UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
Commission File Number
STANDEX INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
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(State of incorporation) | (IRS Employer Identification No.) |
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(Address of principal executive offices) | (Zip Code) |
( (Registrant’s telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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| Accelerated filer ☐ |
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Non-accelerated filer ☐ | Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of shares of Registrant's Common Stock outstanding on November 1, 2022 was
STANDEX INTERNATIONAL CORPORATION
INDEX
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Page No. |
PART I. FINANCIAL INFORMATION: |
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Item 1. |
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Condensed Consolidated Balance Sheets as of September 30, 2022 and June 30, 2022 (unaudited) |
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Condensed Consolidated Statements of Operations for the three months ended September 30, 2022 and 2021 (unaudited) |
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Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended September 30, 2022 and 2021 (unaudited) |
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Condensed Consolidated Statements of Stockholders’ Equity for the three months ended September 30, 2022 and 2021 (unaudited) |
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Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2022 and 2021 (unaudited) |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
Quantitative and Qualitative Disclosures about Market Risk |
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Item 4. |
Controls and Procedures |
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PART II. OTHER INFORMATION: |
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
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Item 6. |
Exhibits |
PART I. FINANCIAL INFORMATION
ITEM 1
STANDEX INTERNATIONAL CORPORATION
Unaudited Condensed Consolidated Balance Sheets
September 30, | June 30, | |||||||
(In thousands, except per share data) | 2022 | 2022 | ||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Accounts receivable, less allowance for credit losses of $ and $ at September 30, 2022 and June 30, 2022, respectively | ||||||||
Inventories | ||||||||
Prepaid expenses and other current assets | ||||||||
Income taxes receivable | ||||||||
Total current assets | ||||||||
Property, plant, and equipment, net | ||||||||
Intangible assets, net | ||||||||
Goodwill | ||||||||
Deferred tax asset | ||||||||
Operating lease right-of-use asset | ||||||||
Other non-current assets | ||||||||
Total non-current assets | ||||||||
Total assets | $ | $ | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | $ | ||||||
Accrued liabilities | ||||||||
Income taxes payable | ||||||||
Total current liabilities | ||||||||
Long-term debt | ||||||||
Operating lease long-term liabilities | ||||||||
Accrued pension and other non-current liabilities | ||||||||
Total non-current liabilities | ||||||||
Contingencies (Note 15) | ||||||||
Stockholders' equity: | ||||||||
Common stock, par value $ per share, shares authorized, shares issued, and shares outstanding at September 30, 2022 and June 30, 2022 | ||||||||
Additional paid-in capital | ||||||||
Retained earnings | ||||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
Treasury shares: and shares at September 30, 2022 and June 30, 2022 | ( | ) | ( | ) | ||||
Total stockholders' equity | ||||||||
Total liabilities and stockholders' equity | $ | $ |
See notes to unaudited condensed consolidated financial statements
STANDEX INTERNATIONAL CORPORATION
Unaudited Condensed Consolidated Statements of Operations
Three Months Ended | ||||||||
September 30, | ||||||||
(In thousands, except per share data) | 2022 | 2021 | ||||||
Net sales | $ | $ | ||||||
Cost of sales | ||||||||
Gross profit | ||||||||
Selling, general, and administrative expenses | ||||||||
Restructuring costs | ||||||||
Acquisition related costs | ||||||||
Total operating expenses | ||||||||
Income from operations | ||||||||
Interest expense | ||||||||
Other non-operating (income) expense, net | ||||||||
Income from continuing operations before income taxes | ||||||||
Provision for income taxes | ||||||||
Income from continuing operations | ||||||||
Income (loss) from discontinued operations, net of tax | ( | ) | ( | ) | ||||
Net income | $ | $ | ||||||
Basic earnings (loss) per share: | ||||||||
Continuing operations | $ | $ | ||||||
Discontinued operations | ||||||||
Total | $ | $ | ||||||
Diluted earnings (loss) per share: | ||||||||
Continuing operations | $ | $ | ||||||
Discontinued operations | ||||||||
Total | $ | $ | ||||||
Weighted average number of shares: | ||||||||
Basic | ||||||||
Diluted |
See notes to unaudited condensed consolidated financial statements
STANDEX INTERNATIONAL CORPORATION
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)
Three Months Ended | ||||||||
September 30, | ||||||||
(In thousands) | 2022 | 2021 | ||||||
Net income | $ | $ | ||||||
Other comprehensive income (loss): | ||||||||
Defined benefit pension plans: | ||||||||
Actuarial gains (losses) and other changes in unrecognized costs, net of tax | $ | $ | ||||||
Amortization of unrecognized costs, net of tax | ||||||||
Derivative instruments: | ||||||||
Change in unrealized gains (losses), net of tax | ||||||||
Amortization of unrealized gains (losses) into interest expense, net of tax | ||||||||
Foreign currency translation gains (losses), net of tax | ( | ) | ( | ) | ||||
Other comprehensive income (loss), net of tax | $ | ( | ) | $ | ( | ) | ||
Comprehensive income | $ | $ |
See notes to unaudited condensed consolidated financial statements
STANDEX INTERNATIONAL CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Stockholders' Equity
Accumulated Other | ||||||||||||||||||||||||||||
For the three month period ended | Additional | Comprehensive | Total | |||||||||||||||||||||||||
September 30, 2022 | Common | Paid-in | Retained | Income | Treasury Stock | Stockholders’ | ||||||||||||||||||||||
(in thousands, except as specified) | Stock | Capital | Earnings | (Loss) | Shares | Amount | Equity | |||||||||||||||||||||
Balance, June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
Stock issued under incentive compensation plans and employee purchase plans | ( | ) | (131 | ) | ||||||||||||||||||||||||
Stock-based compensation | - | |||||||||||||||||||||||||||
Treasury stock acquired | ( | ) | ( | ) | ||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||
Net income | - | |||||||||||||||||||||||||||
Foreign currency translation adjustment | ( | ) | - | ( | ) | |||||||||||||||||||||||
Pension, net of tax of million | - | |||||||||||||||||||||||||||
Change in fair value of derivatives, net of tax of million | - | |||||||||||||||||||||||||||
Dividends declared ( per share) | ( | ) | - | ( | ) | |||||||||||||||||||||||
Balance, September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
For the three month period ended September 30, 2021 | ||||||||||||||||||||||||||||
(in thousands, except as specified) | ||||||||||||||||||||||||||||
Balance, June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
Stock issued under incentive compensation plans and employee purchase plans | ( | ) | ( | ) | ||||||||||||||||||||||||
Stock-based compensation | - | |||||||||||||||||||||||||||
Treasury stock acquired | ( | ) | ( | ) | ||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||
Net income | - | |||||||||||||||||||||||||||
Foreign currency translation adjustment | ( | ) | - | ( | ) | |||||||||||||||||||||||
Pension, net of tax of million | - | |||||||||||||||||||||||||||
Change in fair value of derivatives, net of tax of million | - | |||||||||||||||||||||||||||
Dividends declared ( per share) | ( | ) | - | ( | ) | |||||||||||||||||||||||
Balance, September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ |
See notes to unaudited condensed consolidated financial statements
STANDEX INTERNATIONAL CORPORATION
Unaudited Condensed Consolidated Statements of Cash Flows
Three Months Ended | ||||||||
September 30, | ||||||||
(In thousands) | 2022 | 2021 | ||||||
Cash flows from operating activities | ||||||||
Net income | $ | $ | ||||||
Income (loss) from discontinued operations | ( | ) | ( | ) | ||||
Income from continuing operations | ||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | ||||||||
Stock-based compensation | ||||||||
Non-cash portion of restructuring charge | ( | ) | ( | ) | ||||
Contributions to defined benefit plans | ( | ) | ( | ) | ||||
Changes in operating assets and liabilities, net | ( | ) | ( | ) | ||||
Net cash provided by (used in) operating activities - continuing operations | ( | ) | ||||||
Net cash provided by (used in) operating activities - discontinued operations | ( | ) | ||||||
Net cash provided by (used in) operating activities | ( | ) | ||||||
Cash flows from investing activities | ||||||||
Expenditures for property, plant, and equipment | ( | ) | ( | ) | ||||
Other investing activity | ( | ) | ||||||
Net cash provided by (used in) investing activities | ( | ) | ( | ) | ||||
Cash flows from financing activities | ||||||||
Proceeds from borrowings | ||||||||
Contingent consideration payment | ( | ) | ( | ) | ||||
Activity under share-based payment plans | ||||||||
Purchases of treasury stock | ( | ) | ( | ) | ||||
Cash dividends paid | ( | ) | ( | ) | ||||
Net cash provided by (used in) financing activities | ( | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | ( | ) | ( | ) | ||||
Net change in cash and cash equivalents | ( | ) | ( | ) | ||||
Cash and cash equivalents at beginning of year | ||||||||
Cash and cash equivalents at end of period | $ | $ | ||||||
Supplemental Disclosure of Cash Flow Information: | ||||||||
Cash paid during the year for: | ||||||||
Interest | $ | $ | ||||||
Income taxes, net of refunds | $ | $ |
See notes to unaudited condensed consolidated financial statements
STANDEX INTERNATIONAL CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements
1) Management Statement
In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the results of operations for the three months ended September 30, 2022 and 2021, the cash flows for the three months ended September 30, 2022 and 2021 and the financial position of Standex International Corporation (“Standex”, the “Company”, “we”, “us”, or “our”), at September 30, 2022. The interim results are not necessarily indicative of results for a full year. The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. The unaudited condensed consolidated financial statements and notes do not contain information which would substantially duplicate the disclosures contained in the audited annual consolidated financial statements and notes for the year ended June 30, 2022. The condensed consolidated balance sheet at June 30, 2022 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The financial statements contained herein should be read in conjunction with the Annual Report on Form 10-K and in particular the audited consolidated financial statements for the year ended June 30, 2022. Unless otherwise noted, references to years are to the Company’s fiscal years. Currently our fiscal year end is June 30. For further clarity, our fiscal year 2023 includes the twelve-month period from July 1, 2022 to June 30, 2023.
The estimates and assumptions used in the preparation of the consolidated financial statements have considered the implications on the Company as a result of the COVID-19 pandemic and its related economic impacts. As a result of the COVID-19 pandemic, there is heightened volatility and uncertainty around supply chain performance, labor availability, and customer demand. However, the magnitude of such impact on the Company’s business and its duration is uncertain. The Company is not aware of any specific event or circumstance that would require an update to its estimates or adjustments to the carrying value of its assets and liabilities as of September 30, 2022 and the issuance date of the Quarterly Report on Form 10-Q.
The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The Company evaluated subsequent events through the date and time its unaudited condensed consolidated financial statements were issued.
Recently Issued Accounting Pronouncements
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which requires business entities to provide certain disclosures when they (1) have received government assistance and (2) use a grant or contribution accounting model by analogy to other accounting guidance. The guidance in ASU 2021-10 is effective for all entities for fiscal years beginning after December 15, 2021 with early adoption permitted. The Company adopted ASU 2021-10 in fiscal year 2023. The adoption did not have a material impact on the consolidated financial statements.
2) Acquisitions
At the time of the acquisition and September 30, 2022, the Company evaluated the significance of each acquisition on a standalone basis and in aggregate, considering both qualitative and quantitative factors.
Sensor Solutions
During the third quarter of fiscal year 2022, the Company acquired Sensor Solutions, a designer and manufacturer of customized standard magnetic sensor products including hall effect switch and latching sensors, linear and rotary sensors, and specialty sensors. Sensor Solutions' customer base in automotive, industrial, medical, aerospace, military and consumer electronics end markets are a strategic fit and expand the Company's presence in these markets. Sensor Solutions operates one light manufacturing facility in Colorado. Sensor Solutions' results are reported within the Company's Electronics segment.
The Company paid $
Identifiable intangible assets of $
The components of the fair value of the Sensor Solutions acquisition, including the preliminary allocation of the purchase price are as follows (in thousands):
Preliminary Allocation | Preliminary Allocation | |||||||||||
March 31, 2022 | Adjustments | September 30, 2022 | ||||||||||
Fair value of business combination: | ||||||||||||
Cash payments | $ | $ | ||||||||||
Less cash acquired | ) | ) | ||||||||||
Total | $ | $ | $ | |||||||||
Preliminary Allocation | Preliminary Allocation | |||||||||||
March 31, 2022 | Adjustments | September 30, 2022 | ||||||||||
Identifiable assets acquired and liabilities assumed: | ||||||||||||
Other acquired assets | $ | $ | ) | $ | ||||||||
Inventories | ( | ) | ||||||||||
Property, plant, & equipment | ||||||||||||
Identifiable intangible assets | ( | ) | ||||||||||
Goodwill | ) | |||||||||||
Liabilities assumed | ) | ( | ) | ) | ||||||||
Total | $ | $ | $ |
Other Acquisitions
During the fourth quarter of fiscal year 2022, the Company paid $
Acquisition Related Costs
Acquisition related costs include costs related to acquired businesses and other pending acquisitions. These costs consist of (i) deferred compensation arrangements and (ii) acquisition related professional service fees and expenses, including financial advisory, legal, accounting, and other outside services incurred in connection with acquisition activities, and regulatory matters related to acquired entities. These costs do not include purchase accounting expenses, which we define as acquired backlog and the step-up of inventory to fair value, or the amortization of the acquired intangible assets.
Acquisition related costs for the three months ended September 30, 2022, and 2021 were $
3) Revenue From Contracts With Customers
Most of the Company’s contracts have a single performance obligation which represents the product or service being sold to the customer. Some contracts include multiple performance obligations such as a product and the related installation and/or extended warranty. Additionally, most of the Company’s contracts offer assurance type warranties in connection with the sale of a product to customers. Assurance type warranties provide a customer with assurance that the product complies with agreed-upon specifications. Assurance type warranties do not represent a separate performance obligation.
In general, the Company recognizes revenue at the point in time control transfers to its customer based on predetermined shipping terms. Revenue is recognized over time under certain long-term contracts within the Engineering Technologies and Engraving groups for highly customized customer products that have no alternative use and in which the contract specifies the Company has a right to payment for its costs, plus a reasonable margin. For products manufactured over time, the transfer of control is measured pro rata, based upon current estimates of costs to complete such contracts. Losses on contracts are fully recognized in the period in which the losses become determinable. Revisions in profit estimates are reflected on a cumulative basis in the period in which the basis for such revision becomes known.
Disaggregation of Revenue from Contracts with Customers
The following table presents revenue disaggregated by product line and segment (in thousands):
Three Months Ended | ||||||||
Revenue by Product Line | September 30, 2022 | September 30, 2021 | ||||||
Electronics | $ | $ | ||||||
Engraving Services | ||||||||
Engraving Products | ||||||||
Total Engraving | ||||||||
Scientific | ||||||||
Engineering Technologies | ||||||||
Hydraulics Cylinders and Systems | ||||||||
Merchandising & Display | ||||||||
Pumps | ||||||||
Total Specialty Solutions | ||||||||
Total revenue by product line | $ | $ |
The following table presents revenue from continuing operations disaggregated by geography based on company’s locations (in thousands):
Three Months Ended | Three Months Ended | |||||||
Net sales | September 30, 2022 | September 30, 2021 | ||||||
United States | $ | $ | ||||||
Asia Pacific | ||||||||
EMEA (1) | ||||||||
Other Americas | ||||||||
Total | $ | $ |
(1) EMEA consists primarily of Europe, Middle East and S. Africa.
The following table presents revenue from continuing operations disaggregated by timing of recognition (in thousands) for the three months ended:
Three Months Ended | ||||||||
Timing of Revenue Recognition | September 30, 2022 | September 30, 2021 | ||||||
Products and services transferred at a point in time | $ | $ | ||||||
Products transferred over time | ||||||||
Net sales | $ | $ |
Contract Balances
Contract assets represent sales recognized in excess of billings related to work completed but not yet shipped for which revenue is recognized over time. Contract assets are recorded as prepaid expenses and other current assets. Contract liabilities are customer deposits for which revenue has not been recognized. Current contract liabilities are recorded as accrued liabilities.
The timing of revenue recognition, invoicing and cash collections results in billed receivables, contract assets and contract liabilities on the consolidated balance sheets. When consideration is received from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded. Contract liabilities are recognized as revenue after control of the goods and services are transferred to the customer and all revenue recognition criteria have been met.
The following table provides information about contract assets and liability balances (in thousands):
Balance at Beginning of Period | Additions | Amount Recognized | Balance at End of Period | |||||||||||||
Three months ended September 30, 2022 | ||||||||||||||||
Contract assets: | ||||||||||||||||
Prepaid expenses and other current assets | $ | $ | $ | $ | ||||||||||||
Contract liabilities: | ||||||||||||||||
Customer deposits |
Balance at Beginning of Period | Additions | Amount Recognized | Balance at End of Period | |||||||||||||
Three months ended September 30, 2021 | ||||||||||||||||
Contract assets: | ||||||||||||||||
Prepaid expenses and other current assets | $ | $ | $ | $ | ||||||||||||
Contract liabilities: | ||||||||||||||||
Customer deposits |
We recognized the following revenue which was included in the contract liability beginning balances (in thousands):
September 30, 2022 | ||||
Revenue recognized in the period from: | Three months ended | |||
Amounts included in the contract liability balance at the beginning of the period | $ |
September 30, 2021 | ||||
Revenue recognized in the period from: | Three months ended | |||
Amounts included in the contract liability balance at the beginning of the period | $ |
4) Fair Value Measurements
The financial instruments shown below are presented at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models may be applied.
Assets and liabilities recorded at fair value in the consolidated balance sheet are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities and the methodologies used in valuation are as follows:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets and liabilities. The Company’s deferred compensation plan assets consist of shares in various mutual funds (investments are participant-directed) which invest in a broad portfolio of debt and equity securities. These assets are valued based on publicly quoted market prices for the funds’ shares as of the balance sheet dates.
Level 2 – Inputs, other than quoted prices in an active market, that are observable either directly or indirectly through correlation with market data. For foreign exchange forward contracts and interest rate swaps, the Company values the instruments based on the market price of instruments with similar terms, which are based on spot and forward rates as of the balance sheet dates. The Company has considered the creditworthiness of counterparties in valuing all assets and liabilities.
Level 3 – Unobservable inputs based upon the Company’s best estimate of what market participants would use in pricing the asset or liability.
There were no transfers of assets or liabilities between any levels of the fair value measurement hierarchy at September 30, 2022 and June 30, 2022. The Company’s policy is to recognize transfers between levels as of the date they occur.
Cash and cash equivalents, accounts receivable, accounts payable, and debt are carried at cost, which approximates fair value.
The fair values of financial instruments were as follows (in thousands):
September 30, 2022 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Marketable securities - deferred compensation plan | $ | $ | $ | $ | ||||||||||||
Interest rate swaps | ||||||||||||||||
Liabilities | ||||||||||||||||
Foreign exchange contracts | $ | $ | $ |
June 30, 2022 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Marketable securities - deferred compensation plan | $ | $ | $ | $ | ||||||||||||
Foreign exchange contracts | ||||||||||||||||
Interest rate swaps | ||||||||||||||||
Liabilities | ||||||||||||||||
Foreign exchange contracts | $ | $ | $ | $ | ||||||||||||
Contingent consideration (a) |
(a) The fair value of contingent consideration arrangements is determined based on the Company's evaluation as to the probability and amount of any contingent consideration that has been earned to date.
The financial liabilities based upon Level 3 inputs include contingent consideration arrangements relating to the acquisitions of Renco Electronics. The Company is contractually obligated to pay contingent consideration payments to the Sellers of these businesses based on the achievement of certain criteria.
The Company is contractually obligated to pay contingent consideration to the sellers of GS Engineering in the event that certain revenue and gross margin targets are achieved during the five years following acquisition. The targets set in the GS Engineering stock purchase agreement were not met for the first, second, or third year, which concluded in the fourth quarter of fiscal years 2020, 2021 and 2022, respectively. As of September 30, 2022, the Company could be required to pay up to $
In connection with its acquisition of Renco Electronics, the Company was obligated to pay contingent consideration over a three year period of up to $
The Company has determined the fair value of the liabilities for the contingent consideration based on a probability-weighted discounted cash flow analysis. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. The fair value of the contingent consideration liability associated with future payments was based on several factors, the most significant of which are the financial performance of the acquired businesses and the risk-adjusted discount rate for the fair value measurement.
The Company will update its assumptions each reporting period based on new developments and record such amounts at fair value based on the revised assumptions until the agreements expire.
5) Inventories
Inventories from continuing operations are comprised of the following (in thousands):
September 30, 2022 | June 30, 2022 | |||||||
Raw materials | $ | $ | ||||||
Work in process | ||||||||
Finished goods | ||||||||
Total | $ | $ |
Distribution costs associated with the sale of inventory, which are recorded as a component of selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations were $
6) Goodwill
Changes to goodwill by segment during the period were as follows (in thousands):
June 30, 2022 | Acquisitions | Translation Adjustment | September 30, 2022 | |||||||||||||
Electronics | $ | $ | $ | ( | ) | $ | ||||||||||
Engraving | ( | ) | ||||||||||||||
Scientific | ||||||||||||||||
Engineering Technologies | ( | ) | ||||||||||||||
Specialty Solutions | ||||||||||||||||
Total | $ | $ | $ | ( | ) | $ |
7) Warranty Reserves
September 30, 2022 | June 30, 2022 | |||||||
Balance at beginning of year | $ | $ | ||||||
Acquisitions and other charges | ( | ) | ( | ) | ||||
Warranty expense | ||||||||
Warranty claims | ( | ) | ( | ) | ||||
Balance at end of period | $ | $ |
8) Debt
Long-term debt is comprised of the following (in thousands):
September 30, 2022 | June 30, 2022 | |||||||
Bank credit agreements | $ | $ | ||||||
Total funded debt | ||||||||
Issuance cost | ( | ) | ( | ) | ||||
Total long-term debt | $ | $ |
Bank Credit Agreements
During the second quarter of fiscal year 2019, the Company entered into a
At September 30, 2022, the Company had standby letters of credit outstanding, primarily for insurance purposes, of $
9) | Accrued Liabilities |
Accrued liabilities consist of the following (in thousands):
September 30, 2022 | June 30, 2022 | |||||||
Payroll and employee benefits | $ | $ | ||||||
Operating lease current liability | ||||||||
Litigation accrual | ||||||||
Warranty reserves | ||||||||
Fair value of derivatives | ||||||||
Restructuring costs | ||||||||
Workers' compensation | ||||||||
Contingent consideration | ||||||||
Other | ||||||||
Total | $ | $ |
10) Derivative Financial Instruments
The Company is exposed to market risks from changes in interest rates, commodity prices and changes in foreign currency rates. The Company selectively uses derivative financial instruments in order to manage certain of these risks. Information about the Company’s derivative financial instruments is as follows:
Interest Rate Swaps
From time to time as dictated by market opportunities, the Company enters into interest rate swap agreements designed to manage exposure to interest rates on the Company’s variable rate indebtedness. The Company recognizes all derivatives on its balance sheet at fair value. The Company has designated its interest rate swap agreements, including those that may be forward-dated, as cash flow hedges, and changes in the fair value of the swaps are recognized in other comprehensive income until the hedged items are recognized in earnings. Hedge ineffectiveness, if any, associated with the swaps will be reported by the Company in interest expense.
The Company’s effective swap agreements convert the base borrowing rate on $
Effective Date | Notional Amount | Fixed Interest Rate | Maturity | September 30, 2022 | June 30, 2022 | ||||||||||
August 6, 2018 | | |
| $ | $ | ||||||||||
March 23, 2020 | | |
| ||||||||||||
April 24, 2020 | | |
| ||||||||||||
May 24, 2020 | | |
| ||||||||||||
$ | $ |
The Company reported
Foreign Exchange Contracts
Forward foreign currency exchange contracts are used to limit the impact of currency fluctuations on certain anticipated foreign cash flows, such as collections from customers and loan payments between subsidiaries. The Company enters into such contracts for hedging purposes only. The Company has designated certain of these currency contracts as hedges, and changes in the fair value of these contracts are recognized in other comprehensive income until the hedged items are recognized in earnings. Hedge ineffectiveness, if any, associated with these contracts will be reported in net income. At September 30, 2022 and June 30, 2022, the Company had outstanding forward contracts related to hedges of intercompany loans with net unrealized losses of $
The notional amounts of the Company’s forward contracts, by currency, are as follows (in thousands):
Currency | September 30, 2022 | June 30, 2022 | ||||||
EUR | ||||||||
CAD | ||||||||
JPY |
The table below presents the fair value of derivative financial instruments as well as their classification on the balance sheet (in thousands):
Asset Derivatives | ||||||||||
September 30, 2022 | June 30, 2022 | |||||||||
Derivative designated | Balance | Balance | ||||||||
as hedging instruments | Sheet | Sheet | ||||||||
Line Item | Fair Value | Line Item | Fair Value | |||||||
Interest rate swaps | Prepaid expenses and other current assets | $ | Prepaid expenses and other current assets | $ | 8,420 | |||||
Foreign exchange contracts | Prepaid expenses and other current assets | Prepaid expenses and other current assets | ||||||||
$ | $ |
Liability Derivatives | ||||||||||
September 30, 2022 | June 30, 2022 | |||||||||
Derivative designated | Balance | Balance | ||||||||
as hedging instruments | Sheet | Sheet | ||||||||
Line Item | Fair Value | Line Item | Fair Value | |||||||
Foreign exchange contracts | Accrued liabilities | $ | Accrued liabilities | $ | ||||||
$ | $ |
The table below presents the amount of gain (loss) recognized in comprehensive income on our derivative financial instruments (effective portion) designated as hedging instruments and their classification within comprehensive income for the periods ended (in thousands):
Three Months Ended | ||||||||
September 30, | ||||||||
2022 | 2021 | |||||||
Interest rate swaps | $ | $ | ( | ) | ||||
Foreign exchange contracts | ( | ) | ||||||
$ | $ |
The table below presents the amount reclassified from accumulated other comprehensive income (loss) to net income for the periods ended (in thousands):
Details about Accumulated | Affected line item | ||||||||
Other Comprehensive | Three Months Ended | in the Unaudited | |||||||
Income (Loss) Components | September 30, | Condensed Statements | |||||||
2022 | 2021 | of Operations | |||||||
Interest rate swaps | $ | ( | ) | $ | Interest expense | ||||
Foreign exchange contracts | Other non-operating (income) expense, net | ||||||||
$ | $ |
11) Retirement Benefits
The Company has defined benefit pension plans covering certain current and former employees both inside and outside of the U.S. The Company’s pension plan for U.S. employees is frozen for substantially all participants and has been replaced with a defined contribution benefit plan.
Net periodic benefit cost for the Company’s U.S. and Foreign pension benefit plans for the periods ended consisted of the following components (in thousands):
U.S. Plans | Non-U.S. Plans | |||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Service cost | $ | $ | $ | $ | ||||||||||||
Interest cost | ||||||||||||||||
Expected return on plan assets | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Recognized net actuarial loss | ( | ) | ||||||||||||||
Amortization of prior service cost | ( | ) | ( | ) | ||||||||||||
Net periodic benefit cost | $ | $ | ( | ) | $ | $ |
The following table sets forth the amounts recognized for the Company's defined benefit pension plans (in thousands):
Amounts recognized in the consolidated balance sheets consist of: | September 30, 2022 | June 30, 2022 | ||||||
Prepaid benefit cost | $ | $ | ||||||
Current liabilities | ( | ) | ( | ) | ||||
Non-current liabilities | ( | ) | ( | ) | ||||
Net amount recognized | $ | ( | ) | $ | ( | ) |
The contributions made to defined benefit plans are presented below along with remaining contributions to be made for fiscal year 2023 (in thousands):
Fiscal Year 2023 | Fiscal Year 2022 | Remaining | ||||||||||
Three Months Ended | Three Months Ended | Contributions | ||||||||||
Contributions to defined benefit plans | September 30, 2022 | September 30, 2021 | FY 2023 | |||||||||
United States, funded plan | $ | $ | $ | |||||||||
United States, unfunded plan | ||||||||||||
United Kingdom | ||||||||||||
Germany, unfunded plan | ||||||||||||
Ireland | ||||||||||||
$ | $ | $ |
12) Income Taxes
The Company's effective tax rate from continuing operations for the first quarter of fiscal year 2023 was
13) Earnings Per Share
The following table sets forth a reconciliation of the number of shares (in thousands) used in the computation of basic and diluted earnings per share:
Three Months Ended | ||||||||
September 30, | ||||||||
2022 | 2021 | |||||||
Basic - Average shares outstanding | ||||||||
Dilutive effect of unvested, restricted stock awards | ||||||||
Diluted - Average shares outstanding |
Earnings available to common stockholders are the same for computing both basic and diluted earnings per share. There were
Performance stock units of
14) Accumulated Other Comprehensive Income (Loss)
The components of the Company’s accumulated other comprehensive income (loss) are as follows (in thousands):
September 30, 2022 | June 30, 2022 | |||||||
Foreign currency translation adjustment | $ | ( | ) | $ | ( | ) | ||
Unrealized pension losses, net of tax | ( | ) | ( | ) | ||||
Unrealized gains (losses) on derivative instruments, net of tax | ||||||||
Total | $ | ( | ) | $ | ( | ) |
15) Contingencies
From time to time, the Company is subject to various claims and legal proceedings, including claims related to environmental remediation, either asserted or unasserted, that arise in the ordinary course of business. While the outcome of these proceedings and claims cannot be predicted with certainty, the Company’s management does not believe that the outcome of any of the currently existing legal matters will have a material impact on the Company’s consolidated financial position, results of operations or cash flow. The Company accrues for losses related to a claim or litigation when the Company’s management considers a potential loss probable and can reasonably estimate such potential loss.
Litigation
As reported in the Company's annual report on Form 10-K file on August 5, 2022, during the fourth quarter of fiscal year 2022, the Company agreed to a full and comprehensive settlement of its pending lawsuit with Miniature Precision Components, Inc., and, as a result, recorded $
16) Industry Segment Information
The Company has
• | Electronics – manufactures and sells electronic components for applications throughout the end user market spectrum; | |
• | Engraving – provides mold texturizing, slush molding tools, project management and design services, roll engraving, hygiene product tooling, low observation vents for stealth aircraft, and process machinery for a number of industries; | |
• | Scientific – sells specialty temperature-controlled equipment for the medical, scientific, pharmaceutical, biotech and industrial markets; | |
• | Engineering Technologies – provides net and near net formed single-source customized solutions in the manufacture of engineered components for the aviation, aerospace, defense, energy, industrial, medical, marine, oil and gas, and manned and unmanned space markets; | |
• | Specialty Solutions – an aggregation of three operating segments that manufacture and sell refrigerated, heated and dry merchandizing display cases, custom fluid pump solutions, and single and double acting telescopic and piston rod hydraulic cylinders. |
Net sales and income (loss) from continuing operations by segment were as follows (in thousands):
Three Months Ended September 30, | ||||||||||||||||
Net Sales | Income from Operations | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Industry segment: | ||||||||||||||||
Electronics | $ | $ | $ | $ | ||||||||||||
Engraving | ||||||||||||||||
Scientific | ||||||||||||||||
Engineering Technologies | ||||||||||||||||
Specialty Solutions | ||||||||||||||||
Corporate | - | - | ( | ) | ( | ) | ||||||||||
Restructuring costs | - | - | ( | ) | ( | ) | ||||||||||
Acquisition related costs | - | - | ( | ) | ( | ) | ||||||||||
Sub-total | $ | $ | $ | $ | ||||||||||||
Interest expense | ||||||||||||||||
Other non-operating (income) expense | ||||||||||||||||
Income from continuing operations before income taxes | $ | $ |
Net sales include only transactions with unaffiliated customers and include no intersegment sales. Income (loss) from operations by segment excludes interest expense and other non-operating (income) expense.
17) Restructuring
The Company has undertaken a number of initiatives that have resulted in severance, restructuring, and related charges.
2023 Restructuring Initiatives
The Company continues to focus its efforts to reduce cost and improve productivity across its businesses, particularly through headcount reductions, facility closures, and consolidations. Restructuring expenses primarily related to headcount reductions and other cost saving initiatives. The Company expects the 2023 restructuring activities to be completed by fiscal year 2024.
Prior Year Restructuring Initiatives
Restructuring expenses primarily related to headcount reductions and facility rationalization within our Specialty Solutions segment. The Company also incurred restructuring expenses related to third party assistance with analysis and implementation of these activities. The Company expects the prior year restructuring activities to be completed by fiscal year 2023.
A summary of charges by initiative is as follows (in thousands):
Three Months Ended | ||||||||||||
September 30, 2022 | ||||||||||||
Fiscal Year 2023 | Involuntary Employee Severance and Benefit Costs | Other | Total | |||||||||
Current year initiatives | $ | $ | $ | |||||||||
Prior year initiatives | ||||||||||||
$ | 345 | $ | 237 | $ | 582 |
Three Months Ended | ||||||||||||
September 30, 2021 | ||||||||||||
Fiscal Year 2022 | Involuntary Employee Severance and Benefit Costs | Other | Total | |||||||||
Current year initiatives | $ | $ | $ | |||||||||
Prior year initiatives | ||||||||||||
$ | $ | $ |
Activity in the reserve related to the initiatives is as follows (in thousands):
Current Year Initiatives | Involuntary Employee Severance and Benefit Costs | Other | Total | |||||||||
Restructuring liabilities at June 30, 2022 | $ | $ | $ | |||||||||
Additions and adjustments | ||||||||||||
Payments | ( | ) | ( | ) | ( | ) | ||||||
Restructuring liabilities at September 30, 2022 | $ | $ | $ |
Prior Year Initiatives | Involuntary Employee Severance and Benefit Costs | Other | Total | |||||||||
Restructuring liabilities at June 30, 2022 | $ | $ | $ | |||||||||
Additions and adjustments | ||||||||||||
Payments | ( | ) | ( | ) | ( | ) | ||||||
Restructuring liabilities at September 30, 2022 | $ | $ | $ |
Prior Year Initiatives | Involuntary Employee Severance and Benefit Costs | Other | Total | |||||||||
Restructuring liabilities at June 30, 2021 | $ | $ | $ | |||||||||
Additions and adjustments | ||||||||||||
Payments | ( | ) | ( | ) | ( | ) | ||||||
Restructuring liabilities at September 30, 2021 | $ | $ | $ |
The Company’s total restructuring expenses by segment are as follows (in thousands):
Three Months Ended | ||||||||||||
September 30, 2022 | ||||||||||||
Involuntary Employee Severance and Benefit Costs | Other | Total | ||||||||||
Electronics | $ | $ | $ | |||||||||
Engraving | ||||||||||||
$ | $ | $ |
Three Months Ended | ||||||||||||
September 30, 2021 | ||||||||||||
Involuntary Employee Severance and Benefit Costs | Other | Total | ||||||||||
Engraving | $ | $ | $ | |||||||||
Engineering Technologies | ||||||||||||
$ | $ | $ |
Restructuring expense is expected to be approximately $
Management's Discussion and Analysis of Financial Condition and Results of Operations |
Statements contained in this Quarterly Report that are not based on historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of forward-looking terminology such as “should,” “could,” “may,” “will,” “expect,” “believe,” “estimate,” “anticipate,” “intend,” “continue,” or similar terms or variations of those terms or the negative of those terms. There are many factors that affect the Company’s business and the results of its operations and that may cause the actual results of operations in future periods to differ materially from those currently expected or anticipated. These factors include, but are not limited to: the impact of pandemics such as the current coronavirus on employees, our supply chain, and the demand for our products and services around the world; materially adverse or unanticipated legal judgments, fines, penalties or settlements; conditions in the financial and banking markets, including fluctuations in exchange rates and the inability to repatriate foreign cash; domestic and international economic conditions, including the impact, length and degree of economic downturns on the customers and markets we serve and more specifically conditions in the automotive, construction, aerospace, defense, transportation, food service equipment, consumer appliance, energy, oil and gas and general industrial markets; lower-cost competition; the relative mix of products which impact margins and operating efficiencies in certain of our businesses; the impact of higher raw material and component costs, particularly steel, certain materials used in electronics parts, petroleum based products, and refrigeration components; the impact of higher transportation and logistics costs, especially with respect to transportation of goods from Asia; the impact of inflation on the costs of providing our products and services; an inability to realize the expected cost savings from restructuring activities including effective completion of plant consolidations, cost reduction efforts including procurement savings and productivity enhancements, capital management improvements, strategic capital expenditures, and the implementation of lean enterprise manufacturing techniques; the potential for losses associated with the exit from or divestiture of businesses that are no longer strategic or no longer meet our growth and return expectations; the inability to achieve the savings expected from global sourcing of raw materials and diversification efforts in emerging markets; the impact on cost structure and on economic conditions as a result of actual and threatened increases in trade tariffs; the inability to attain expected benefits from acquisitions and the inability to effectively consummate and integrate such acquisitions and achieve synergies envisioned by the Company; market acceptance of our products; our ability to design, introduce and sell new products and related product components; the ability to redesign certain of our products to continue meeting evolving regulatory requirements; the impact of delays initiated by our customers; our ability to increase manufacturing production to meet demand including as a result of labor shortages; and potential changes to future pension funding requirements. In addition, any forward-looking statements represent management's estimates only as of the day made and should not be relied upon as representing management's estimates as of any subsequent date. While the Company may elect to update forward-looking statements at some point in the future, the Company and management specifically disclaim any obligation to do so, even if management's estimates change.
Overview
We are a diversified industrial manufacturer with leading positions in a variety of products and services that are used in diverse commercial and industrial markets. Headquartered in Salem, New Hampshire, we have seven operating segments aggregated into five reportable segments: Electronics, Engraving, Scientific, Engineering Technologies, and Specialty Solutions. Three operating segments are aggregated into Specialty Solutions. Our businesses work in close partnership with our customers to deliver custom solutions or engineered components that solve their unique and specific needs, an approach we call "Customer Intimacy".
Our long-term business strategy is to create, improve, and enhance shareholder value by building more profitable, focused industrial platforms through our Standex Value Creation System. This methodology employs four components: Balanced Performance Plan, Growth Disciplines, Operational Excellence, and Talent Management and provides both a company-wide framework and tools used to achieve our goals. We intend to continue investing organically and inorganically in high margin and growth businesses using this balanced and proven approach.
It is our objective to grow larger and more profitable business units through both organic and inorganic initiatives. We have a particular focus on identifying and investing in opportunities that complement our products and will increase the overall scale, global presence and capabilities of our businesses. We recently established an innovation and technology function focused on accelerating new, longer-term growth opportunities for emerging technologies, including our ongoing development project with a global renewable energy company. We continue to execute on acquisitions where strategically aligned with our businesses and where the opportunity meets our investment metrics. We have divested, and likely will continue to divest, businesses that we feel are not strategic or do not meet our growth and return expectations.
As part of our ongoing strategy:
● |
In the third quarter of fiscal year 2022, we acquired Sensor Solutions, a designer and manufacturer of customized standard magnetic sensor products including hall effect switch and latching sensors, linear and rotary sensors, and specialty sensors. Sensor Solutions' customer base in automotive, industrial, medical, aerospace, military and consumer electronics end markets are a strategic fit and expand our presence in these markets. Sensor Solution's operates one light manufacturing facility in Colorado. Its results are reported within our Electronics segment. |
As a result of our portfolio moves over the past several years, we have transformed Standex to a company with a more focused group of businesses selling customized solutions to high value end markets via a compelling customer value proposition. The narrowing of the portfolio allows for greater management focus on driving operational disciplines and positions us well to use our cash flow from operations to invest selectively in our ongoing pipeline of organic and inorganic opportunities.
The Company’s strong historical cash flow has been a cornerstone for funding our capital allocation strategy. We use cash flow generated from operations to fund investments in capital assets to upgrade our facilities, improve productivity and lower costs, invest in the strategic growth programs described above, including organic growth and acquisitions, and to return cash to our shareholders through payment of dividends and stock buybacks.
Restructuring expenses reflect costs associated with our efforts of continuously improving operational efficiency and expanding globally in order to remain competitive in our end user markets. We incur costs for actions to size our businesses to a level appropriate for current economic conditions, improve our cost structure, enhance our competitive position and increase operating margins. Such expenses include costs for moving facilities to locations that allow for lower fixed and variable costs, external consultants who provide additional expertise starting up plants after relocation, downsizing operations because of changing economic conditions, and other costs resulting from asset redeployment decisions. Shutdown costs include severance, benefits, stay bonuses, lease and contract terminations, asset write-downs, costs of moving fixed assets, and moving and relocation costs. Vacant facility costs include maintenance, utilities, property taxes and other costs.
Because of the diversity of the Company’s businesses, end user markets and geographic locations, management does not use specific external indices to predict the future performance of the Company, other than general information about broad macroeconomic trends. Each of our individual business units serves niche markets and attempts to identify trends other than general business and economic conditions which are specific to its business and which could impact its performance. Those units report pertinent information to senior management, which uses it to the extent relevant to assess the future performance of the Company. A description of any such material trends is described below in the applicable segment analysis.
We monitor a number of key performance indicators (“KPIs”) including net sales, income from operations, backlog, effective income tax rate, gross profit margin, and operating cash flow. A discussion of these KPIs is included below. We may also supplement the discussion of these KPIs by identifying the impact of foreign exchange rates, acquisitions, and other significant items when they have a material impact on a specific KPI.
We believe the discussion of these items provides enhanced information to investors by disclosing their impact on the overall trend which provides a clearer comparative view of the KPI, as applicable. For discussion of the impact of foreign exchange rates on KPIs, we calculate the impact as the difference between the current period KPI calculated at the current period exchange rate as compared to the KPI calculated at the historical exchange rate for the prior period. For discussion of the impact of acquisitions, we isolate the effect on the KPI amount that would have existed regardless of such acquisition. Sales resulting from synergies between the acquisition and existing operations of the Company are considered organic growth for the purposes of our discussion.
Unless otherwise noted, references to years are to fiscal years.
Impact of COVID-19 Pandemic on the Company
Given the global nature of our business and the number of our facilities worldwide, we continue to be impacted globally by COVID-19 related issues. We have taken effective action around the world to protect our health and safety, continue to serve our customers, support our communities and manage our cash flows. Our priority was and remains the health and safety of all of our employees. Each of our facilities is following safe practices as defined in their local jurisdictions as well as sharing experiences and innovative ways of overcoming challenges brought on by the crisis during updates with global site leaders. We are rigorously following health protocols in our plants, including changing work cell configurations and revising shift schedules when appropriate, in order to do our best to maintain operations. While overall customer demand has rebounded from the impact of the pandemic, more recently we have been impacted by (i) supply chain shortages, (ii) increased material costs, (iii) labor shortages, especially in North America, and (iv) lockdowns implemented by the Chinese government in select cities in which we operate. Like other industrial manufacturers, we are impacted by rising inflation which we attempt to manage through appropriate pricing actions and enhanced production efficiency measures.
We exited the first quarter of fiscal year 2023 with $103.4 million in cash and $198.9 million of borrowings under our revolving credit facility. Our leverage ratio covenant, as defined in our revolving credit agreement, was 1.16 to 1 and allowed us the capacity to borrow an additional $294.2 million at September 30, 2022. We believe that we have sufficient liquidity around the world and access to financing to execute on our short and long-term strategic plans.
Finally, we continue to monitor our ability to participate in any governmental assistance programs available to us in each of our global locations and participate in these programs as available and appropriate.
Results from Continuing Operations
Three Months Ended |
||||||||
September 30, |
||||||||
(In thousands, except percentages) |
2022 |
2021 |
||||||
Net sales |
$ | 180,600 | $ | 175,610 | ||||
Gross profit margin |
37.8 | % | 37.7 | % | ||||
Income from operations |
26,290 | 22,828 |
Three Months Ended |
||||
(In thousands) |
September 30, 2022 |
|||
Net sales, prior year period |
$ | 175,610 | ||
Components of change in sales: |
||||
Organic sales change |
12,810 | |||
Effect of acquisitions |
1,116 | |||
Effect of exchange rates |
(8,936 | ) | ||
Net sales, current period |
$ | 180,600 |
Net sales increased in the first quarter of fiscal year 2023 by $5.0 million or 2.8% when compared to the prior year quarter. Organic sales increased $12.8 million or 7.3%, primarily due to pricing actions and strong demand in our Engraving and Specialty segments, acquisitions had a $1.1 million impact on sales, while foreign currency had an $8.9 million or 5.1% negative impact on sales.
Gross Profit Margin
Our gross margin for the first quarter of fiscal year 2023 was 37.8%, which increased slightly from the prior year quarter’s gross margin of 37.7%. This increase is primarily a result of organic sales increases, productivity and targeted pricing initiatives and the absence of a one-time project related charge at Engineering Technologies during the first quarter of fiscal year 2022, partially offset by foreign currency, raw material availability and inflationary headwinds.
Selling, General, and Administrative Expenses
Selling, General, and Administrative (“SG&A”) expenses for the first quarter of fiscal year 2023 were $41.1 million, or 22.8% of sales, compared to $42.8 million, or 24.3% of sales, during the prior year quarter. SG&A expenses during the quarter were primarily impacted by decreased distribution expenses, partially offset by increased research and development spending to drive future product initiatives.
Restructuring Charges
We incurred restructuring expenses of $0.6 million in the first quarter of fiscal year 2023, primarily related to productivity improvements, facility rationalization activities, and global headcount reductions within our Engraving and Electronics segments.
We expect to incur restructuring costs of approximately $1.0 million throughout the remainder of fiscal year 2023, as we continue to focus our efforts to reduce cost and improve productivity across our businesses, particularly through headcount reductions and productivity initiatives.
Acquisition Related Expenses
We incurred acquisition related expenses of $0.3 million in the first quarter of fiscal year 2023. Acquisition related expenses typically consist of due diligence, integration, and valuation expenses incurred in connection with recent or pending acquisitions.
Income from Operations
Income from operations for the first quarter of fiscal year 2023 was $26.3 million, compared to $22.8 million during the prior year quarter. The increase of $3.5 million, or 15.2%, is primarily due to income from organic sales increases and pricing actions, along with cost reduction activities and productivity improvement initiatives, partially offset by foreign currency, material inflation, and increased logistics and labor costs.
Interest Expense
Interest expense for the first quarter of fiscal year 2023 was $1.2 million, a 31.0% decrease from interest expense of $1.7 million during the prior year quarter. Our effective interest rate in the first quarter of fiscal year 2023 was 2.52%.
Income Taxes
Our effective tax rate from continuing operations for the first quarter of fiscal year 2023 was 24.0% compared with 25.0% for the prior year quarter. The tax rate was impacted in the current period by the following items: (i) a discrete tax benefit related to equity compensation, (ii) the jurisdictional mix of earnings, (iii) foreign withholding taxes, and (iv) federal research and development tax credits. The tax rate was impacted in the prior period by the following items: (i) a discrete tax benefit related to equity compensation, (ii) the jurisdictional mix of earnings, (iii) foreign withholding taxes, and (iv) increased capacity to utilize foreign tax credits.
The Inflation Reduction Act (“IRA”) was enacted on August 16, 2022. The IRA includes provisions imposing a 1% excise tax on share repurchases and introduces a 15% corporate alternative minimum tax (“CAMT”) on adjusted financial statement income. The income tax provisions are effective for fiscal years beginning after December 31, 2022. The 1% excise tax on share repurchases is effective as of January 1, 2023. We currently are not expecting the IRA to have a material impact to our financial statements.
Backlog
Backlog includes all active or open orders for goods and services. Backlog also includes any future deliveries based on executed customer contracts, so long as such deliveries are based on agreed upon delivery schedules. Backlog orders are not necessarily an indicator of future sales levels because of variations in lead times and customer production demand pull systems, with the exception of Engineering Technologies. Customers may delay delivery of products or cancel orders prior to shipment, subject to possible cancellation penalties. Due to the nature of long-term agreements in the Engineering Technologies segment, the timing of orders and delivery dates can vary considerably resulting in significant backlog changes from one period to another.
As of September 30, 2022 |
As of September 30, 2021 |
|||||||||||||||
Total Backlog |
Backlog under 1 year |
Total Backlog |
Backlog under 1 year |
|||||||||||||
Electronics |
$ | 174,810 | $ | 146,977 | $ | 134,974 | $ | 131,111 | ||||||||
Engraving |
22,380 | 17,008 | 25,483 | 19,333 | ||||||||||||
Scientific |
5,649 | 5,649 | 7,446 | 7,446 | ||||||||||||
Engineering Technologies |
58,880 | 50,319 | 56,667 | 43,283 | ||||||||||||
Specialty Solutions |
49,022 | 46,211 | 40,205 | 35,256 | ||||||||||||
Total |
$ | 310,741 | $ | 266,164 | $ | 264,775 | $ | 236,429 |
Total backlog realizable under one year increased $29.7 million, or 12.6%, to $266.2 million at September 30, 2022 from $236.4 million at September 30, 2021. Electronics total backlog increased approximately 28.1% primarily due to the global recovery from the pandemic and new business opportunities, plus an additional $1.9 million due to the acquisition of Sensor Solutions.
Changes in backlog under one year are as follows (in thousands):
As of |
||||
(In thousands) |
September 30, 2022 |
|||
Backlog under 1 year, prior year period |
$ | 236,429 | ||
Components of change in backlog: |
||||
Organic change |
27,877 | |||
Effect of acquisitions |
1,858 | |||
Backlog under 1 year, current period |
$ | 266,164 |
Segment Analysis
Overall
Looking forward to the remainder of fiscal year 2023, we expect to be well positioned to build on fiscal year 2022 and the three months ended September 30, 2022 momentum, with anticipated year over year improvement in key financial metrics, supported by orders growth and productivity initiatives.
In general, for fiscal year 2023, we expect:
● |
continued growth in transportation markets from electric vehicle programs, both the ramp up of existing business and new business opportunities; |
● |
vaccine storage demand to decline after record COVID-19 related surge in fiscal year 2021 and early fiscal year 2022, countered by a return of demand from universities and research institutions; | |
● |
commercial aviation and defense end markets to remain strong with double digit sales increase from the prior year based on current program expectations; |
|
● |
space markets to remain attractive, with an anticipated moderate volume decline due to timing of production versus launch; |
● | refuse and dump truck and dump trailer end markets to remain stable while being supported by investments in the U.S. infrastructure bill; | |
● |
strong Merchandising and Pumps business to benefit from return to pre-COVID-19 demand levels in food service equipment markets. |
Electronics Group
Three Months Ended |
||||||||||||
September 30, |
% |
|||||||||||
(In thousands, except percentages) |
2022 |
2021 |
Change |
|||||||||
Net sales |
$ | 75,199 | $ | 75,836 | (0.8 | %) | ||||||
Income from operations |
18,141 | 18,273 | (0.7 | %) | ||||||||
Operating income margin |
24.1 | % | 24.1 | % |
Net sales in the first quarter of fiscal year 2023 decreased $0.6 million, or 0.8%, when compared to the prior year quarter. Organic sales increased by $3.2 million or 4.3%, reflecting positive trends in end markets such as industrial applications, medical, power management and electric vehicle related applications, with some softness in white goods. Sensor Solutions was acquired in the third quarter of fiscal year 2022, adding $1.1 million in sales for the quarter. The foreign currency impact decreased sales by $5.0 million, or 6.6%.
Income from operations in the first quarter of fiscal year 2023 decreased by $0.2 million, or 0.7%, when compared to the prior year quarter. The operating income decrease was the result of inflationary and currency impacts almost fully offset by organic sales growth and various cost saving initiatives.
In the second quarter of fiscal year 2023, on a sequential basis, we expect revenue to be similar, as relay and magnetic components growth in North America is offset by softness in white goods end markets in Europe. We expect a slight decrease in operating margin mostly due to mix and higher growth investments, partially offset by continued price actions.
Engraving Group
Three Months Ended |
||||||||||||
September 30, |
% |
|||||||||||
(In thousands, except percentages) |
2022 |
2021 |
Change |
|||||||||
Net sales |
$ | 35,024 | $ | 35,170 | (0.4 | %) | ||||||
Income from operations |
5,854 | 4,874 | 20.1 | % | ||||||||
Operating income margin |
16.7 | % | 13.9 | % |
Net sales in the first quarter of fiscal year 2023 decreased by $0.1 million, or 0.4%, when compared to the prior year quarter. Organic sales increased by $2.8 million, or 7.9% as a result of timing of projects. The sales increase was offset by foreign exchange impacts of $2.9 million, or 8.3%.
Income from operations in the first quarter of fiscal year 2023 increased by $1.0 million, when compared to the prior year quarter. Operating income increased during the quarter reflecting the organic sales increase and productivity actions, offsetting the foreign exchange impacts.
Sequentially during the second quarter of fiscal year 2023, we expect revenue to be similar operating margin to decrease slightly due to project mix.
Scientific
Three Months Ended |
||||||||||||
September 30, |
% |
|||||||||||
(In thousands, except percentages) |
2022 |
2021 |
Change |
|||||||||
Net sales |
$ | 18,456 | $ | 21,529 | (14.3 | %) | ||||||
Income from operations |
3,723 | 4,508 | (17.4 | %) | ||||||||
Operating income margin |
20.2 | % | 20.9 | % |
Net sales in the first quarter of fiscal year 2023 decreased by $3.1 million, or 14.3% when compared to the prior year quarter. The net sales decreased as expected due to lower demand for cold storage surrounding COVID-19 vaccine distribution partially offset by pricing actions.
Income from operations in the first quarter of fiscal year 2023 decreased $0.8 million, or 17.4% when compared to the prior year quarter. The decrease reflects lower sales volume, partially offset by pricing and productivity actions.
Sequentially during the second quarter of fiscal year 2023 we expect a slight revenue increase and a slightly lower to similar operating margin due primarily to R&D investments and higher spend on advertising and tradeshows.
Engineering Technologies Group
Three Months Ended |
||||||||||||
September 30, |
% |
|||||||||||
(In thousands, except percentages) |
2022 |
2021 |
Change |
|||||||||
Net sales |
$ | 16,999 | $ | 17,573 | (3.3 | %) | ||||||
Income from operations |
1,865 | 899 | 107.5 | % | ||||||||
Operating income margin |
11.0 | % | 5.1 | % |
Net sales in the first quarter of fiscal year 2023 decreased by $0.6 million, or 3.3%, compared to the prior year quarter. Net sales decreased as expected due a decline in space segment sales as a result of project timing partially offset by increases in the aviation sector and increased defense sales for missile production and development programs.
Income from operations increased $1.0 million, or 107.5%, in the first quarter of fiscal year 2023 compared to the prior year quarter primarily due to productivity and efficiency initiatives and the impact of a one-time project related charge in fiscal first quarter 2022 that did not repeat.
Sequentially during the second quarter of fiscal year 2023, we expect a moderate to significant increase in revenue and operating margin reflecting an increased level of project activity.
Specialty Solutions Group
Three Months Ended |
||||||||||||
September 30, |
% |
|||||||||||
(In thousands, except percentages) |
2022 |
2021 |
Change |
|||||||||
Net sales |
$ | 34,922 | $ | 25,502 | 36.9 | % | ||||||
Income from operations |
6,077 | 2,815 | 115.9 | % | ||||||||
Operating income margin |
17.4 | % | 11.0 | % |
Net sales in the first quarter of fiscal year 2023 increased $9.4 million or 36.9% when compared to the prior year quarter. Organic sales increased $10.0 million, or 39.3%. Increased sales volume is primarily due to pricing realization, strong market demand in the Hydraulics business and absence of the labor work stoppage in two plants during the prior year quarter.
Income from operations increased $3.3 million or 115.9% in the first quarter of fiscal year 2023 when compared to the prior year quarter primarily as a result of pricing actions and volume increases.
Sequentially during the second quarter of fiscal year 2023, we expect revenue to decrease slightly due to seasonality in the food service equipment end market. We expect similar operating margin due to volume decline offset by pricing and productivity initiatives.
Corporate and Other
Three Months Ended |
||||||||||||
September 30, |
% |
|||||||||||
(In thousands, except percentages) |
2022 |
2021 |
Change |
|||||||||
Income (loss) from operations: |
||||||||||||
Corporate |
$ | (8,496 | ) | $ | (7,884 | ) | 7.8 | % | ||||
Restructuring |
(582 | ) | (440 | ) | 32.3 | % | ||||||
Acquisition related costs |
(292 | ) | (217 | ) | 34.6 | % |
Corporate expenses in the first quarter of fiscal year 2023 increased by 7.8%, when compared to the prior year period. The increase is related to employee related compensation accruals and research and development costs.
The restructuring and acquisition related costs have been discussed above in the Company Overview.
Discontinued Operations
In pursuing our business strategy, the Company may divest certain businesses. Future divestitures may be classified as discontinued operations based on their strategic significance to the Company. Net loss from discontinued operations was less than $0.1 million for the three months ended September 30, 2022 and 2021, respectively.
Liquidity and Capital Resources
At September 30, 2022, our total cash balance was $103.4 million, of which $93.9 million was held by foreign subsidiaries. During the first quarter of fiscal year 2023, we did not repatriate any cash to the United States from our foreign subsidiaries. We expect to repatriate between $30.0 million and $35.0 million during the remainder of fiscal year 2023, however, the amount and timing of cash repatriation during the fiscal year will be dependent upon each business unit’s operational needs including requirements to fund working capital, capital expenditures, and jurisdictional tax payments. The repatriation of cash balances from certain of our subsidiaries could have adverse tax consequences or be subject to capital controls; however, those balances are generally available without legal restrictions to fund ordinary business operations.
Net cash used in continuing operating activities for the three months ended September 30, 2022, was $2.7 million compared to net cash provided by continuing operating activities of $13.1 million in the prior year. We generated $26.8 million from operating activities and used $29.5 million of cash to fund working capital and other balance sheet increases. Cash flow used in investing activities for the three months ended September 30, 2022 totaled $5.2 million and primarily consisted of $5.3 million used for capital expenditures. Cash provided by financing activities for the three months ended September 30, 2022 was $12.2 million and consisted primarily of borrowings of $24.0 million offset by purchases of stock of $8.4 million, cash paid for dividends of $3.1 million, and contingent consideration payments due to the seller of the Renco business of $1.2 million.
During the second quarter of fiscal year 2019, we entered into a five-year Amended and Restated Credit Agreement (“credit agreement”, or “facility”) with a borrowing limit of $500 million. The facility can be increased by an amount of up to $250 million, in accordance with specified conditions contained in the agreement. The facility also includes a $10 million sublimit for swing line loans and a $35 million sublimit for letters of credit.
Under the terms of the Credit Facility, we pay a variable rate of interest and a commitment fee on borrowed amounts as well as a commitment fee on unused amounts under the facility. The amount of the commitment fee depends upon both the undrawn amount remaining available under the facility and the Company’s funded debt to EBITDA (as defined in the agreement) ratio at the last day of each quarter. As our funded debt to EBITDA ratio increases, the commitment fee increases.
Funds borrowed under the facility may be used for the repayment of debt, working capital, capital expenditures, acquisitions (so long as certain conditions, including a specified funded debt to EBITDA leverage ratio is maintained), and other general corporate purposes. As of September 30, 2022, the Company used $6.1 million against the letter of credit sub-facility and had the ability to borrow $294.2 million under the facility based on our current trailing twelve-month EBITDA. The facility contains customary representations, warranties and restrictive covenants, as well as specific financial covenants. The Company’s current financial covenants under the facility are as follows:
Interest Coverage Ratio - The Company is required to maintain a ratio of Earnings Before Interest and Taxes, as Adjusted (“Adjusted EBIT per the Credit Facility”), to interest expense for the trailing twelve months of at least 2.75:1. Adjusted EBIT per the Credit Facility specifically excludes extraordinary and certain other defined items such as cash restructuring and acquisition related charges up to the lower of $20.0 million or 10% of EBITDA. The facility also allows for unlimited non-cash charges including purchase accounting and goodwill adjustments. At September 30, 2022, the Company’s Interest Coverage Ratio was 18.1.
Leverage Ratio - The Company’s ratio of funded debt to trailing twelve month Adjusted EBITDA per the Credit Facility, calculated as Adjusted EBIT per the Credit Facility plus depreciation and amortization, may not exceed 3.5:1. Under certain circumstances in connection with a Material Acquisition (as defined in the Facility), the Facility allows for the leverage ratio to go as high as 4.0:1 for a four-fiscal quarter period. At September 30, 2022, the Company’s Leverage Ratio was 1.16.
As of September 30, 2022, we had borrowings under our facility of $199.0 million. In order to manage our interest rate exposure on these borrowings, we are party to $175.0 million of active floating to fixed rate swaps. These swaps convert our interest payments from LIBOR to a weighted average fixed rate of 1.18%. The effective rate of interest for our outstanding borrowings, including the impact of the interest rate swaps, was 2.52%.
Our primary cash requirements in addition to day-to-day operating needs include interest payments, capital expenditures, acquisitions, share repurchases, and dividends. Our primary sources of cash for these requirements are cash flows from continuing operations and borrowings under the facility. We expect fiscal year 2023 capital spending to be approximately $35.0 million and $40.0 million which includes amounts not spent in fiscal year 2022. We expect that fiscal year 2023 depreciation and amortization expense will be between $20.0 and $21.0 million and $7.0 and $9.0 million, respectively.
The following table sets forth our capitalization:
(In thousands) |
September 30, 2022 |
June 30, 2022 |
||||||
Long-term debt |
$ | 198,915 | $ | 174,830 | ||||
Less cash and cash equivalents |
(103,428 | ) | (104,844 | ) | ||||
Net debt |
95,487 | 69,986 | ||||||
Stockholders' equity |
491,690 | 499,343 | ||||||
Total capitalization |
$ | 587,177 | $ | 569,329 |
We sponsor a number of defined benefit and defined contribution retirement plans. The U.S. pension plan is frozen for substantially all participants. We have evaluated the current and long-term cash requirements of these plans, and our existing sources of liquidity are expected to be sufficient to cover required contributions under ERISA and other governing regulations.
The fair value of the Company's U.S. defined benefit pension plan assets was $138.1 million at September 30, 2022, as compared to $157.9 million at the most recent measurement date, which occurred as of June 30, 2022. The next measurement date to determine plan assets and benefit obligations will be on June 30, 2023.
The Company expects to pay $0.4 million in contributions to its defined benefit plans during the remainder of fiscal year 2023. Contributions of $0.1 million and $0.1 million were made during the three months ended September 30, 2022 and 2021, respectively. There are no required contributions to the United States funded pension plan for fiscal year 2023. The Company expects to make contributions during the remainder of fiscal year 2023 of $0.1 million and $0.2 million to its unfunded defined benefit plans in the U.S. and Germany, respectively. Any subsequent plan contributions will depend on the results of future actuarial valuations.
We have an insurance program in place to fund supplemental retirement income benefits for three retired executives. Current executives and new hires are not eligible for this program. At September 30, 2022, the underlying policies had a cash surrender value of $11.2 million and are reported net of loans of $5.1 million for which we have the legal right of offset, these amounts are reported net on our balance sheet.
Inflation – Certain of our expenses, such as wages and benefits, occupancy costs, freight and equipment repair and replacement, are subject to normal inflationary pressures. Inflation for medical costs can impact both our employee benefit costs as well as our reserves for workers' compensation claims. We monitor the inflationary rate and make adjustments to reserves whenever it is deemed necessary. Our ability to control worker compensation insurance medical cost inflation is dependent upon our ability to manage claims and purchase insurance coverage to limit the maximum exposure for us. Each of our segments is subject to the effects of changing raw material costs caused by the underlying commodity price movements. We have experienced price fluctuations for a number of materials including rhodium, steel, and other metal commodities. These materials are some of the key elements in the products manufactured in these segments. Wherever possible, we will implement price increases to offset the impact of changing prices. The ultimate acceptance of these price increases will be impacted by our affected divisions’ respective competitors and the timing of their price increases. In general, we do not enter into purchase contracts that extend beyond one operating cycle. While Standex considers our relationship with our suppliers to be good, there can be no assurances that we will not experience any supply shortage.
Foreign Currency Translation – Our primary functional currencies used by our non-U.S. subsidiaries are the Euro, British Pound Sterling (Pound), Japanese (Yen), and Chinese (Yuan).
Defined Benefit Pension Plans – We record expenses related to these plans based upon various actuarial assumptions such as discount rates, mortality rates, and assumed rates of returns. The Company’s pension plan is frozen for substantially all eligible U.S. employees and participants in the plan ceased accruing future benefits.
Environmental Matters – To the best of our knowledge, we believe that we are presently in substantial compliance with all existing applicable environmental laws and regulations and do not anticipate any instances of non-compliance that will have a material effect on our future capital expenditures, earnings or competitive position.
Seasonality – We are a diversified business with generally low levels of seasonality.
Employee Relations – The Company has labor agreements with several union locals in the United States and several European employees belong to European trade unions.
Critical Accounting Policies
The condensed consolidated financial statements include the accounts of Standex International Corporation and all of its subsidiaries. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying condensed consolidated financial statements. Although we believe that materially different amounts would not be reported due to the accounting policies adopted, the application of certain accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. Our Annual Report on Form 10-K for the year ended June 30, 2022 lists a number of accounting policies which we believe to be the most critical.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Risk Management
We are exposed to market risks from changes in interest rates, commodity prices and changes in foreign currency exchange. To reduce these risks, we selectively use, from time to time, financial instruments and other proactive management techniques. We have internal policies and procedures that place financial instruments under the direction of the Treasurer and restrict all derivative transactions to those intended for hedging purposes only. The use of financial instruments for trading purposes (except for certain investments in connection with the non-qualified defined contribution plan) or speculation is strictly prohibited. The Company has no majority-owned subsidiaries that are excluded from the consolidated financial statements. Further, we have no interests in or relationships with any special purpose entities.
Exchange Rate Risk
We are exposed to both transactional risk and translation risk associated with exchange rates. The transactional risk is mitigated, in large part, by natural hedges developed with locally denominated debt service on intercompany accounts. We also mitigate certain of our foreign currency exchange rate risks by entering into forward foreign currency contracts from time to time. The contracts are used as a hedge against anticipated foreign cash flows, such as loan payments, customer remittances, and materials purchases, and are not used for trading or speculative purposes. The fair values of the forward foreign currency exchange contracts are sensitive to changes in foreign currency exchange rates, as an adverse change in foreign currency exchange rates from market rates would decrease the fair value of the contracts. However, any such losses or gains would generally be offset by corresponding gains and losses, respectively, on the related hedged asset or liability. At September 30, 2022 the fair value, in the aggregate, of the Company’s open foreign exchange contracts was a liability of $1.4 million.
Our primary translation risk is with the Euro, British Pound Sterling, Peso, Japanese Yen and Chinese Yuan. A hypothetical 10% appreciation or depreciation of the value of any these foreign currencies to the U.S. Dollar at September 30, 2022, would not result in a material change in our operations, financial position, or cash flows. We hedge our most significant foreign currency translation risks primarily through cross currency swaps and other instruments, as appropriate.
Interest Rate Risk
The Company’s effective interest rate on borrowings was 2.52% at September 30, 2022. Our interest rate exposure is limited primarily to interest rate changes on our variable rate borrowings and is mitigated by our use of interest rate swap agreements to modify our exposure to interest rate movements. At September 30, 2022, we have $175.0 million of active floating to fixed rate swaps with terms ranging from one to four years. These swaps convert our interest payments from LIBOR to a weighted average rate of 1.18%. At September 30, 2022 the fair value, in the aggregate, of the Company’s interest rate swaps was assets of $12.2 million. A 25-basis point increase in interest rates would not materially change our annual interest expense as most of our outstanding debt is currently converted to fixed rate debts by means of interest rate swaps.
Concentration of Credit Risk
We have a diversified customer base. As such, the risk associated with concentration of credit risk is inherently minimized. As of September 30, 2022, no one customer accounted for more than 5% of our consolidated outstanding receivables or of our sales.
Commodity Prices
The Company is exposed to fluctuating market prices for all commodities used in its manufacturing processes. Each of our segments is subject to the effects of changing raw material costs caused by the underlying commodity price movements. In general, we do not enter into purchase contracts that extend beyond one operating cycle. While Standex considers our relationship with our suppliers to be good, there can be no assurances that we will not experience any supply shortage.
The Engineering Technologies, Specialty Solutions, and Electronics segments are all sensitive to price increases for steel and aluminum products, other metal commodities such as rhodium and copper, and petroleum-based products. We have experienced price fluctuations for a number of materials including rhodium, steel, and other metal commodities. These materials are some of the key elements in the products manufactured in these segments. Wherever possible, we will implement price increases to offset the impact of changing prices. The ultimate acceptance of these price increases, if implemented, will be impacted by our affected divisions’ respective competitors and the timing of their price increases.
ITEM 4. CONTROLS AND PROCEDURES
At the end of the period covered by this Report, the management of the Company, including the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2022 in ensuring that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's ("SEC") rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
There was no change in the Company's internal control over financial reporting during the quarterly period ended September 30, 2022 that has materially affected or is reasonably likely to materially affect the Company's internal control over financial reporting.
PART II. OTHER INFORMATION
Item 5. Unregistered Sales of Equity Securities and Use of Proceeds
(c) |
The following table provides information about purchases by the Company of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act: |
Issuer Purchases of Equity Securities(1) |
Quarter Ended September 30, 2022 |
Period |
(a) Total number of shares (or units) purchased |
(b) Average price paid per share (or unit) |
(c) Total number of shares (or units) purchased as part of publicly announced plans or programs |
(d) Maximum number (or appropriate dollar value) of shares (or units) that may yet be purchased under the plans or programs |
||||||||||||
July 1 - July 31, 2022 |
- | $ | - | - | $ | 90,651 | ||||||||||
August 1 - August 31, 2022 |
52,957 | 97.89 | 52,957 | 85,467 | ||||||||||||
September 1 - September 30, 2022 |
37,411 | 85.79 | 37,411 | 82,258 | ||||||||||||
Total |
90,368 | $ | 92.88 | 90,368 | $ | 82,258 |
(1) | The Company has a Stock Buyback Program (the “Program”) which was originally announced on January 30, 1985 and most recently amended on April 28, 2022. Under the Program, the Company is authorized to repurchase up to an aggregate of $200 million of its shares. Under the program, purchases may be made from time to time on the open market, including through 10b5-1 trading plans, or through privately negotiated transactions, block transactions, or other techniques in accordance with prevailing market conditions and the requirements of the Securities and Exchange Commission. The Board’s authorization is open-ended and does not establish a timeframe for the purchases. The Company is not obligated to acquire a particular number of shares, and the program may be discontinued at any time at the Company’s discretion. |
(a) |
Exhibits |
|
31.1 |
|
31.2 |
||
32 |
||
101 |
The following materials from this Quarterly Report on Form 10-Q, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Unaudited Condensed Consolidated Financial Statements. |
|
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
ALL OTHER ITEMS ARE INAPPLICABLE
SIGNATURES
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.
|
|
STANDEX INTERNATIONAL CORPORATION |
|
|
|
Date: |
November 4, 2022 |
/s/ ADEMIR SARCEVIC |
|
|
Ademir Sarcevic |
|
|
Vice President/Chief Financial Officer |
|
|
(Principal Financial & Accounting Officer) |
|
|
|
Date: |
November 4, 2022 | /s/ SEAN C. VALASHINAS |
|
|
Sean C. Valashinas |
Vice President/Chief Accounting Officer/Assistant Treasurer |
EXHIBIT 31.1
RULE 13a-14(a) CERTIFICATION
I, David Dunbar, certify that:
1. |
I have reviewed this Quarterly Report on Form 10-Q of Standex International Corporation for the quarter ending September 30, 2022; |
2. |
Based on my knowledge, this 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 report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this 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 report; |
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared; |
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 4, 2022
/s/ David Dunbar
______________________________
David Dunbar
President/Chief Executive Officer
EXHIBIT 31.2
RULE 13a-14(a) CERTIFICATION
I, Ademir Sarcevic, certify that:
1. |
I have reviewed this Quarterly Report on Form 10-Q of Standex International Corporation for the quarter ending September 30, 2022; |
2. |
Based on my knowledge, this 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 report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this 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 report; |
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared; |
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 4, 2022
/s/ Ademir Sarcevic
______________________________
Ademir Sarcevic
Vice President/Chief Financial Officer
EXHIBIT 32
Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. Sec. 1350)
With Respect to the Standex International Corporation
Quarterly Report on Form 10-Q
For the Fiscal Quarter Ended September 30, 2022
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned Chief Executive Officer and Chief Financial Officer respectively of Standex International Corporation, a Delaware corporation (the “Company”) do hereby certify that:
1. |
The Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2022 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) as applicable, of the Securities Exchange Act of 1934, as amended; and |
2. |
Information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: November 4, 2022 |
/s/ David Dunbar |
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|
|
David Dunbar |
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|
Chief Executive Officer |
|
Dated: November 4, 2022 | /s/ Ademir Sarcevic | |
Ademir Sarcevic | ||
Chief Financial Officer |
Unaudited Condensed Consolidated Balance Sheets (Parentheticals) - USD ($) |
Sep. 30, 2022 |
Jun. 30, 2022 |
---|---|---|
Reserve for doubtful accounts | $ 2,245 | $ 2,214 |
Common stock, par value (in dollars per share) | $ 1.50 | $ 1.50 |
Common stock, shares authorized (in shares) | 60,000,000 | 60,000,000 |
Common stock, shares issued (in shares) | 27,984,278 | 27,984,278 |
Common stock, shares outstanding (in shares) | 11,865,582 | 11,824,128 |
Treasury stock, shares (in shares) | 16,118,696 | 16,160,150 |
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands |
3 Months Ended | |
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Sep. 30, 2022 |
Sep. 30, 2021 |
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Net income | $ 18,270 | $ 15,818 |
Defined benefit pension plans: | ||
Actuarial gains (losses) and other changes in unrecognized costs, net of tax | 96 | 85 |
Amortization of unrecognized costs, net of tax | 710 | 1,112 |
Derivative instruments: | ||
Change in unrealized gains (losses), net of tax | 2,796 | 158 |
Foreign currency translation gains (losses), net of tax | (21,543) | (2,416) |
Other comprehensive income (loss), net of tax | (17,787) | (126) |
Comprehensive income | 483 | 15,692 |
Interest Expense [Member] | ||
Derivative instruments: | ||
Amortization of unrealized gains (losses) into interest expense, net of tax | $ 154 | $ 935 |
Unaudited Condensed Consolidated Statements of Stockholders' Equity (Parentheticals) - USD ($) $ in Millions |
3 Months Ended | |
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Sep. 30, 2022 |
Sep. 30, 2021 |
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Pension and OPEB adjustments, tax | $ 0.3 | $ 0.4 |
Change in fair value of derivatives, tax | $ 0.9 | $ 0.1 |
Dividends declared, per share (in dollars per share) | $ 0.26 | $ 0.24 |
Note 1 - Management Statement |
3 Months Ended |
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Sep. 30, 2022 | |
Notes to Financial Statements | |
Business Description and Basis of Presentation [Text Block] |
1) Management Statement
In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the results of operations for the three months ended September 30, 2022 and 2021, the cash flows for the three months ended September 30, 2022 and 2021 and the financial position of Standex International Corporation (“Standex”, the “Company”, “we”, “us”, or “our”), at September 30, 2022. The interim results are not necessarily indicative of results for a full year. The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. The unaudited condensed consolidated financial statements and notes do not contain information which would substantially duplicate the disclosures contained in the audited annual consolidated financial statements and notes for the year ended June 30, 2022. The condensed consolidated balance sheet at June 30, 2022 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The financial statements contained herein should be read in conjunction with the Annual Report on Form 10-K and in particular the audited consolidated financial statements for the year ended June 30, 2022. Unless otherwise noted, references to years are to the Company’s fiscal years. Currently our fiscal year end is June 30. For further clarity, our fiscal year 2023 includes the twelve-month period from July 1, 2022 to June 30, 2023.
The estimates and assumptions used in the preparation of the consolidated financial statements have considered the implications on the Company as a result of the COVID-19 pandemic and its related economic impacts. As a result of the COVID-19 pandemic, there is heightened volatility and uncertainty around supply chain performance, labor availability, and customer demand. However, the magnitude of such impact on the Company’s business and its duration is uncertain. The Company is not aware of any specific event or circumstance that would require an update to its estimates or adjustments to the carrying value of its assets and liabilities as of September 30, 2022 and the issuance date of the Quarterly Report on Form 10-Q.
The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The Company evaluated subsequent events through the date and time its unaudited condensed consolidated financial statements were issued.
Recently Issued Accounting Pronouncements
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which requires business entities to provide certain disclosures when they (1) have received government assistance and (2) use a grant or contribution accounting model by analogy to other accounting guidance. The guidance in ASU 2021-10 is effective for all entities for fiscal years beginning after December 15, 2021 with early adoption permitted. The Company adopted ASU 2021-10 in fiscal year 2023. The adoption did not have a material impact on the consolidated financial statements.
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Note 2 - Acquisitions |
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Business Combination Disclosure [Text Block] |
2) Acquisitions
At the time of the acquisition and September 30, 2022, the Company evaluated the significance of each acquisition on a standalone basis and in aggregate, considering both qualitative and quantitative factors.
Sensor Solutions
During the third quarter of fiscal year 2022, the Company acquired Sensor Solutions, a designer and manufacturer of customized standard magnetic sensor products including hall effect switch and latching sensors, linear and rotary sensors, and specialty sensors. Sensor Solutions' customer base in automotive, industrial, medical, aerospace, military and consumer electronics end markets are a strategic fit and expand the Company's presence in these markets. Sensor Solutions operates one light manufacturing facility in Colorado. Sensor Solutions' results are reported within the Company's Electronics segment.
The Company paid $9.9 million in cash for all the issued and outstanding equity interests of Sensor Solutions. The purchase price was allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on a valuation of their fair values on the closing date. Goodwill recorded from this transaction is attributable to Sensor Solutions' technical and applications expertise in sectors such as electric vehicles, industrial automation and medical end markets, which is highly complementary to the Company's existing business.
Identifiable intangible assets of $2.8 million consist primarily of $0.8 million for indefinite lived tradenames, and $2.0 million of customer relationships to be amortized over 10 years. The goodwill of $6.0 million created by the transaction is deductible for income tax purposes. The accounting for business combinations requires estimates and judgments regarding expectations for future cash flows of the acquired business, and the allocations of those cash flows to identifiable tangible and intangible assets, in determining the assets acquired and liabilities assumed. The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management's best estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques.
The components of the fair value of the Sensor Solutions acquisition, including the preliminary allocation of the purchase price are as follows (in thousands):
Other Acquisitions
During the fourth quarter of fiscal year 2022, the Company paid $3.1 million in cash for acquired assets and liabilities of a manufacturer of magnetic components. The results are reported within the Company's Electronics segment. The transaction resulted in $2.5 million of goodwill that is deductible for income tax purposes.
Acquisition Related Costs
Acquisition related costs include costs related to acquired businesses and other pending acquisitions. These costs consist of (i) deferred compensation arrangements and (ii) acquisition related professional service fees and expenses, including financial advisory, legal, accounting, and other outside services incurred in connection with acquisition activities, and regulatory matters related to acquired entities. These costs do not include purchase accounting expenses, which we define as acquired backlog and the step-up of inventory to fair value, or the amortization of the acquired intangible assets.
Acquisition related costs for the three months ended September 30, 2022, and 2021 were $0.3 million and $0.2 million, respectively.
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Note 3 - Revenue From Contracts With Customers |
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Revenue from Contract with Customer [Text Block] |
3) Revenue From Contracts With Customers
Most of the Company’s contracts have a single performance obligation which represents the product or service being sold to the customer. Some contracts include multiple performance obligations such as a product and the related installation and/or extended warranty. Additionally, most of the Company’s contracts offer assurance type warranties in connection with the sale of a product to customers. Assurance type warranties provide a customer with assurance that the product complies with agreed-upon specifications. Assurance type warranties do not represent a separate performance obligation.
In general, the Company recognizes revenue at the point in time control transfers to its customer based on predetermined shipping terms. Revenue is recognized over time under certain long-term contracts within the Engineering Technologies and Engraving groups for highly customized customer products that have no alternative use and in which the contract specifies the Company has a right to payment for its costs, plus a reasonable margin. For products manufactured over time, the transfer of control is measured pro rata, based upon current estimates of costs to complete such contracts. Losses on contracts are fully recognized in the period in which the losses become determinable. Revisions in profit estimates are reflected on a cumulative basis in the period in which the basis for such revision becomes known.
Disaggregation of Revenue from Contracts with Customers
The following table presents revenue disaggregated by product line and segment (in thousands):
The following table presents revenue from continuing operations disaggregated by geography based on company’s locations (in thousands):
(1) EMEA consists primarily of Europe, Middle East and S. Africa.
The following table presents revenue from continuing operations disaggregated by timing of recognition (in thousands) for the three months ended:
Contract Balances
Contract assets represent sales recognized in excess of billings related to work completed but not yet shipped for which revenue is recognized over time. Contract assets are recorded as prepaid expenses and other current assets. Contract liabilities are customer deposits for which revenue has not been recognized. Current contract liabilities are recorded as accrued liabilities.
The timing of revenue recognition, invoicing and cash collections results in billed receivables, contract assets and contract liabilities on the consolidated balance sheets. When consideration is received from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded. Contract liabilities are recognized as revenue after control of the goods and services are transferred to the customer and all revenue recognition criteria have been met.
The following table provides information about contract assets and liability balances (in thousands):
We recognized the following revenue which was included in the contract liability beginning balances (in thousands):
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Note 4 - Fair Value Measurements |
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Fair Value Disclosures [Text Block] |
4) Fair Value Measurements
The financial instruments shown below are presented at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models may be applied.
Assets and liabilities recorded at fair value in the consolidated balance sheet are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities and the methodologies used in valuation are as follows:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets and liabilities. The Company’s deferred compensation plan assets consist of shares in various mutual funds (investments are participant-directed) which invest in a broad portfolio of debt and equity securities. These assets are valued based on publicly quoted market prices for the funds’ shares as of the balance sheet dates.
Level 2 – Inputs, other than quoted prices in an active market, that are observable either directly or indirectly through correlation with market data. For foreign exchange forward contracts and interest rate swaps, the Company values the instruments based on the market price of instruments with similar terms, which are based on spot and forward rates as of the balance sheet dates. The Company has considered the creditworthiness of counterparties in valuing all assets and liabilities.
Level 3 – Unobservable inputs based upon the Company’s best estimate of what market participants would use in pricing the asset or liability.
There were no transfers of assets or liabilities between any levels of the fair value measurement hierarchy at September 30, 2022 and June 30, 2022. The Company’s policy is to recognize transfers between levels as of the date they occur.
Cash and cash equivalents, accounts receivable, accounts payable, and debt are carried at cost, which approximates fair value.
The fair values of financial instruments were as follows (in thousands):
(a) The fair value of contingent consideration arrangements is determined based on the Company's evaluation as to the probability and amount of any contingent consideration that has been earned to date.
The financial liabilities based upon Level 3 inputs include contingent consideration arrangements relating to the acquisitions of Renco Electronics. The Company is contractually obligated to pay contingent consideration payments to the Sellers of these businesses based on the achievement of certain criteria.
The Company is contractually obligated to pay contingent consideration to the sellers of GS Engineering in the event that certain revenue and gross margin targets are achieved during the five years following acquisition. The targets set in the GS Engineering stock purchase agreement were not met for the first, second, or third year, which concluded in the fourth quarter of fiscal years 2020, 2021 and 2022, respectively. As of September 30, 2022, the Company could be required to pay up to $12.8 million for contingent consideration arrangements if the revenue and gross margin targets are met in fiscal years 2023 through 2024.
In connection with its acquisition of Renco Electronics, the Company was obligated to pay contingent consideration over a three year period of up to $3.5 million to the sellers of Renco. During the first quarter of fiscal year 2022, the Company paid $1.2 million to the sellers as Renco exceeded the earnings targets during the first year of the measurement period. During the third quarter of fiscal year 2022, the parties agreed to reduce and fix the aggregate earnout payments to a total of $3.4 million. The parties also agreed to accelerate the payment of the remaining unpaid amounts. During the fourth quarter of fiscal year 2022, the Company paid $1.0 million to the sellers of Renco. The remaining unpaid amount of $1.2 million was paid in the first quarter of fiscal year 2023 and the obligation is considered settled.
The Company has determined the fair value of the liabilities for the contingent consideration based on a probability-weighted discounted cash flow analysis. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. The fair value of the contingent consideration liability associated with future payments was based on several factors, the most significant of which are the financial performance of the acquired businesses and the risk-adjusted discount rate for the fair value measurement.
The Company will update its assumptions each reporting period based on new developments and record such amounts at fair value based on the revised assumptions until the agreements expire. |
Note 5 - Inventories |
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Inventory Disclosure [Text Block] |
5) Inventories
Inventories from continuing operations are comprised of the following (in thousands):
Distribution costs associated with the sale of inventory, which are recorded as a component of selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations were $2.9 million and $3.7 million for the three months ended September 30, 2022 and 2021, respectively.
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Note 6 - Goodwill |
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Goodwill Disclosure [Text Block] |
6) Goodwill
Changes to goodwill by segment during the period were as follows (in thousands):
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Note 7 - Warranty Reserves |
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Product Warranty Disclosure [Text Block] |
7) Warranty Reserves
The expected cost associated with warranty obligations on our products is recorded as a component of cost of sales when the revenue is recognized. The Company’s estimate of warranty cost is based on contract terms and historical warranty loss experience that is periodically adjusted for recent actual experience. Since warranty estimates are forecasts based on the best available information, claims costs may differ from amounts provided. Adjustments to initial obligations for warranties are made as changes in the obligations become reasonably estimable.
The change in warranty reserves from continuing operations, which are recorded as a component of accrued liabilities were as follows (in thousands):
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Note 8 - Debt |
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Debt Disclosure [Text Block] |
8) Debt
Long-term debt is comprised of the following (in thousands):
Bank Credit Agreements
During the second quarter of fiscal year 2019, the Company entered into a -year Amended and Restated Credit Agreement (“Credit Facility”, or “facility”). The facility has a borrowing limit of $500 million, which can be increased by an amount of up to $250 million, in accordance with specified conditions contained in the agreement. The facility also includes a $10 million sublimit for swing line loans and a $35 million sublimit for letters of credit.
At September 30, 2022, the Company had standby letters of credit outstanding, primarily for insurance purposes, of $6.1 million and had the ability to borrow $294.2 million under the facility. Funds borrowed under the facility may be used for the repayment of debt, working capital, capital expenditures, acquisitions (so long as certain conditions, including a specified funded debt to EBITDA leverage ratio is maintained), and other general corporate purposes. The facility contains customary representations, warranties and restrictive covenants, as well as specific financial covenants which the Company was compliant with as of September 30, 2022. At September 30, 2022, the carrying value of the current borrowings approximate fair value.
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Note 9 - Accrued Liabilities |
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Accounts Payable, Accrued Liabilities, and Other Liabilities Disclosure, Current [Text Block] |
Accrued liabilities consist of the following (in thousands):
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Note 10 - Derivative Financial Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Text Block] |
10) Derivative Financial Instruments
The Company is exposed to market risks from changes in interest rates, commodity prices and changes in foreign currency rates. The Company selectively uses derivative financial instruments in order to manage certain of these risks. Information about the Company’s derivative financial instruments is as follows:
Interest Rate Swaps
From time to time as dictated by market opportunities, the Company enters into interest rate swap agreements designed to manage exposure to interest rates on the Company’s variable rate indebtedness. The Company recognizes all derivatives on its balance sheet at fair value. The Company has designated its interest rate swap agreements, including those that may be forward-dated, as cash flow hedges, and changes in the fair value of the swaps are recognized in other comprehensive income until the hedged items are recognized in earnings. Hedge ineffectiveness, if any, associated with the swaps will be reported by the Company in interest expense.
The Company’s effective swap agreements convert the base borrowing rate on $175 million of debt due under our revolving credit agreement from a variable rate equal to 1 month LIBOR to a weighted average fixed rate of 1.18% at September 30, 2022. The fair value of the swaps, recognized in accrued liabilities and in other comprehensive income, is as follows (in thousands, except percentages):
The Company reported no losses for the three months ended September 30, 2022, as a result of hedge ineffectiveness. Future changes in these swap arrangements, including termination of the agreements, may result in a reclassification of any gain or loss reported in accumulated other comprehensive income (loss) into earnings as an adjustment to interest expense. Accumulated other comprehensive income (loss) related to these instruments is being amortized into interest expense concurrent with the hedged exposure.
Foreign Exchange Contracts
Forward foreign currency exchange contracts are used to limit the impact of currency fluctuations on certain anticipated foreign cash flows, such as collections from customers and loan payments between subsidiaries. The Company enters into such contracts for hedging purposes only. The Company has designated certain of these currency contracts as hedges, and changes in the fair value of these contracts are recognized in other comprehensive income until the hedged items are recognized in earnings. Hedge ineffectiveness, if any, associated with these contracts will be reported in net income. At September 30, 2022 and June 30, 2022, the Company had outstanding forward contracts related to hedges of intercompany loans with net unrealized losses of $1.4 million and losses of $0.6 million, respectively, which approximate the unrealized gains and losses on the related loans. The contracts have maturity dates ranging from fiscal year 2024 to 2025, which correspond to the related intercompany loans.
The notional amounts of the Company’s forward contracts, by currency, are as follows (in thousands):
The table below presents the fair value of derivative financial instruments as well as their classification on the balance sheet (in thousands):
The table below presents the amount of gain (loss) recognized in comprehensive income on our derivative financial instruments (effective portion) designated as hedging instruments and their classification within comprehensive income for the periods ended (in thousands):
The table below presents the amount reclassified from accumulated other comprehensive income (loss) to net income for the periods ended (in thousands):
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Note 11 - Retirement Benefits |
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Retirement Benefits [Text Block] |
11) Retirement Benefits
The Company has defined benefit pension plans covering certain current and former employees both inside and outside of the U.S. The Company’s pension plan for U.S. employees is frozen for substantially all participants and has been replaced with a defined contribution benefit plan.
Net periodic benefit cost for the Company’s U.S. and Foreign pension benefit plans for the periods ended consisted of the following components (in thousands):
The following table sets forth the amounts recognized for the Company's defined benefit pension plans (in thousands):
The contributions made to defined benefit plans are presented below along with remaining contributions to be made for fiscal year 2023 (in thousands):
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Note 12 - Income Taxes |
3 Months Ended |
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Notes to Financial Statements | |
Income Tax Disclosure [Text Block] |
12) Income Taxes
The Company's effective tax rate from continuing operations for the first quarter of fiscal year 2023 was 24.0% compared with 25.0% for the prior year quarter. The tax rate was impacted in the current period by the following items: (i) a discrete tax benefit related to equity compensation, (ii) the jurisdictional mix of earnings, (iii) foreign withholding taxes, and (iv) federal research and development tax credits. The tax rate was impacted in the prior period by the following items: (i) a discrete tax benefit related to equity compensation, (ii) the jurisdictional mix of earnings, (iii) foreign withholding taxes, and (iv) increased capacity to utilize foreign tax credits.
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Note 13 - Earnings Per Share |
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Earnings Per Share [Text Block] |
13) Earnings Per Share
The following table sets forth a reconciliation of the number of shares (in thousands) used in the computation of basic and diluted earnings per share:
Earnings available to common stockholders are the same for computing both basic and diluted earnings per share. There were no outstanding instruments that had an anti-dilutive effect at September 30, 2022 or 2021.
Performance stock units of 141,918 and 131,888 for the three months ended September 30, 2022 and 2021, respectively, are excluded from the diluted earnings per share calculation as the performance criteria have not been met. |
Note 14 - Accumulated Other Comprehensive Income (Loss) |
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Comprehensive Income (Loss) Note [Text Block] |
14) Accumulated Other Comprehensive Income (Loss)
The components of the Company’s accumulated other comprehensive income (loss) are as follows (in thousands):
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Note 15 - Contingencies |
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Sep. 30, 2022 | |
Notes to Financial Statements | |
Contingencies Disclosure [Text Block] |
15) Contingencies
From time to time, the Company is subject to various claims and legal proceedings, including claims related to environmental remediation, either asserted or unasserted, that arise in the ordinary course of business. While the outcome of these proceedings and claims cannot be predicted with certainty, the Company’s management does not believe that the outcome of any of the currently existing legal matters will have a material impact on the Company’s consolidated financial position, results of operations or cash flow. The Company accrues for losses related to a claim or litigation when the Company’s management considers a potential loss probable and can reasonably estimate such potential loss.
Litigation
As reported in the Company's annual report on Form 10-K file on August 5, 2022, during the fourth quarter of fiscal year 2022, the Company agreed to a full and comprehensive settlement of its pending lawsuit with Miniature Precision Components, Inc., and, as a result, recorded $5.7 million as accrued liabilities in the consolidated balance sheet. During the first quarter of fiscal year 2023, the liability was paid and the matter is considered settled.
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Note 16 - Industry Segment Information |
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Segment Reporting Disclosure [Text Block] |
16) Industry Segment Information
The Company has five reportable segments organized around the types of products sold:
Net sales and income (loss) from continuing operations by segment were as follows (in thousands):
Net sales include only transactions with unaffiliated customers and include no intersegment sales. Income (loss) from operations by segment excludes interest expense and other non-operating (income) expense. |
Note 17 - Restructuring |
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Restructuring and Related Activities Disclosure [Text Block] |
17) Restructuring
The Company has undertaken a number of initiatives that have resulted in severance, restructuring, and related charges.
2023 Restructuring Initiatives
The Company continues to focus its efforts to reduce cost and improve productivity across its businesses, particularly through headcount reductions, facility closures, and consolidations. Restructuring expenses primarily related to headcount reductions and other cost saving initiatives. The Company expects the 2023 restructuring activities to be completed by fiscal year 2024.
Prior Year Restructuring Initiatives
Restructuring expenses primarily related to headcount reductions and facility rationalization within our Specialty Solutions segment. The Company also incurred restructuring expenses related to third party assistance with analysis and implementation of these activities. The Company expects the prior year restructuring activities to be completed by fiscal year 2023.
A summary of charges by initiative is as follows (in thousands):
Activity in the reserve related to the initiatives is as follows (in thousands):
The Company’s total restructuring expenses by segment are as follows (in thousands):
Restructuring expense is expected to be approximately $1.0 million for the remainder of fiscal year 2023. |
Note 2 - Acquisitions (Tables) |
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Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block] |
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Note 3 - Revenue From Contracts With Customers (Tables) |
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Disaggregation of Revenue [Table Text Block] |
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Contract with Customer, Contract Asset, Contract Liability, and Receivable [Table Text Block] |
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Note 4 - Fair Value Measurements (Tables) |
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block] |
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Note 5 - Inventories (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
Notes Tables | ||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventory, Current [Table Text Block] |
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Note 6 - Goodwill (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Schedule of Goodwill [Table Text Block] |
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Note 7 - Warranty Reserves (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Schedule of Product Warranty Liability [Table Text Block] |
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Note 8 - Debt (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
Notes Tables | ||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-Term Debt Instruments [Table Text Block] |
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Note 9 - Accrued Liabilities (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Schedule of Accrued Liabilities [Table Text Block] |
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Note 10 - Derivative Financial Instruments (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Schedule of Interest Rate Derivatives [Table Text Block] |
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Schedule of Foreign Exchange Contracts, Statement of Financial Position [Table Text Block] |
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Schedule of Derivative Instruments, Effect on Other Comprehensive Income (Loss) [Table Text Block] |
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Derivative Instruments, Gain (Loss) [Table Text Block] |
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Reclassification out of Accumulated Other Comprehensive Income [Table Text Block] |
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Note 11 - Retirement Benefits (Tables) |
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Schedule of Defined Benefit Plan Contributions [Table Text Block] |
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Schedule of Net Benefit Costs [Table Text Block] |
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Schedule of Net Funded Status [Table Text Block] |
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Note 13 - Earnings Per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] |
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Note 14 - Accumulated Other Comprehensive Income (Loss) (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
Notes Tables | ||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block] |
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Note 16 - Industry Segment Information (Tables) |
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Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Table Text Block] |
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Note 17 - Restructuring (Tables) |
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Restructuring and Related Costs [Table Text Block] |
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Schedule of Restructuring Reserve by Type of Cost [Table Text Block] |
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Restructuring Expenses By Segment [Table Text Block] |
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Note 2 - Acquisitions - Components of Fair Value of Acquisitions and Allocation of Purchase Price For Acquisition of Renco (Details) - USD ($) $ in Thousands |
6 Months Ended | |||
---|---|---|---|---|
Sep. 30, 2022 |
Mar. 31, 2022 |
Sep. 30, 2022 |
Jun. 30, 2022 |
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Goodwill | $ 261,064 | $ 261,064 | $ 267,906 | |
Renco Electronics [Member] | ||||
Cash payments | 10,016 | $ 10,016 | ||
Cash payments, adjustments | 0 | |||
Less cash acquired | (114) | (114) | ||
Less, cash acquired, adjustments | 0 | |||
Total | 9,902 | 9,902 | ||
Total, adjustments | 0 | |||
Other acquired assets | 488 | 490 | 488 | |
Other acquired assets, adjustments | (2) | |||
Inventories | 529 | 531 | 529 | |
Inventories, adjustments | (2) | |||
Property, plant, & equipment | 420 | 232 | 420 | |
Property, plant, & equipment, adjustments | 188 | |||
Identifiable intangible assets | 2,780 | 2,800 | 2,780 | |
Identifiable intangible assets, adjustments | (20) | |||
Goodwill | 5,840 | 6,001 | 5,840 | |
Goodwill, adjustments | (161) | |||
Liabilities assumed | $ (155) | $ (152) | (155) | |
Liabilities assumed, adjustments | $ (3) |
Note 3 - Revenue From Contracts With Customers - Contract Assets and Liabilities (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
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Contract assets | $ 24,679 | $ 15,013 |
Contract assets, additions | 16,315 | 9,087 |
Contract assets, deduction | 11,456 | 5,965 |
Contract assets | 29,538 | 18,135 |
Contract liabilities | 41 | 471 |
Contract liabilities, additions | 2,635 | 2,955 |
Contract liabilities, deductions | 2,638 | 3,174 |
Contract liabilities | 38 | 252 |
Amounts included in the contract liability balance at the beginning of the period | $ 41 | $ 471 |
Note 4 - Fair Value Measurements (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | |||
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Sep. 30, 2022 |
Jun. 30, 2022 |
Sep. 30, 2021 |
Mar. 31, 2022 |
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Payment for Contingent Consideration Liability, Financing Activities | $ 1,167 | $ 1,167 | ||
Business Combination, Contingent Consideration, Liability, Total | $ 1,167 | |||
GS Engineering [Member] | ||||
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High | 12,800 | |||
Renco Electronics [Member] | ||||
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High | $ 3,500 | |||
Payment for Contingent Consideration Liability, Financing Activities | $ 1,200 | $ 1,000 | $ 1,200 | |
Business Combination, Contingent Consideration, Liability, Total | $ 3,400 |
Note 4 - Fair Value Measurements - Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Jun. 30, 2022 |
---|---|---|
Interest rate swaps | $ 12,191 | |
Foreign exchange contracts, assets | 1,445 | $ 122 |
Interest rate swaps | 8,420 | |
Foreign exchange contracts | 711 | |
Business Combination, Contingent Consideration, Liability, Total | 1,167 | |
Fair Value, Inputs, Level 1 [Member] | ||
Interest rate swaps | 0 | |
Foreign exchange contracts, assets | 0 | 0 |
Interest rate swaps | 0 | |
Foreign exchange contracts | 0 | |
Business Combination, Contingent Consideration, Liability, Total | 0 | |
Fair Value, Inputs, Level 2 [Member] | ||
Interest rate swaps | 12,191 | |
Foreign exchange contracts, assets | 1,445 | 122 |
Interest rate swaps | 8,420 | |
Foreign exchange contracts | 711 | |
Business Combination, Contingent Consideration, Liability, Total | 0 | |
Fair Value, Inputs, Level 3 [Member] | ||
Interest rate swaps | 0 | |
Foreign exchange contracts, assets | 0 | 0 |
Interest rate swaps | 0 | |
Foreign exchange contracts | 0 | |
Business Combination, Contingent Consideration, Liability, Total | 1,167 | |
Deferred Compensation Plan [Member] | ||
Marketable securities - deferred compensation plan | 2,939 | 3,033 |
Deferred Compensation Plan [Member] | Fair Value, Inputs, Level 1 [Member] | ||
Marketable securities - deferred compensation plan | 2,939 | 3,033 |
Deferred Compensation Plan [Member] | Fair Value, Inputs, Level 2 [Member] | ||
Marketable securities - deferred compensation plan | 0 | 0 |
Deferred Compensation Plan [Member] | Fair Value, Inputs, Level 3 [Member] | ||
Marketable securities - deferred compensation plan | $ 0 | $ 0 |
Note 5 - Inventories (Details Textual) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
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Selling Expense | $ 2.9 | $ 3.7 |
Note 5 - Inventories - Summary of Inventories (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Jun. 30, 2022 |
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Raw materials | $ 57,036 | $ 56,321 |
Work in process | 21,759 | 20,592 |
Finished goods | 30,844 | 28,426 |
Total | $ 109,639 | $ 105,339 |
Note 6 - Goodwill - Changes to Goodwill (Details) $ in Thousands |
3 Months Ended |
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Sep. 30, 2022
USD ($)
| |
Balance | $ 267,906 |
Acquisitions | 0 |
Impairments | (6,842) |
Translation adjustment | 261,064 |
Electronics Products Group [Member] | |
Balance | 136,969 |
Acquisitions | 0 |
Impairments | (5,567) |
Translation adjustment | 131,402 |
Engraving Group [Member] | |
Balance | 76,250 |
Acquisitions | 0 |
Impairments | (568) |
Translation adjustment | 75,682 |
Scientific Group [Member] | |
Balance | 15,454 |
Acquisitions | 0 |
Impairments | 0 |
Translation adjustment | 15,454 |
Engineering Technologies Group [Member] | |
Balance | 35,928 |
Acquisitions | 0 |
Impairments | (707) |
Translation adjustment | 35,221 |
Specialty Solutions Group [Member] | |
Balance | 3,305 |
Acquisitions | 0 |
Impairments | 0 |
Translation adjustment | $ 3,305 |
Note 7 - Warranty Reserves - Changes in Warranty Reserve (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2022 |
Jun. 30, 2022 |
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Balance at beginning of year | $ 1,918 | $ 2,086 |
Acquisitions and other charges | (27) | (29) |
Warranty expense | 385 | 1,083 |
Warranty claims | (340) | (1,222) |
Balance at end of period | $ 1,936 | $ 1,918 |
Note 8 - Debt (Details Textual) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Sep. 30, 2022 |
|
Amended and Restated Credit Agreement [Member] | ||
Debt Instrument, Term (Year) | 5 years | |
Line of Credit Facility, Maximum Borrowing Capacity | $ 500.0 | |
Line Of Credit, Accordion Feature | 250.0 | |
Swing Line Loan [Member] | ||
Line of Credit Facility, Maximum Borrowing Capacity | 10.0 | |
Letter of Credit [Member] | ||
Line of Credit Facility, Maximum Borrowing Capacity | $ 35.0 | |
Standby Letters of Credit [Member] | ||
Long-Term Line of Credit, Total | $ 6.1 | |
Line of Credit Facility, Remaining Borrowing Capacity | $ 294.2 |
Note 8 - Debt - Long-term Debt (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Sep. 30, 2021 |
---|---|---|
Funded debt | $ 199,000 | $ 175,000 |
Issuance cost | (85) | (170) |
Total long-term debt | 198,915 | 174,830 |
Line of Credit [Member] | ||
Funded debt | $ 199,000 | $ 175,000 |
Note 9 - Accrued Liabilities - Accrued Expenses (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Jun. 30, 2022 |
---|---|---|
Payroll and employee benefits | $ 21,626 | $ 31,211 |
Litigation accrual | 0 | 5,745 |
Warranty reserves | 1,936 | 1,918 |
Fair value of derivatives | 1,445 | 0 |
Restructuring costs | 674 | 1,740 |
Workers' compensation | 1,521 | 1,664 |
Contingent consideration | 0 | 1,166 |
Other | 18,538 | 16,438 |
Total | 53,421 | 67,773 |
Accrued Expense [Member] | ||
Operating lease current liability | $ 7,681 | $ 7,891 |
Note 10 - Derivative Financial Instruments (Details Textual) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Jun. 30, 2022 |
Sep. 30, 2022 |
|
Derivative, Notional Amount | ||
Derivative Instruments, Loss Recognized in Income, Ineffective Portion and Amount Excluded from Effectiveness Testing | $ 0 | |
Interest Rate Swap [Member] | ||
Derivative, Notional Amount | $ 175,000 | |
Derivative, Average Fixed Interest Rate | 1.18% | |
Foreign Exchange Forward [Member] | ||
Outstanding Forward Contracts, Net Unrealized Gain (Loss) | $ 600 | $ 1,400 |
Note 10 - Derivative Financial Instruments - Fair Value of Swaps Recognized in Accrued Liabilities and in Other Comprehensive Income (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Jun. 30, 2022 |
|
Notional Amount | ||
Fixed Rate | ||
Fair Value, Liability | $ 12,191 | $ 8,420 |
Interest Rate Swap Effective August 6, 2018 [Member] | ||
Notional Amount | $ 25,000 | |
Fixed Rate | 2.83% | |
Maturity | Aug. 06, 2023 | |
Fair Value, Liability | $ 310 | 48 |
Interest Rate Swap Effective March 23, 2020 [Member] | ||
Notional Amount | $ 100,000 | |
Fixed Rate | 0.91% | |
Maturity | Mar. 23, 2025 | |
Fair Value, Liability | $ 7,891 | 5,538 |
Interest Rate Swap Effective April 24, 2020 [Member] | ||
Notional Amount | $ 25,000 | |
Fixed Rate | 0.88% | |
Maturity | Apr. 24, 2025 | |
Fair Value, Liability | $ 2,019 | 1,447 |
Interest Rate Swap Effective May 24, 2020 [Member] | ||
Notional Amount | $ 25,000 | |
Fixed Rate | 0.91% | |
Maturity | Mar. 24, 2025 | |
Fair Value, Liability | $ 1,971 | $ 1,387 |
Note 10 - Derivative Financial Instruments - Foreign Currency Exchange Contracts (Details) € in Thousands, $ in Millions, ¥ in Billions |
Sep. 30, 2022
USD ($)
|
Sep. 30, 2022
EUR (€)
|
Sep. 30, 2022
CAD ($)
|
Sep. 30, 2022
JPY (¥)
|
Jun. 30, 2022
EUR (€)
|
Jun. 30, 2022
CAD ($)
|
Jun. 30, 2022
JPY (¥)
|
---|---|---|---|---|---|---|---|
EUR | |||||||
Foreign Exchange Contract [Member] | |||||||
EUR | € 5,750 | $ 16.6 | ¥ 1 | € 5,750 | $ 16.6 | ¥ 1 |
Note 10 - Derivative Financial Instruments - Amounts Reclassified From Accumulated Other Comprehensive Income (Loss) to Net Income (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Jun. 30, 2022 |
Sep. 30, 2021 |
---|---|---|---|
Derivative liability, fair value | $ 12,191 | $ 8,420 | |
Designated as Hedging Instrument [Member] | |||
Derivative, fair value | 12,191 | $ 8,542 | |
Derivative liability, fair value | 263 | 0 | |
Prepaid Expenses and Other Current Assets [Member] | Interest Rate Swap [Member] | Designated as Hedging Instrument [Member] | |||
Derivative, fair value | 12,191 | ||
Prepaid Expenses and Other Current Assets [Member] | Foreign Exchange Contract [Member] | Designated as Hedging Instrument [Member] | |||
Derivative, fair value | 0 | 122 | |
Accrued Liabilities [Member] | Foreign Exchange Contract [Member] | Designated as Hedging Instrument [Member] | |||
Derivative liability, fair value | $ 263 | $ 0 |
Note 10 - Derivative Financial Instruments - Gain (Loss) Recognized in Comprehensive Income on Derivative Financial Instruments (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Change in unrealized gains (losses) | $ 3,836 | $ 143 |
Interest Rate Swap [Member] | ||
Change in unrealized gains (losses) | 4,225 | (61) |
Foreign Exchange Contract [Member] | ||
Change in unrealized gains (losses) | $ (389) | $ 204 |
Note 10 - Derivative Financial Instruments - Details About Accumulated Other Comprehensive Income (Loss) Components (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Accumulated other comprehensive income (loss) component | $ 42 | $ 1,084 |
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net, Total | 42 | 1,084 |
Interest Rate Swap [Member] | Interest Expense [Member] | Cash Flow Hedging [Member] | ||
Accumulated other comprehensive income (loss) component | (454) | 602 |
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net, Total | (454) | 602 |
Foreign Exchange Contract [Member] | Other Nonoperating Income (Expense) [Member] | Cash Flow Hedging [Member] | ||
Accumulated other comprehensive income (loss) component | 496 | 482 |
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net, Total | $ 496 | $ 482 |
Note 11 - Retirement Benefits - Components of Net Periodic Benefit Cost (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
UNITED STATES | ||
Service cost | $ 0 | $ 1 |
Interest cost | 2,397 | 1,830 |
Expected return on plan assets | (2,993) | (3,260) |
Recognized net actuarial loss | 953 | 1,384 |
Amortization of prior service cost | 0 | 0 |
Net periodic benefit cost | 357 | (45) |
Foreign Plan [Member] | ||
Service cost | 44 | 63 |
Interest cost | 262 | 190 |
Expected return on plan assets | (245) | (211) |
Recognized net actuarial loss | (15) | 84 |
Amortization of prior service cost | (1) | (1) |
Net periodic benefit cost | $ 45 | $ 125 |
Note 11 - Retirement Benefits - Funded Status for US and Foreign Pension Plan (Details) - UNITED STATES - USD ($) $ in Thousands |
Sep. 30, 2022 |
Sep. 30, 2021 |
---|---|---|
Prepaid benefit cost | $ 5,823 | $ 6,295 |
Current liabilities | (521) | (456) |
Non-current liabilities | (46,602) | (47,695) |
Net amount recognized | $ (41,300) | $ (41,856) |
Note 11 - Retirement Benefits - Contributions to Defined Benefit Plans (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Contributions to defined benefit plans | $ 52 | $ 52 |
Remaining contributions to be made | 440 | |
UNITED STATES | Defined Benefit Plan, Funded Plan [Member] | ||
Contributions to defined benefit plans | 0 | 0 |
Remaining contributions to be made | 0 | |
UNITED STATES | Defined Benefit Plan, Unfunded Plan [Member] | ||
Contributions to defined benefit plans | 52 | 52 |
Remaining contributions to be made | 148 | |
UNITED KINGDOM | ||
Contributions to defined benefit plans | 0 | 0 |
Remaining contributions to be made | 0 | |
GERMANY | Defined Benefit Plan, Unfunded Plan [Member] | ||
Contributions to defined benefit plans | 0 | 0 |
Remaining contributions to be made | 234 | |
IRELAND | ||
Contributions to defined benefit plans | 0 | $ 0 |
Remaining contributions to be made | $ 58 |
Note 12 - Income Taxes (Details Textual) |
3 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Effective Income Tax Rate Reconciliation, Percent, Total | 24.00% | 25.00% |
Note 13 - Earnings Per Share (Details Textual) - shares |
3 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Share-Based Payment Arrangement, Option [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | 0 | 0 |
Performance Shares [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | 141,918 | 131,888 |
Note 13 - Earnings Per Share - Computation of Basic and Diluted Earnings Per Share (Details) - shares shares in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Basic (in shares) | 11,823 | 12,023 |
Dilutive effect of unvested, restricted stock awards (in shares) | 129 | 126 |
Diluted - Average shares outstanding (in shares) | 11,952 | 12,149 |
Note 14 - Accumulated Other Comprehensive Income (Loss) - Components of Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Jun. 30, 2022 |
---|---|---|
Foreign currency translation adjustment | $ (89,222) | $ (67,679) |
Unrealized pension losses, net of tax | (91,835) | (92,641) |
Unrealized gains (losses) on derivative instruments, net of tax | 9,958 | 7,008 |
Total | $ (171,099) | $ (153,312) |
Note 15 - Contingencies (Details Textual) $ in Millions |
Sep. 30, 2022
USD ($)
|
---|---|
Lawsuit Filed Against Electronics [Member] | |
Loss Contingency Accrual, Ending Balance | $ 5.7 |
Note 16 - Industry Segment Information (Details Textual) |
3 Months Ended |
---|---|
Sep. 30, 2022 | |
Number of Reportable Segments | 5 |
Note 16 - Industry Segment Information - Net Sales and Income (Loss) by Industry Segments (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Net sales | $ 180,600 | $ 175,610 |
Income from operations | 26,290 | 22,828 |
Restructuring costs | (582) | (440) |
Acquisition related costs | (292) | (217) |
Interest expense | 1,187 | 1,720 |
Other non-operating (income) expense | 1,018 | 23 |
Income from continuing operations before income taxes | 24,085 | 21,085 |
Electronics Products Group [Member] | ||
Net sales | 75,199 | 75,836 |
Income from operations | 18,141 | 18,273 |
Restructuring costs | (254) | |
Engraving Group [Member] | ||
Net sales | 35,024 | 35,170 |
Income from operations | 5,854 | 4,874 |
Restructuring costs | (328) | (349) |
Scientific Group [Member] | ||
Net sales | 18,456 | 21,529 |
Income from operations | 3,723 | 4,508 |
Engineering Technologies Group [Member] | ||
Net sales | 16,999 | 17,573 |
Income from operations | 1,865 | 899 |
Restructuring costs | (91) | |
Specialty Solutions Group [Member] | ||
Net sales | 34,922 | 25,502 |
Income from operations | 6,077 | 2,815 |
Corporate and Other [Member] | ||
Income from operations | $ (8,496) | $ (7,884) |
Note 17 - Restructuring (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Jun. 30, 2023 |
|
Restructuring Costs, Total | $ 582 | $ 440 | |
Forecast [Member] | |||
Restructuring Costs, Total | $ 1,000 |
Note 17 - Restructuring - Summary of Severance, Restructuring, and Related Charges by Initiative (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Current year initiatives | $ 582 | $ 440 |
Involuntary Employee Severance And Benefit Costs [Member] | ||
Current year initiatives | 345 | 375 |
Other Restructuring [Member] | ||
Current year initiatives | 237 | 65 |
Current Year Restructuring Initiatives [Member] | ||
Current year initiatives | 137 | 440 |
Current Year Restructuring Initiatives [Member] | Involuntary Employee Severance And Benefit Costs [Member] | ||
Current year initiatives | 94 | 375 |
Current Year Restructuring Initiatives [Member] | Other Restructuring [Member] | ||
Current year initiatives | 43 | 65 |
Prior Year Initiatives [Member] | ||
Current year initiatives | 445 | 0 |
Prior Year Initiatives [Member] | Involuntary Employee Severance And Benefit Costs [Member] | ||
Current year initiatives | 251 | 0 |
Prior Year Initiatives [Member] | Other Restructuring [Member] | ||
Current year initiatives | $ 194 | $ 0 |
Note 17 - Restructuring - Summary of Activity in Reserves Related to Restructuring Initiatives (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Restructuring liabilities | $ 1,740 | |
Restructuring liabilities | 674 | |
Current Year Restructuring Initiatives [Member] | ||
Restructuring liabilities | 0 | |
Additions and adjustments | 137 | |
Payments | (137) | |
Restructuring liabilities | 0 | |
Current Year Restructuring Initiatives [Member] | Involuntary Employee Severance And Benefit Costs [Member] | ||
Restructuring liabilities | 0 | |
Additions and adjustments | 94 | |
Payments | (94) | |
Restructuring liabilities | 0 | |
Current Year Restructuring Initiatives [Member] | Other Restructuring [Member] | ||
Restructuring liabilities | 0 | |
Additions and adjustments | 43 | |
Payments | (43) | |
Restructuring liabilities | 0 | |
Prior Year Initiatives [Member] | ||
Restructuring liabilities | 1,740 | $ 49 |
Additions and adjustments | 445 | 440 |
Payments | (1,511) | (489) |
Restructuring liabilities | 674 | 0 |
Prior Year Initiatives [Member] | Involuntary Employee Severance And Benefit Costs [Member] | ||
Restructuring liabilities | 1,045 | 39 |
Additions and adjustments | 251 | 375 |
Payments | (1,042) | (414) |
Restructuring liabilities | 254 | 0 |
Prior Year Initiatives [Member] | Other Restructuring [Member] | ||
Restructuring liabilities | 695 | 10 |
Additions and adjustments | 194 | 65 |
Payments | (469) | (75) |
Restructuring liabilities | $ 420 | $ 0 |
Note 17 - Restructuring - Summary of Restructuring Expenses by Segment (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Restructuring charges | $ 582 | $ 440 |
Current year initiatives | 582 | 440 |
Involuntary Employee Severance And Benefit Costs [Member] | ||
Restructuring charges | 345 | 375 |
Current year initiatives | 345 | 375 |
Other Restructuring [Member] | ||
Restructuring charges | 237 | 65 |
Current year initiatives | 237 | 65 |
Electronics Products Group [Member] | ||
Restructuring charges | 254 | |
Current year initiatives | 254 | |
Electronics Products Group [Member] | Involuntary Employee Severance And Benefit Costs [Member] | ||
Restructuring charges | 131 | |
Current year initiatives | 131 | |
Electronics Products Group [Member] | Other Restructuring [Member] | ||
Restructuring charges | 123 | |
Current year initiatives | 123 | |
Engraving Group [Member] | ||
Restructuring charges | 328 | 349 |
Current year initiatives | 328 | 349 |
Engraving Group [Member] | Involuntary Employee Severance And Benefit Costs [Member] | ||
Restructuring charges | 214 | 284 |
Current year initiatives | 214 | 284 |
Engraving Group [Member] | Other Restructuring [Member] | ||
Restructuring charges | 114 | 65 |
Current year initiatives | $ 114 | 65 |
Engineering Technologies Group [Member] | ||
Restructuring charges | 91 | |
Current year initiatives | 91 | |
Engineering Technologies Group [Member] | Involuntary Employee Severance And Benefit Costs [Member] | ||
Restructuring charges | 91 | |
Current year initiatives | 91 | |
Engineering Technologies Group [Member] | Other Restructuring [Member] | ||
Restructuring charges | 0 | |
Current year initiatives | $ 0 |
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