Item 2. Changes in Securities and Use of Proceeds.
There were no securities of the Company sold by the Company during the three
months ended September 30, 2002, which were not registered under the
Securities Act of 1933, in reliance upon an exemption from registration
provided by Section 4 (2) of the Act.
During the period covered by this report, the Company offered participants in
the Twin Disc, Incorporated B The Accelerator 401(k) Savings Plan (the APlan@)
the option to invest their Plan accounts in a fund comprised of Company stock.
Participation interests of Plan participants in the Plan, which may be
considered securities, were not registered with the SEC. During the fiscal
year ended June 30, 2002, 68 Plan participants allocated an aggregate of
$81,000 toward this investment option. Participant accounts in the Plan
consist of a combination of employee deferrals, Company matching
contributions, and, in some cases, additional Company profit-sharing
contributions. No underwriters were involved in these transactions. On
September 6, 2002, the Company filed a Form S-8 to register 100,000 shares of
Company common stock offered through the Plan, as well as an indeterminate
amount of Plan participation interests.
Item 5. Other Information.
The discussions in this report on Form 10-Q and in the documents incorporated
herein by reference, and oral presentations made by or on behalf of the
Company contain or may contain various forward-looking statements
(particularly those referring to the expectations as to possible strategic
alternatives, future business and/or operations, in the future tense, or using
terms such as "believe", "anticipate", "expect" or "intend") that involve
risks and uncertainties. The Company's actual future results could differ
materially from those discussed, due to the factors which are noted in
connection with the statements and other factors. The factors that could
cause or contribute to such differences include, but are not limited to, those
further described in the "Management's Discussion and Analysis".
Item 6. Exhibits and Reports on Form 8-K.
There were no reports on Form 8-K during the three months ended September 30,
2002.
14
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TWIN DISC, INCORPORATED
(Registrant)
November 14, 2002 /S/ FRED H. TIMM
----------------------- ---------------------------
(Date) Fred H. Timm
Vice President - Administration and
Secretary
15
CERTIFICATIONS
I, Michael E. Batten, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Twin Disc,
Incorporated;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002 /s/ MICHAEL E. BATTEN
Michael E. Batten
Chairman, Chief Executive Officer
16
CERTIFICATIONS
I, James O. Parrish, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Twin Disc,
Incorporated;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002 /s/ JAMES O. PARRISH
James O. Parrish
Vice President Finance, Treasurer,
Chief Financial Officer