10-Q 1 sxi20220331_10q.htm FORM 10-Q sxi20220331_10q.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 

     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2022

 

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number 001-07233

 

STANDEX INTERNATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware

 

31-0596149

(State of incorporation)

(IRS Employer Identification No.)

 

23 Keewaydin drive, Salem, New Hampshire

03079

(Address of principal executive offices)

(Zip Code)

 

(603) 893-9701

(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

Common Stock, Par Value $1.50 Per Share

SXI

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

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). Yes ☒ No ☐

 

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.

 

Large accelerated filer ☒

 

 

Accelerated filer ☐

 

Non-accelerated filer ☐  

Smaller reporting company 

 

   

Emerging growth company 

 

 

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     No ☒

 

The number of shares of Registrant's Common Stock outstanding on May 3, 2022 was 12,069,658.

 

1

 

 

 

STANDEX INTERNATIONAL CORPORATION

 

 

INDEX

 

 

 

 

Page No.

PART I.  FINANCIAL INFORMATION:

 

 

 

 

Item 1.

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2022 and June 30, 2021 (unaudited)

3

 

 

 

 

Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 2022 and 2021 (unaudited)

4

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended March 31, 2022 and 2021 (unaudited)

5

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended March 31, 2022 and 2021 (unaudited)

6

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2022 and 2021 (unaudited)

8

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

9

 

 

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

25

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

37

 

 

 

Item 4.

Controls and Procedures

38

 

 

 

PART II.  OTHER INFORMATION:

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

39

     

Item 6.

Exhibits

40

 

2

 

 

 

PART I. FINANCIAL INFORMATION

ITEM 1

 

STANDEX INTERNATIONAL CORPORATION

Unaudited Condensed Consolidated Balance Sheets

 

  March 31,  June 30, 

(In thousands, except per share data)

 

2022

  

2021

 

ASSETS

        

Current Assets:

        

Cash and cash equivalents

 $133,902  $136,367 

Accounts receivable, less allowance for credit losses of $1,997 and $1,588 at March 31, 2022 and June 30, 2021, respectively

  115,428   109,883 

Inventories

  103,930   91,862 

Prepaid expenses and other current assets

  41,800   23,504 

Income taxes receivable

  15,584   12,750 

Total current assets

  410,644   374,366 
         

Property, plant, and equipment, net

  128,181   133,373 

Intangible assets, net

  91,545   98,929 

Goodwill

  275,127   278,054 

Deferred tax asset

  5,369   9,566 

Operating lease right-of-use asset

  35,558   37,276 

Other non-current assets

  27,144   30,659 

Total non-current assets

  562,924   587,857 
         

Total assets

 $973,568  $962,223 
         

LIABILITIES AND STOCKHOLDERS' EQUITY

        

Current Liabilities:

        

Accounts payable

 $75,275  $74,756 

Accrued liabilities

  57,185   61,717 

Income taxes payable

  9,279   7,236 

Total current liabilities

  141,739   143,709 
         

Long-term debt

  199,745   199,490 

Operating lease long-term liabilities

  28,683   29,041 

Accrued pension and other non-current liabilities

  75,781   83,558 

Total non-current liabilities

  304,209   312,089 
         

Contingencies (Note 15)

          
         

Stockholders' equity:

        

Common stock, par value $1.50 per share, 60,000,000 shares authorized, 27,984,278 shares issued, 11,929,389 and 12,044,405 shares outstanding at March 31, 2022 and June 30, 2021

  41,976   41,976 

Additional paid-in capital

  88,197   80,788 

Retained earnings

  891,303   852,489 

Accumulated other comprehensive loss

  (121,870)  (116,140)

Treasury shares: 16,054,889 and 15,939,873 shares at March 31, 2022 and June 30, 2021

  (371,986)  (352,688)

Total stockholders' equity

  527,620   506,425 
         

Total liabilities and stockholders' equity

 $973,568  $962,223 

 

See notes to unaudited condensed consolidated financial statements 

 

3

 
 

STANDEX INTERNATIONAL CORPORATION

Unaudited Condensed Consolidated Statements of Operations

 

   

Three Months Ended

   

Nine Months Ended

 
   

March 31,

   

March 31,

 

(In thousands, except per share data)

 

2022

   

2021

   

2022

   

2021

 

Net sales

  $ 189,281     $ 172,216     $ 550,600     $ 479,797  

Cost of sales

    120,900       109,516       347,210       304,344  

Gross profit

    68,381       62,700       203,390       175,453  

Selling, general, and administrative expenses

    42,306       41,689       128,589       120,758  

Loss on sale of business

    -       14,624       -       14,624  

Restructuring costs

    1,186       482       2,469       2,478  

Acquisition related costs

    419       255       1,561       850  

Other operating (income) expense, net

    -       -       1,700       -  

Total operating expenses

    43,911       57,050       134,319       138,710  

Income from operations

    24,470       5,650       69,071       36,743  

Interest expense

    1,238       1,317       4,484       4,403  

Other non-operating (income) expense, net

    340       306       651       73  

Income from continuing operations before income taxes

    22,892       4,027       63,936       32,267  

Provision for income taxes

    5,484       2,269       15,677       8,155  

Income from continuing operations

    17,408       1,758       48,259       24,112  

Income (loss) from discontinued operations, net of tax

    (86 )     (331 )     (135 )     (1,588 )

Net income

  $ 17,322     $ 1,427     $ 48,124     $ 22,524  
                                 

Basic earnings (loss) per share:

                               

Continuing operations

  $ 1.45     $ 0.14     $ 4.02     $ 1.98  

Discontinued operations

    (0.01 )     (0.03 )     (0.01 )     (0.13 )

Total

  $ 1.44     $ 0.11     $ 4.01     $ 1.85  

Diluted earnings (loss) per share:

                               

Continuing operations

  $ 1.44     $ 0.14     $ 3.98     $ 1.97  

Discontinued operations

    (0.01 )     (0.03 )     (0.01 )     (0.13 )

Total

  $ 1.43     $ 0.11     $ 3.97     $ 1.84  
                                 

Weighted average number of shares:

                               

Basic

    11,982       12,136       12,009       12,185  

Diluted

    12,089       12,253       12,121       12,267  

 

See notes to unaudited condensed consolidated financial statements 

 

4

 
 

STANDEX INTERNATIONAL CORPORATION 

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)

 

   

Three Months Ended

   

Nine Months Ended

 
   

March 31,

   

March 31,

 

(In thousands)

 

2022

   

2021

   

2022

   

2021

 

Net income

  $ 17,322     $ 1,427     $ 48,124     $ 22,524  

Other comprehensive income (loss):

                               

Defined benefit pension plans:

                               

Actuarial gains (losses) and other changes in unrecognized costs, net of tax

  $ 88     $ 22     $ 189     $ (351 )

Amortization of unrecognized costs, net of tax

    1,103       1,275       3,320       3,810  

Derivative instruments:

                               

Change in unrealized gains (losses), net of tax

    4,340       3,185       5,949       3,089  

Amortization of unrealized gains (losses) into interest expense, net of tax

    627       (77 )     2,155       767  

Foreign currency translation gains (losses), net of tax

    (8,018 )     (11,299 )     (17,343 )     9,301  

Other comprehensive income (loss), net of tax

  $ (1,860 )   $ (6,894 )   $ (5,730 )   $ 16,616  

Comprehensive income

  $ 15,462     $ (5,467 )   $ 42,394     $ 39,140  

 

See notes to unaudited condensed consolidated financial statements 

 

5

 
 

STANDEX INTERNATIONAL CORPORATION AND SUBSIDIARIES 

Unaudited Condensed Consolidated Statements of Stockholders' Equity 

 

              

Accumulated Other

             

For the nine month period ended

    Additional     Comprehensive     Total 

March 31, 2022

 

Common

  

Paid-in

  

Retained

  

Income

  

Treasury Stock

  

Stockholders’

 

(in thousands, except as specified)

 

Stock

  

Capital

  

Earnings

  

(Loss)

  

Shares

  

Amount

  

Equity

 

Balance, June 30, 2021

 $41,976  $80,788  $852,489  $(116,140)  15,940  $(352,688) $506,425 

Stock issued under incentive compensation plans and employee purchase plans

  -   (804)  -   -   (94)  2,122   1,318 

Stock-based compensation

  -   8,213   -   -   -   -   8,213 

Treasury stock acquired

  -   -   -   -   209   (21,420)  (21,420)

Comprehensive income:

                            

Net income

  -   -   48,124   -   -   -   48,124 

Foreign currency translation adjustment

  -   -   -   (17,343)  -   -   (17,343)

Pension, net of tax of $1.1 million

  -   -   -   3,509   -   -   3,509 

Change in fair value of derivatives, net of tax of $2.4 million

  -   -   -   8,104   -   -   8,104 

Dividends declared ($0.76 per share)

  -   -   (9,310)  -   -   -   (9,310)

Balance, March 31, 2022

 $41,976  $88,197  $891,303  $(121,870)  16,055  $(371,986) $527,620 
                             

For the nine month period ended March 31, 2021

                            

(in thousands, except as specified)

                            

Balance, June 30, 2020

 $41,976  $72,752  $827,656  $(147,659)  15,748  $(333,093) $461,632 

Stock issued under incentive compensation plans and employee purchase plans

  -   (432)  -   -   (72)  1,549   1,117 

Stock-based compensation

  -   5,658   -   -   -   -   5,658 

Treasury stock acquired

  -   -   -   -   217   (16,205)  (16,205)

Comprehensive income:

                          - 

Net income

  -   -   22,524   -   -   -   22,524 

Foreign currency translation adjustment

  -   -   -   9,301   -   -   9,301 

Pension, net of tax of $1.1 million

  -   -   -   3,459   -   -   3,459 

Change in fair value of derivatives, net of tax of $0.9 million

  -   -   -   3,856   -   -   3,856 

Dividends declared ($0.70 per share)

  -   -   (8,689)  -   -   -   (8,689)

Balance, March 31, 2021

 $41,976  $77,978  $841,491  $(131,043)  15,893  $(347,749) $482,653 

 

6

 

STANDEX INTERNATIONAL CORPORATION AND SUBSIDIARIES 

Unaudited Condensed Consolidated Statements of Stockholders' Equity 

 

              

Accumulated Other

             

For the three month period ended

    Additional     Comprehensive     Total 

March 31, 2022

 

Common

  

Paid-in

  

Retained

  

Income

  

Treasury Stock

  

Stockholders’

 

(in thousands, except as specified)

 

Stock

  

Capital

  

Earnings

  

(Loss)

  

Shares

  

Amount

  

Equity

 

Balance, December 31, 2021

 $41,976  $84,560  $877,158  $(120,010)  15,948  $(360,234) $523,450 

Stock issued under incentive compensation plans and employee purchase plans

  -   49   -   -   (5)  122   171 

Stock-based compensation

  -   3,588   -   -   -   -   3,588 

Treasury stock acquired

  -   -   -   -   112   (11,874)  (11,874)

Comprehensive income:

                            

Net income

  -   -   17,322   -   -   -   17,322 

Foreign currency translation adjustment

  -   -   -   (8,018)  -   -   (8,018)

Pension, net of tax of $0.4 million

  -   -   -   1,191   -   -   1,191 

Change in fair value of derivatives, net of tax of $1.6 million

  -   -   -   4,967   -   -   4,967 

Dividends declared ($0.26 per share)

  -   -   (3,177)  -   -   -   (3,177)

Balance, March 31, 2022

 $41,976  $88,197  $891,303  $(121,870)  16,055  $(371,986) $527,620 
                             

For the three month period ended March 31, 2021

                            

(in thousands, except as specified)

                            

Balance, December 31, 2020

 $41,976  $76,548  $843,038  $(124,149)  15,803  $(339,223) $498,190 

Stock issued under incentive compensation plans and employee purchase plans

  -   60   -   -   (4)  86   146 

Stock-based compensation

  -   1,370   -   -   -   -   1,370 

Treasury stock acquired

  -   -   -   -   94   (8,612)  (8,612)

Comprehensive income:

                            

Net income

  -   -   1,427   -   -   -   1,427 

Foreign currency translation adjustment

  -   -   -   (11,299)  -   -   (11,299)

Pension, net of tax of $0.4 million

  -   -   -   1,297   -   -   1,297 

Change in fair value of derivatives, net of tax of $0.7 million

  -   -   -   3,108   -   -   3,108 

Dividends declared ($0.24 per share)

  -   -   (2,974)  -   -   -   (2,974)

Balance, March 31, 2021

 $41,976  $77,978  $841,491  $(131,043)  15,893  $(347,749) $482,653 

 

7

 
 

STANDEX INTERNATIONAL CORPORATION

 Unaudited Condensed Consolidated Statements of Cash Flows

 

   

Nine Months Ended

 
   

March 31,

 

(In thousands)

 

2022

   

2021

 

Cash flows from operating activities

               

Net income

  $ 48,124     $ 22,524  

Income (loss) from discontinued operations

    (135 )     (1,588 )

Income from continuing operations

    48,259       24,112  

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

               

Depreciation and amortization

    22,411       24,843  

Stock-based compensation

    8,213       5,658  

Non-cash portion of restructuring charge

    595       (538 )

Loss on sale of business

    -       14,624  

Contributions to defined benefit plans

    (157 )     (7,962 )

Changes in operating assets and liabilities, net

    (30,693 )     (11,399 )

Net cash provided by operating activities - continuing operations

    48,628       49,338  

Net cash provided by (used in) operating activities - discontinued operations

    (375 )     2,225  

Net cash provided by operating activities

    48,253       51,563  

Cash flows from investing activities

               

Expenditures for property, plant, and equipment

    (13,138 )     (15,612 )

Expenditures for acquisitions, net of cash acquired

    (9,902 )     (27,406 )

Proceeds from sale of business

    -       11,678  

Other investing activity

    5,718       (1,449 )

Net cash provided by (used in) investing activities

    (17,322 )     (32,789 )

Cash flows from financing activities

               

Proceeds from borrowings

    -       17,000  

Payments of debt

    -       (17,000 )

Contingent consideration payment

    (1,167 )     -  

Activity under share-based payment plans

    1,318       1,117  

Purchases of treasury stock

    (21,420 )     (16,205 )

Cash dividends paid

    (9,148 )     (8,547 )

Net cash provided by (used in) financing activities

    (30,417 )     (23,635 )

Effect of exchange rate changes on cash and cash equivalents

    (2,979 )     4,092  

Net change in cash and cash equivalents

    (2,465 )     (769 )

Cash and cash equivalents at beginning of year

    136,367       118,809  

Cash and cash equivalents at end of period

  $ 133,902     $ 118,040  
                 

Supplemental Disclosure of Cash Flow Information:

               

Cash paid during the year for:

               

Interest

  $ 3,791     $ 3,754  

Income taxes, net of refunds

  $ 14,797     $ 14,631  

 

See notes to unaudited condensed consolidated financial statements

 

8

 

 

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 and nine months ended March 31, 2022 and 2021, the cash flows for the nine months ended March 31, 2022 and 2021 and the financial position of Standex International Corporation (“Standex”, the “Company”, “we”, “us”, or “our”), at March 31, 2022. The interim results are not necessarily indicative of results for a full year. The following 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, 2021. The condensed consolidated balance sheet at June 30, 2021 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, 2021. 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 2022 includes the twelve-month period from July 1, 2021 to June 30, 2022.

 

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  March 31, 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 does not expect the adoption of this ASU to have a significant impact on its Consolidated Financial Statements. 

 

 

2)     Acquisitions

 

The Company's recent acquisitions are strategically significant to the future growth prospects of the Company. At the time of the acquisition and March 31, 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.

 

9

 

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 at March 31, 2022, are as follows (in thousands): 

 

   

Preliminary Allocation as of March 31, 2022

 
         

Fair value of business combination:

       

Cash payments

  $ 10,016  

Less cash acquired

    (114 )

Total

  $ 9,902  

 

   

Preliminary Allocation as of March 31, 2022

 

Identifiable assets acquired and liabilities assumed:

       

Other acquired assets

  $ 490  

Inventories

    531  

Property, plant, & equipment

    232  

Identifiable intangible assets

    2,800  

Goodwill

    6,001  

Liabilities assumed

    (152 )

Total

  $ 9,902  

 

Renco Electronics

 

During the first quarter of fiscal year 2021, the Company acquired Renco Electronics ("Renco"), a designer and manufacturer of customized standard magnetics components and products including transformers, inductors, chokes and coils for power and RF applications.  Renco’s end markets and customer base in areas such as consumer and industrial applications are highly complementary to our existing business with the potential to further expand key account relationships and capitalize on cross selling opportunities between the two companies.  Renco operates one manufacturing facility in Florida and is supported by contract manufacturers in Asia. Renco’s results are reported within our Electronics segment.

 

The Company paid $27.4 million in cash for all of the issued and outstanding equity interests of Renco Electronics. 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 Renco’s significant engineering and technical expertise in end markets supported by strong engineer-to-engineer relationships. In addition, Renco’s end markets and customer base in areas such as consumer and industrial are highly complementary to the Company’s existing business.

 

10

 

Identifiable intangible assets of $10.4 million consist primarily of $3.6 million for indefinite lived tradenames, and $6.8 million of customer relationships to be amortized over 12 years. The goodwill of $14.0 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, including contingent consideration, 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 Renco Electronics acquisition, including the final allocation of the purchase price are as follows (in thousands):

 

   

Final Allocation

 

Fair value of business combination:

       

Cash payments

  $ 29,613  

Less, cash acquired

    (2,207 )

Fair value of contingent consideration

    3,000  

Total

  $ 30,406  

 

   

Final Allocation

 

Identifiable assets acquired and liabilities assumed:

       

Other acquired assets

  $ 4,522  

Inventories

    5,446  

Property, plant, & equipment

    410  

Identifiable intangible assets

    10,400  

Goodwill

    13,991  

Debt assumed

    (712 )

Liabilities assumed

    (3,651 )

Total

  $ 30,406  

 

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 March 31, 2022, and 2021 were $0.4 million and $0.3 million, respectively. Acquisition related costs for the nine months ended March 31, 2022, and 2021 were $1.6 million and $0.9 million, respectively. 

 

 

11

 
 

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

 

March 31, 2022

   

March 31, 2021

 
                 

Electronics

  $ 79,889     $ 65,085  
                 

Engraving Services

    34,399       33,655  

Engraving Products

    2,824       2,371  

Total Engraving

    37,223       36,026  
                 

Scientific

    18,914       24,221  
                 

Engineering Technologies

    20,890       19,951  
                 

Hydraulics Cylinders and Systems

    15,306       13,629  

Merchandising & Display

    8,438       6,276  

Pumps

    8,621       7,028  

Total Specialty Solutions

    32,365       26,933  
                 

Total revenue by product line

  $ 189,281     $ 172,216  

 

12

 

The following table presents revenue disaggregated by product line and segment (in thousands):

 

   

Nine Months Ended

 

Revenue by Product Line

 

March 31, 2022

   

March 31, 2021

 
                 

Electronics

  $ 232,351     $ 180,524  
                 

Engraving Services

    101,637       102,950  

Engraving Products

    7,400       7,427  

Total Engraving

    109,037       110,377  
                 

Scientific

    65,079       58,777  
                 

Engineering Technologies

    56,558       55,091  
                 

Hydraulics Cylinders and Systems

    39,207       36,583  

Merchandising & Display

    23,548       19,515  

Pumps

    24,820       18,930  

Total Specialty Solutions

    87,575       75,028  
                 

Total revenue by product line

  $ 550,600     $ 479,797  

 

The following table presents revenue from continuing operations disaggregated by geography based on company’s locations (in thousands):

 

   

Three Months Ended

   

Three Months Ended

   

Nine Months Ended

   

Nine Months Ended

 

Net sales

 

March 31, 2022

   

March 31, 2021

   

March 31, 2022

   

March 31, 2021

 

United States

  $ 110,076     $ 103,005     $ 314,657     $ 286,522  

Asia Pacific

    37,441       31,715       116,842       89,189  

EMEA (1)

    37,963       34,367       108,841       93,549  

Other Americas

    3,801       3,129       10,260       10,537  

Total

  $ 189,281     $ 172,216     $ 550,600     $ 479,797  

 

(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

 

March 31, 2022

   

March 31, 2021

 

Products and services transferred at a point in time

  $ 170,949     $ 163,356  

Products transferred over time

    18,332       8,860  

Net sales

  $ 189,281     $ 172,216  

 

   

Nine Months Ended

 

Timing of Revenue Recognition

 

March 31, 2022

   

March 31, 2021

 

Products and services transferred at a point in time

  $ 510,988     $ 454,007  

Products transferred over time

    39,612       25,790  

Net sales

  $ 550,600     $ 479,797  

 

13

 

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

 

Nine months ended March 31, 2022

                               

Contract assets:

                               

Prepaid expenses and other current assets

  $ 15,013     $ 35,091     $ 25,711     $ 24,393  

Contract liabilities:

                               

Customer deposits

    471       10,293       10,721       43  

 

   

Balance at Beginning of Period

   

Additions

   

Amount Recognized

   

Balance at End of Period

 

Nine months ended March 31, 2021

                               

Contract assets:

                               

Prepaid expenses and other current assets

  $ 9,140     $ 21,055     $ 18,422     $ 11,773  

Contract liabilities:

                               

Customer deposits

    2,298       6,497       7,871       924  

 

We recognized the following revenue which was included in the contract liability beginning balances (in thousands):

 

 

   

March 31, 2022

 

Revenue recognized in the period from:

 

Three months ended

   

Nine months ended

 

Amounts included in the contract liability balance at the beginning of the period

  $ 252     $ 471  

 

   

March 31, 2021

 

Revenue recognized in the period from:

 

Three months ended

   

Nine months ended

 

Amounts included in the contract liability balance at the beginning of the period

  $ 365     $ 2,298  

 

 

 

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.

 

14

 

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 March 31, 2022 and June 30, 2021. 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):

 

   

March 31, 2022

 
   

Total

   

Level 1

   

Level 2

   

Level 3

 

Assets

                               

Marketable securities - deferred compensation plan

  $ 3,281     $ 3,281     $ -     $ -  

Foreign exchange contracts

    169       -       169       -  

Interest rate swaps

    6,881       -       6,881       -  
                                 

Liabilities

                               

Foreign exchange contracts

  $ -     $ -       -     $ -  

Interest rate swaps

    331       -       331       -  

Contingent acquisition payments (a)

    2,167       -       -       2,167  

 

   

June 30, 2021

 
   

Total

   

Level 1

   

Level 2

   

Level 3

 

Assets

                               

Marketable securities - deferred compensation plan

  $ 2,988     $ 2,988     $ -     $ -  

Foreign exchange contracts

    255       -       255       -  
                                 

Liabilities

                               

Foreign exchange contracts

  $ 1,222     $ -     $ 1,222     $ -  

Interest rate swaps

    3,096       -       3,096