Twin Disc, Incorporated (TWIN) Cash Flow Statement

The bulk of the difference is mechanical — cumulative depreciation and amortization of approximately $33.6M over the same period accounts for most of the $28.3M gap, though volatile working capital adds substantial quarter-to-quarter noise. Individual quarters tell a more complicated story: 2026Q2 reported $22.4M of net income on only $4.6M of operating cash flow (OCF/NI of 0.20), an inversion that appears consistent with the non-operating items flagged in the prior income statement review, while 2026Q4 reverses the pattern at $1.9M of net income on $20.6M of operating cash flow. The average OCF/NI ratio of roughly 1.8x overstates the quality signal, because it is inflated by a large D&A add-back while individual quarters swing wildly, so investors should weigh the trailing cash trend more heavily than any single period's reported earnings.

The rebound is not purely operating-driven: a $9.2M working capital release contributed roughly half of 2026Q4's $17.2M of free cash flow, meaning underlying earnings-to-cash conversion is softer than the headline 15% margin implies. More telling is the cumulative picture — approximately $32.3M of FCF over ten quarters versus $36.3M of cumulative net income, an inversion that is unusual for a manufacturer of this capital intensity and suggests that reported earnings gains have been absorbed into inventory and receivables rather than converted to cash. Whether the current FCF margin proves durable hinges on whether the revenue reacceleration to $114.4M per quarter can be funded without another round of working capital draws, a risk that the historical quarterly pattern makes credible.

The historical pattern is consistent with a business where receivables and inventory build during revenue acceleration and release when order growth moderates — a $9.8M release in 2024Q4, a $5.5M build in 2025Q1, an $11.0M build in 2026Q1, and a $9.2M release in 2026Q4. Cumulative working capital contributed roughly $8.0M to operating cash flow across the ten quarters, but its uneven timing means any single quarter's OCF/NI ratio is an unreliable guide to earnings quality; the 2026Q1 figure of 14.53 is the clearest example of that distortion. Investors should monitor whether collections continue to improve as revenue expands, because a fresh working capital build during the current growth phase would compress reported cash flow even if operating income keeps improving.

Cumulative capex of about $32.2M over the ten quarters is broadly in line with cumulative D&A of $33.6M, implying that the machinery and tooling base is being replaced rather than expanded — a posture that sits awkwardly alongside reported revenue growth of 18.3% year-over-year. Capital intensity has compressed from 8.0% of revenue in 2025Q4 to 3.0% in 2026Q4, which mechanically flatters free cash flow but also raises the possibility that deferred investment could constrain capacity if end-market demand holds. If double-digit revenue growth persists, capex may need to rise above D&A to sustain output, and that potential headwind to FCF is not yet reflected in current margin levels.

Dividends have been held flat at roughly $570K per quarter even as operating cash flow swung from -$7.5M to $20.6M, which indicates a conservative payout that does not flex with cyclicality and implies retained cash may be funding inventory investment or balance sheet repair rather than being returned to shareholders. The complete absence of share repurchases across a period in which the stock presumably traded at cyclically depressed multiples is notable, though the disclosed data does not allow an assessment of whether that reflects capital allocation priorities or financing constraints. The 2024Q4 acquisition at $23.2M is the only material use of cash beyond operations, and its return on invested capital cannot be evaluated from cash flow statements alone — a gap investors should flag when weighing the quality of the deployment.