Company Quick10K Filing
Standex
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 13 $933
10-Q 2019-11-06 Quarter: 2019-09-30
10-K 2019-08-27 Annual: 2019-06-30
10-Q 2019-04-30 Quarter: 2019-04-29
10-Q 2019-01-31 Quarter: 2018-12-31
10-Q 2018-10-29 Quarter: 2018-09-30
10-K 2018-08-28 Annual: 2018-06-30
10-Q 2018-05-01 Quarter: 2018-03-31
10-Q 2018-01-30 Quarter: 2017-12-31
10-Q 2017-11-01 Quarter: 2017-09-30
10-K 2017-08-28 Annual: 2017-06-30
10-Q 2017-05-02 Quarter: 2017-03-31
10-Q 2017-02-03 Quarter: 2016-12-31
10-Q 2016-10-28 Quarter: 2016-09-30
10-K 2016-08-25 Annual: 2016-06-30
10-Q 2016-05-03 Quarter: 2016-03-31
10-Q 2016-02-02 Quarter: 2015-12-31
10-Q 2015-10-29 Quarter: 2015-09-30
10-K 2015-08-27 Annual: 2015-06-30
10-Q 2015-05-01 Quarter: 2015-03-31
10-Q 2015-02-03 Quarter: 2014-12-31
10-Q 2014-10-31 Quarter: 2014-09-30
10-K 2014-08-28 Annual: 2014-06-30
10-Q 2014-05-02 Quarter: 2014-03-31
10-Q 2013-11-07 Quarter: 2013-09-30
10-K 2013-08-27 Annual: 2013-06-30
10-Q 2014-02-03 Quarter: 2013-06-30
10-Q 2013-05-06 Quarter: 2013-03-31
10-Q 2013-02-01 Quarter: 2012-12-31
10-Q 2012-11-01 Quarter: 2012-09-30
10-K 2012-08-28 Annual: 2012-06-30
10-Q 2012-05-02 Quarter: 2012-03-31
10-Q 2012-02-13 Quarter: 2011-12-31
10-Q 2011-10-27 Quarter: 2011-09-30
10-K 2011-09-08 Annual: 2011-06-30
10-Q 2011-04-29 Quarter: 2011-03-31
10-Q 2011-01-28 Quarter: 2010-12-31
10-Q 2010-10-28 Quarter: 2010-09-30
10-K 2010-08-27 Annual: 2010-06-30
10-Q 2010-04-29 Quarter: 2010-03-31
10-Q 2010-01-28 Quarter: 2009-12-31
8-K 2019-12-02 Regulation FD, Exhibits
8-K 2019-10-22 Shareholder Vote
8-K 2019-08-26 Earnings, Exhibits
8-K 2019-08-23 Exhibits
8-K 2019-08-08 Exhibits
8-K 2019-04-01 M&A, Regulation FD, Exhibits
8-K 2019-03-31 Earnings, Other Events, Exhibits
8-K 2019-01-30 Exhibits
8-K 2019-01-16 Other Events, Exhibits
8-K 2018-12-21 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-10-23 Officers, Shareholder Vote, Exhibits
8-K 2018-10-05 Officers
8-K 2018-09-30 Earnings, Exhibits
8-K 2018-09-28 Other Events, Exhibits
8-K 2018-06-30 Earnings, Other Events, Exhibits
8-K 2018-05-01 Earnings, Exhibits
8-K 2017-12-31 Earnings, Exhibits
SXI 2019-09-30
Part I. Financial Information Item 1
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4.     Controls and Procedures
Part II. Other Information
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 ex_163075.htm
EX-31.2 ex_163077.htm
EX-32 ex_163078.htm

Standex Earnings 2019-09-30

SXI 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
KAI 1,022 966 567 678 289 65 123 1,310 43% 10.7 7%
MLAB 969 160 41 104 62 1 18 982 59% 55.2 1%
SXI 933 922 458 792 268 68 128 1,038 34% 8.1 7%
MCRN 932 1,731 1,199 1,140 358 24 45 1,606 31% 35.5 1%
TPIC 886 788 576 1,176 51 -10 45 974 4% 21.9 -1%
LNN 864 506 236 465 115 6 36 870 25% 24.2 1%
RTEC 861 444 66 246 128 28 41 749 52% 18.4 6%
FARO 852 523 149 400 224 -3 16 732 56% 44.9 -1%
THR 843 671 316 415 173 21 75 805 42% 10.8 3%
SYX 840 390 233 934 322 216 235 749 34% 3.2 56%

sxi20190930_10q.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 

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

 

For the quarterly period ended September 30, 2019

 

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

 

Commission File Number 1-7233

 

STANDEX INTERNATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

 

 

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

 

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 [X]     NO [  ]

 

Delaware

31-0596149

(State of incorporation)

(IRS Employer Identification No.)

 

11 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 is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer [ X ]    Accelerated filer [   ]
Non-accelerated filer [   ]    Smaller Reporting Company [   ]

         

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      YES [  ]     NO [X]

 

The number of shares of Registrant's Common Stock outstanding on November 3, 2019 was 12,461,560.

 

 

1

 

 

 

 

STANDEX INTERNATIONAL CORPORATION

 

 

INDEX

 

 

    Page No.
PART I. FINANCIAL INFORMATION:  
     

Item 1.

   
     
 

Condensed Consolidated Balance Sheets as of September 30, 2019 (unaudited) and June 30, 2019

3

     
 

Condensed Consolidated Statements of Operations for the three months ended September 30, 2019 and 2018 (unaudited)

4

     
 

Condensed Consolidated Statements of Comprehensive Income for the three months ended September 30, 2019 and 2018 (unaudited)

5

     
 

Condensed Consolidated Statement of Stockholders’ Equity for the three months ended September 30, 2019 and 2018 (unaudited)

6

     
 

Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2019 and 2018 (unaudited)

7

     
 

Notes to Unaudited Condensed Consolidated Financial Statements

8

     
Item 2.

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

25

     

Item 3.

Quantitative and Qualitative Disclosures about Market Risk 33
 

 

 

Item 4.

Controls and Procedures 34
 

 

 

PART II.

OTHER INFORMATION:

 
     
Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

34

     
Item 6.

Exhibits

35

 

 

 

2

 

 

PART I. FINANCIAL INFORMATION

ITEM 1

 

 

STANDEX INTERNATIONAL CORPORATION

Condensed Consolidated Balance Sheets

 

(In thousands, except per share data)

  September 30, 2019 (unaudited)     June 30, 2019  

ASSETS

               

Current Assets:

               

Cash and cash equivalents

  $ 90,244     $ 93,145  

Accounts receivable, net of reserve for doubtful accounts of $1,765 and $1,451 at September 30, 2019 and June 30, 2019

    114,038       119,589  

Inventories

    98,359       88,645  

Prepaid expenses and other current assets

    20,297       30,872  

Income taxes receivable

    1,444       1,622  

Total current assets

    324,382       333,873  

Property, plant, and equipment, net

    147,408       148,024  

Intangible assets, net

    114,854       118,660  

Goodwill

    281,149       281,503  

Deferred tax asset

    12,853       14,140  
Operating lease right-of-use asset     42,079       -  

Other non-current assets

    26,567       25,689  

Total non-current assets

    624,910       588,016  

Total assets

  $ 949,292     $ 921,889  
                 

LIABILITIES AND STOCKHOLDERS' EQUITY

               

Current Liabilities:

               

Accounts payable

  $ 66,651     $ 72,603  

Accrued liabilities

    63,631       62,648  

Income taxes payable

    4,306       5,744  

Current liabilities-Discontinued Operations

    124       620  

Total current liabilities

    134,712       141,615  

Long-term debt

    188,895       197,610  
Operating lease long-term liabilities     34,192       -  

Accrued pension and other non-current liabilities

    118,572       118,351  

Total non-current liabilities

    341,659       315,961  

Stockholders' equity:

               

Common stock, par value $1.50 per share, 60,000,000 shares authorized, 27,984,278 issued, 12,373,209 and 12,334,607 outstanding at September 30, 2019 and June 30, 2019

    41,976       41,976  

Additional paid-in capital

    68,196       65,515  

Retained earnings

    828,226       818,282  

Accumulated other comprehensive loss

    (141,549 )     (137,278 )

Treasury shares: 15,611,069 shares at September 30, 2019 and 15,649,671 shares at June 30, 2019

    (323,928 )     (324,182 )

Total stockholders' equity

    472,921       464,313  

Total liabilities and stockholders' equity

  $ 949,292     $ 921,889  

 

See notes to unaudited condensed consolidated financial statements

 

 

3

 

 

 

 

STANDEX INTERNATIONAL CORPORATION

Unaudited Condensed Consolidated Statements of Operations

 

   

Three Months Ended

 
   

September 30,

 

(In thousands, except per share data)

 

2019

   

2018

 

Net sales

  $ 196,438     $ 193,080  

Cost of sales

    128,154       123,828  

Gross profit

    68,284       69,252  

Selling, general, and administrative expenses

    48,675       45,472  

Restructuring costs

    1,479       447  

Acquisition related expenses

    734       688  
Other operating (income) expense, net     (1,045 )     -  

Total operating expenses

    49,843       46,607  

Income from operations

    18,441       22,645  

Interest expense

    (2,121 )     (2,244 )

Other non-operating income (expense)

    916       (201 )

Income from continuing operations before income taxes

    17,236       20,200  

Provision for income taxes

    4,786       5,842  

Income from continuing operations

    12,450       14,358  

Income (loss) from discontinued operations, net of income taxes

    (11 )     1,499  

Net income (loss)

  $ 12,439     $ 15,857  
                 

Basic earnings (loss) per share:

               

Continuing operations

  $ 1.01     $ 1.13  

Discontinued operations

    -       0.12  

Total

  $ 1.01     $ 1.25  

Diluted earnings (loss) per share:

               

Continuing operations

  $ 1.00     $ 1.12  

Discontinued operations

    -       0.12  

Total

  $ 1.00     $ 1.24  
                 

Cash dividends per share

  $ 0.20     $ 0.18  

 

See notes to unaudited condensed consolidated financial statements

 

 

4

 

 

 

 

STANDEX INTERNATIONAL CORPORATION

Unaudited Condensed Consolidated Statements of Comprehensive Income

 

   

Three Months Ended

 
   

September 30,

 

(In thousands)

 

2019

   

2018

 

Net income

  $ 12,439     $ 15,857  

Other comprehensive income (loss):

               

Defined benefit pension plans:

               

Actuarial gains (losses) and other changes in unrecognized costs

  $ 348     $ 320  

Amortization of unrecognized costs

    1,435       1,116  

Derivative instruments:

               

Change in unrealized gains (losses)

    1,152       363  

Amortization of unrealized gains (losses) into interest expense

    (1,201 )     (659 )

Foreign currency translation gains (losses)

    (5,595 )     (6,021 )

Other comprehensive income (loss) before tax

  $ (3,861 )   $ (4,881 )
                 

Income tax provision (benefit):

               

Defined benefit pension plans:

               

Actuarial gains (losses) and other changes in unrecognized costs

  $ (47 )   $ (10 )

Amortization of unrecognized costs

    (345 )     (272 )

Derivative instruments:

               

Change in unrealized gains and (losses)

    (25 )     (98 )

Amortization of unrealized gains and (losses) into interest expense

    7       15  

Income tax provision (benefit) to other comprehensive income (loss)

  $ (410 )   $ (365 )
                 

Other comprehensive income (loss), net of tax

    (4,271 )     (5,246 )

Comprehensive income (loss)

  $ 8,168     $ 10,611  

 

See notes to unaudited condensed consolidated financial statements

 

 

5

 

 

 

 

Consolidated Statements of Stockholders' Equity

Standex International Corporation and Subsidiaries

 

                            Accumulated Other                
           

Additional

           

Comprehensive

                   

Total

 
For the Three month period ended September 30, 2019     Common       Paid-in       Retained       Income       Treasury Stock               Stockholders’  

(in thousands, except as specified)

 

Stock

   

Capital

   

Earnings

   

(Loss)

   

Shares

   

Amount

   

Equity

 

Balance, June 30, 2019

  $ 41,976     $ 65,515     $ 818,282     $ (137,278 )     15,650     $ (324,182 )   $ 464,313  

Stock issued for employee stock option and purchase plans, including related income tax benefit and other

    -       (76 )     -       -       (50 )     1,025       949  

Stock-based compensation

    -       2,757       -       -       -       -       2,757  

Treasury stock acquired

    -       -       -       -       11       (771 )     (771 )

Comprehensive income:

                                                    -  

Net Income

    -       -       12,439       -       -       -       12,439  

Foreign currency translation adjustment

    -       -               (5,595 )     -       -       (5,595 )

Pension and OPEB adjustments, net of tax of $0.4 million

    -       -       -       1,390       -       -       1,390  

Change in fair value of derivatives, net of tax of $0.4 million

    -       -       -       (66 )     -       -       (66 )

Dividends declared ($0.20 per share)

    -       -       (2,495 )     -       -       -       (2,495 )

Balance, September 30, 2019

  $ 41,976     $ 68,196     $ 828,226     $ (141,549 )     15,611     $ (323,928 )   $ 472,921  
                                                         

For the Three month period ended September 30, 2018

                                                       

(in thousands, except as specified)

                                                       

Balance, June 30, 2018

  $ 41,976     $ 61,328     $ 761,431     $ (121,860 )     15,279     $ (292,080 )   $ 450,795  

Stock issued for employee stock option and purchase plans, including related income tax benefit and other

    -       (205 )     -       -       (45 )     858       653  

Stock-based compensation

    -       2,157       -       -       -       -       2,157  

Treasury stock acquired

    -       -       -       -       8       (837 )     (837 )

Adoption of ASU 2018-02

    -       -       (1,033 )     -       -       -       (1,033 )
Comprehensive income:                                                     -  

Net Income

    -       -       15,857       -       -       -       15,857  

Foreign currency translation adjustment

    -       -       -       (6,021 )     -       -       (6,021 )

Pension and OPEB adjustments, net of tax of $0.3 million

    -       -       -       1,154       -       -       1,154  

Change in fair value of derivatives, net of tax of $0.4 million

    -       -       -       (378 )     -       -       (378 )

Dividends declared ($0.18 per share)

    -       -       (2,317 )     -       -       -       (2,317 )

Balance, September 30, 2018

  $ 41,976     $ 63,280     $ 773,938     $ (127,105 )     15,242     $ (292,059 )   $ 460,030  

 

 

6

 

 

 

 

STANDEX INTERNATIONAL CORPORATION

Unaudited Condensed Consolidated Statements of Cash Flows

 

   

Three Months Ended

 
   

September 30,

 

(In thousands)

 

2019

   

2018

 

Cash flows from operating activities

               

Net income

  $ 12,439     $ 15,857  

Income from discontinued operations

    (11 )     1,499  

Income from continuing operations

    12,450       14,358  

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

               

Depreciation and amortization

    8,380       6,655  

Stock-based compensation

    2,757       2,157  

Non-cash portion of restructuring charge

    (122 )     13  
Life Insurance Benefit     (1,302 )     -  

Contributions to defined benefit plans

    (241 )     (252 )

Net changes in operating assets and liabilities

    (13,607 )     (25,502 )

Net cash provided by operating activities - continuing operations

    8,315       (2,571 )

Net cash (used in) operating activities - discontinued operations

    99       3,560  

Net cash provided by operating activities

    8,414       989  

Cash flows from investing activities

               

Expenditures for property, plant, and equipment

    (7,034 )     (7,465 )

Expenditures for acquisitions, net of cash acquired

    -       (96,828 )

Proceeds from insurance recovery

    9,000       -  

Other investing activity

    376       2,332  

Net cash provided by (used in) investing activities- continuing operations

    2,342       (101,961 )

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

    -       (232 )

Net cash provided by (used in) investing activities

    2,342       (102,193 )

Cash flows from financing activities

               

Borrowings on revolving credit facility

    25,700       139,500  

Payments of revolving credit facility

    (34,500 )     (34,000 )

Activity under share-based payment plans

    949       652  

Purchases of treasury stock

    (771 )     (837 )

Cash dividends paid

    (2,463 )     (2,287 )

Net cash provided by financing activities

    (11,085 )     103,028  

Effect of exchange rate changes on cash and cash equivalents

    (2,572 )     (2,156 )

Net change in cash and cash equivalents

    (2,901 )     (332 )

Cash and cash equivalents at beginning of year

    93,145       109,602  

Cash and cash equivalents at end of period

  $ 90,244     $ 109,270  
                 

Supplemental Disclosure of Cash Flow Information:

               

Cash paid during the year for:

               

Interest

  $ 1,841     $ 1,447  

Income taxes, net of refunds

  $ 5,114     $ 5,264  

 

See notes to unaudited condensed consolidated financial statements

 

 

7

 

 

 

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, cash flows and changes in stockholder’s equity for the three months ended September 30, 2019 and 2018 and the financial position of Standex International Corporation (“Standex”, the “Company”, “we”, “us”, or “our”), at September 30, 2019. The interim results are not necessarily indicative of results for a full year. The following unaudited condensed 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, 2019. The condensed consolidated balance sheet at June 30, 2019 was derived from audited consolidated financial statements included in the annual report for the fiscal year ended June 30, 2019, 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 audited consolidated financial statements included in the Annual Report on Form 10-K and in particular the audited consolidated financial statements for the year ended June 30, 2019. Certain prior period amounts have been reclassified to conform to the current period presentation. Unless otherwise noted, references to years are to the Company’s fiscal years.

 

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. We evaluated subsequent events through the date and time our unaudited condensed consolidated financial statements were issued.

 

Recently Issued Accounting Pronouncements

 

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the accounting for goodwill impairments by eliminating step two from the goodwill impairment test.  Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.  ASU 2017-04 also clarifies the requirements for excluding and allocating foreign currency translation adjustments to reporting units related to an entity's testing of reporting units for goodwill impairment. It further clarifies that an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.  ASU 2017-04 is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.  The Company is currently assessing the potential impact of the adoption of ASU 2017-04 on our goodwill impairment testing procedures and our consolidated financial statements.

 

 

 

8

 

 

 

 

 

 

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 September 30, 2019, the Company evaluated the significance of each acquisition on a standalone basis and in aggregate, considering both qualitative and quantitative factors.

 

GS Engineering

 

During the fourth quarter of fiscal year 2019, the Company acquired Ohio-based Genius Solutions Engineering Company (d/b/a GS Engineering). The privately held company is a provider of specialized “soft surface” skin texturized tooling. GS Engineering primarily serves the automotive end market and its operating results are included in the Company’s Engraving segment.

 

The Company paid $30.5 million in cash for all of the issued and outstanding equity interests of GS Engineering.  The preliminary purchase price was allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on a preliminary estimate of their fair values on the closing date. The Company has commenced a formal valuation of the acquired assets and liabilities and has updated the preliminary intangible assets based on the preliminary valuation results. Goodwill from the transaction is attributable to the combined organization utilizing the GS technology across its global production footprint to enable customers worldwide to benefit from a combined offering for harmonized designs across a variety of surfaces and materials.

 

Intangible assets of $8.9 million are preliminarily recorded, consisting of $5.6 million for developed technology to be amortized over a period of 15 years, $0.9 million for indefinite lived trademarks, and $2.4 million of customer relationships to be amortized over 13 years. The Company’s assigned fair values are preliminary as of September 30, 2019 until reviewed closing financial statements, including U.S. 338(h)10 elections, can be prepared by an independent accountant and agreed to by both parties as required by the stock purchase agreement.  The goodwill of $18.1 million created by the transaction is deductible for income tax purposes.

 

The components of the fair value of the GS Engineering acquisition, including the preliminary allocation of the purchase price at September 30 2019, are as follows (in thousands):

 

   

Preliminary Allocation June 30, 2019

   

Adjustments

   

Adjusted Preliminary Allocation September 30, 2019

 

Fair value of business combination:

                       

Cash payments

  $ 30,502     $ -     $ 30,502  

Less, cash acquired

    (622 )     -       (622 )

Total

  $ 29,880     $ -     $ 29,880  

 

9

 

 

   

Preliminary Allocation June 30, 2019

   

Adjustments

   

Adjusted Preliminary Allocation September 30, 2019

 

Identifiable assets acquired and liabilities assumed:

                       

Other acquired assets

  $ 2,197     $ (72 )   $ 2,125  

Inventories

    228       (75 )     153  

Customer Backlog

    180       -       180  

Property, plant, & equipment

    1,391       -       1,391  

Identifiable intangible assets

    8,910       -       8,910  

Goodwill

    17,976       147       18,123  

Liabilities assumed

    (1,002 )     -       (1,002 )

Total

  $ 29,880     $ -     $ 29,880  

  

 

 

Agile Magnetics

 

On the last business day of the first quarter of fiscal year 2019, the Company acquired Regional Mfg. Specialists, Inc. (now named Agile Magnetics).  The New Hampshire based, privately held company is a provider of high-reliability magnetics to customers in the semiconductor, military, aerospace, healthcare, and general industrial industries.  The Company has included the results of Agile in its Electronics segment in the consolidated financial statements.

 

The Company paid $39.2 million in cash for all of the issued and outstanding equity interests of Agile.  The purchase price was allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on a their fair values on the closing date. Goodwill recorded from this transaction is attributable to expanded capabilities of the combined organization which will allow for improved responsiveness to customer demands via a larger pool of engineering resources and local manufacturing. 

 

Intangible assets of $17.4 million are recorded, consisting of $13.5 million of customer relationships to be amortized over a period of 13 years, $3.8 million for indefinite lived trademarks, and $0.1 million for a non-compete arrangement to be amortized over 5 years. The goodwill of $16.4 million recorded in connection with the transaction is deductible for income tax purposes.  The Company’s assigned fair values are final as of September 30, 2019.

 

The components of the fair value of the Agile acquisition, including the final allocation of the purchase price at September 30, 2019, are as follows (in thousands):

 

   

Preliminary Allocation September 30, 2018

   

Adjustments

    Final Allocation September 30, 2019  

Fair value of business combination:

                       

Cash payments

  $ 39,194     $ -     $ 39,194  

Less, cash acquired

    (1 )     -       (1 )

Total

  $ 39,193     $ -     $ 39,193  

 

   

Preliminary Allocation September 30, 2018

   

Adjustments

    Final Allocation September 30, 2019  

Identifiable assets acquired and liabilities assumed:

                       

Other acquired assets

  $ 1,928     $ (35 )   $ 1,893  

Inventories

    2,506       268       2,774  

Customer Backlog

    -       200       200  

Property, plant, & equipment

    1,318       (348 )     970  

Identifiable intangible assets

    13,718       3,632       17,350  

Goodwill

    20,142       (3,708 )     16,434  

Liabilities assumed

    (419 )     (9 )     (428 )

Total

  $ 39,193     $ -     $ 39,193  

 

10

 

 

 

Tenibac-Graphion Inc.

 

During August of fiscal year 2019, the Company acquired Tenibac-Graphion Inc. (“Tenibac”).  The Michigan based privately held company is a provider of chemical and laser texturing services for the automotive, medical, packaging, and consumer products markets.  The Company has included the results of Tenibac in its Engraving segment in the condensed consolidated financial statements.

 

The Company paid $57.3 million in cash for all of the issued and outstanding equity interests of Tenibac.  The purchase price was allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values on the closing date.  Goodwill recorded from this transaction is attributable to the complementary services that the combined business can now offer to customers, through increased responsiveness to customer demands, and providing innovative approaches to solving customer needs by offering a full line of mold and tool services to customers. 

 

Intangible assets of $16.9 million are recorded, consisting of $11.3 million of customer relationships to be amortized over a period of 15 years, $4.2 million for indefinite lived trademarks, and $1.4 million of other intangibles assets to be amortized over 5 years.  The Company’s assigned fair values are final as of June 30, 2019. The goodwill of $34.4 million created by the transaction is deductible for income tax purposes.

 

The components of the fair value of the Tenibac acquisition, including the final allocation of the purchase price are as follows (in thousands):

 

   

Preliminary Allocation September 30, 2018

   

Adjustments

    Final Allocation  
                         

Fair value of business combination:

                       

Cash payments

  $ 57,284     $ -     $ 57,284  

Less cash acquired

    (558 )     -       (558 )

Total

  $ 56,726     $ -     $ 56,726  

 

   

Preliminary Allocation September 30, 2018

   

Adjustments

    Final Allocation  

Identifiable assets acquired and liabilities assumed:

                       

Other acquired assets

  $ 5,023     $ (1,253 )   $ 3,770  

Inventories

    324       -       324  

Customer backlog

    1,000       (800 )     200  

Property, plant, & equipment

    2,490       (19 )     2,471  

Identifiable intangible assets

    15,960       900       16,860  

Goodwill

    32,949       1,411       34,360  

Liabilities assumed

    (1,020 )     (239 )     (1,259 )

Total

  $ 56,726     $ -     $ 56,726  


Acquisition-Related Costs

 

Acquisition-related costs include costs related to acquired businesses and other pending acquisitions. These costs consist of (i) deferred compensation 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.

 

Deferred compensation costs relate to the acquisition of Horizon Scientific on October 16, 2016, for which payments were due to the seller of $2.8 million on the second anniversary and $5.6 million on the third anniversary of the closing date of the purchase. For the three months ended September 30, 2019 we recorded deferred compensation costs of $0.7 million related to estimated deferred compensation earned by the Horizon Scientific seller to date which are nearly equal to the amounts recorded during the same period in fiscal year 2019. The payments are contingent on the seller remaining an employee of the Company, with limited exceptions, at each anniversary date.

 

Acquisition related costs consist of miscellaneous professional service fees and expenses for our recent acquisitions.

 

11

 

 

The components of acquisition-related costs are as follows (in thousands):

 

   

Three Months Ended

 
   

September 30,

 
   

2019

   

2018

 

Deferred compensation arrangements

  $ 703     $ 667  

Other acquisition-related costs

    31       21  

Total

  $ 734     $ 688  

 

  

 

 

3)

Revenue From Contracts With Customers

 

Effective July 1, 2018, the Company adopted the new accounting standard, ASU No. 2014-09, “Revenue from Contracts with Customers” (ASC 606) using the modified retrospective method to contracts that were not completed as of June 30, 2018. The adoption of ASC 606 represents a change in accounting principle that provides enhanced revenue recognition disclosures.

 

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 recognized under long-term contracts within the Engineering Technologies group 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 are recognized over time. 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, 2019

   

September 30, 2018

 

Engraving Services

    36,066       33,855  

Engraving Products

    2,365       2,124  

Total Engraving

    38,431       35,979  
                 

Electronics

    46,617       51,450  
                 

Engineering Technologies Components

    24,644       20,784  
                 

Hydraulics Cylinders and Systems

    13,749       12,536  
                 

Refrigeration

  $ 55,133     $ 54,545  

Merchandising & Display

    9,823       9,058  

Pumps

    8,041       8,728  

Total Food Service Equipment

    72,997       72,331  
                 

Total Revenue by Product Line

  $ 196,438     $ 193,080  

 

12

 

 

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

 

   

Three Months Ended

 

Net sales

 

September 30, 2019

   

September 30,2018

 

United States

  $ 134,293     $ 124,729  

Asia Pacific

    24,346       27,878  

EMEA (1)

    34,300       35,526  

Other Americas

    3,499       4,947  

Total

  $ 196,438     $ 193,080  

 

(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):

 

   

Three Months Ended

 

Timing of Revenue Recognition

 

September 30, 2019

   

September 30, 2018

 

Products and services transferred at a point in time

  $ 189,954     $ 187,898  

Products transferred over time

    6,484       5,182  

Net Sales

  $ 196,438     $ 193,080  

 

 

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 and other current assets. Contract liabilities are customer deposits for which revenue has not been recognized. Current contract liabilities are recorded as accrued expenses.

 

The following table provides information about contract assets and liability balances as of September 30, 2019 (in thousands):

 

    Balance at Beginning of Period    

Additions

   

Deductions

    Balance at End of Period  

Three months ended September 30, 2019

                               

Contract assets:

                               

Prepaid and other current assets

    8,418       6,325       8,679       6,064  

Contract liabilities:

                               

Customer deposits

    1,358       1,943       3,277       24  

 

During the three months ended September 30, 2019, we recognized the following revenue as a result of changes in the contract liability balances (in thousands):

 

   

Three months ended

 

Revenue recognized in the period from:

 

September 30, 2019

 

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

  $ 1,358  

 

 

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.

 

 

13

 

 

 

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 in active markets for identical assets and liabilities. The Company’s deferred compensation plan assets consist of shares in various mutual funds (for the deferred compensation plan, 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, 2019 and June 30, 2019. The Company’s policy is to recognize transfers between levels as of the date they occur.

 

Cash and cash equivalents, accounts receivable, and accounts payable are carried at cost, which approximates fair value.

 

Items presented at fair value at September 30, 2019 and June 30, 2019 consisted of the following (in thousands):

 

   

September 30, 2019

 
   

Total

   

Level 1

   

Level 2

   

Level 3

 

Assets

                               

Marketable securities - deferred compensation plan

  $ 2,429     $ 2,429     $ -     $ -  

Interest rate swaps

    14       -       14       -  
                                 

Liabilities

                               

Foreign exchange contracts

  $ 1,521     $ -     $ 1,521     $ -  

Interest rate swaps

    1,678       -       1,678       -  

Contingent acquisition payments (a)

    7,006       -       -       7,006  

 

   

June 30, 2019

 
   

Total

   

Level 1

   

Level 2

   

Level 3

 

Assets

                               

Marketable securities - deferred compensation plan

  $ 2,354     $ 2,354     $ -     $ -  

Foreign exchange contracts

    -       -       -       -  

Interest rate swaps

    52       -       52       -  
                                 

Liabilities

                               

Foreign exchange contracts

  $ 3,052     $ -     $ 3,052     $ -  
Interest rate swaps     1,432               1,432          

Contingent acquisition payments (a)

    6,418       -       -       6,418  

 

 

(a)

The fair value of our contingent consideration arrangement is determined based on our evaluation as to the probability and amount of any deferred compensation that has been earned to date.

 

14

 

 

Our financial liabilities based upon Level 3 inputs consist of contingent consideration arrangements relating to our acquisitions of Horizon Scientific, Piazza Rosa, and GS Engineering. We are contractually obligated to pay contingent consideration payments in connection with the Horizon Scientific acquisition based on the criteria of continued employment of the seller on the second and third anniversary of the closing date of the acquisition. The seller of Horizon remained employed on the second anniversary of the closing date and a payment was made to the seller in the second quarter of fiscal 2019.  We are contractually obligated to pay contingent consideration payments in connection with the Piazza Rosa acquisition based on the achievement of certain revenue targets during each of the first three years following acquisition. Piazza Rosa exceeded the defined revenue targets during the first year and a payment was made to the Piazza Rosa sellers during the first quarter of fiscal 2019. The Company is currently calculating the achievement of revenue targets of the second year and a payment is expected to be made to the Piazza Rosa sellers during the second quarter of fiscal 2020.  The Company is also 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.  As of September 30, 2019, the targets set in the GS stock purchase agreement have not yet been met due to the length of time since the acquisition.

 

We will update our assumptions each reporting period based on new developments and record such amounts at fair value based on the revised assumptions until the consideration is paid. As of September 30, 2019, neither the range of outcomes nor the assumptions used to develop the estimate had changed.

 

 

 

5)

Discontinued Operations

 

In pursuing our business strategy, the Company continues to divest certain businesses and record activities of these businesses as discontinued operations.

 

During the first quarter of fiscal 2019, in order to focus its financial assets and managerial resources on its remaining portfolio of businesses, the Company decided to divest its Cooking Solutions Group, which consisted of three operating segments and a minority interest investment. In connection with the divestiture, during the second quarter of fiscal 2019, the Company sold its minority interest investment to the majority shareholders. During the third quarter of fiscal 2019, the Company entered into a definitive agreement to sell the three operating segments to The Middleby Corporation for a cash purchase price of $105 million, subject to post-closing adjustments and various transaction fees.

 

The transaction closed on March 31, 2019 and resulted in a pre-tax gain of $20.5 million less related transaction expenses of $4.4 million. The Company reported a tax benefit related to the sale due to the write-off of deferred tax liabilities related to the Cooking Solutions Group. Because the transaction closed on a non-business day, cash proceeds related to the sale were not received until the next business day which resulted in a receivable of $106.9 million recorded at March 31, 2019.

 

Results of the Cooking Solutions Group in current and prior periods have been classified as discontinued operations in the Condensed Consolidated Financial Statements and excluded from the results from continuing operations. Activity related to the Cooking Solutions Group and other discontinued operations for the three months ended September 30, 2019 and 2018 is as follows (in thousands):

 

   

Three Months Ended

 
   

September 30,

 
   

2019

   

2018

 

Net Sales

  $ -     $ 24,448  
                 

Income from Operations

  $ 194     $ 1,832  
                 

Profit Before Taxes

  $ 25     $ 1,832  

Benefit (Provision) for Taxes

    (36 )     (333 )

Net income from Discontinued Operations

  $ (11 )   $ 1,499  

 

 

 

 

6)

Inventories

 

Inventories are comprised of the following (in thousands):

 

    September 30, 2019     June 30, 2019  

Raw materials

  $ 46,315     $ 43,117  

Work in process

    28,672       28,120  

Finished goods

    23,372       17,408  

Total

  $ 98,359     $ 88,645  

 

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 $5.0 million and $4.1 million for the three months ended September 30, 2019 and 2018, respectively.

 

 

15

 

 

 

7)

Goodwill

 

Changes to goodwill during the period ended September 30, 2019 were as follows (in thousands):

 

    June 30, 2019    

Acquisitions

    Translation Adjustment     September 30, 2019  

Engraving

  $ 79,776     $ 147     $ (312 )   $ 79,611  

Electronics

    131,317       820       (729 )     131,408  

Engineering Technologies

    43,890       -       (280 )     43,610  

Hydraulics

    3,059       -       -       3,059  

Food Service Equipment

    23,461       -       -       23,461  

Total

  $ 281,503     $ 967     $ (1,321 )   $ 281,149  

 

 

 

8)

Intangible Assets

 

Intangible assets consist of the following (in thousands):

 

    Customer Relationships     Tradenames (Indefinite-lived)     Developed Technology    

Other

   

Total

 

September 30, 2019

                                       

Cost

  $ 73,748