STANDEX INTERNATIONAL CORP/DE/ [SXI] Filings

10-Q 1 sxi20230331_10q.htm FORM 10-Q sxi20230331_10q.htm

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, 2023

☐ 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, 2023 was 11,902,676.

STANDEX INTERNATIONAL CORPORATION

INDEX

		Page No.
PART I. FINANCIAL INFORMATION:

Item 1.

	Condensed Consolidated Balance Sheets as of March 31, 2023 and June 30, 2022 (unaudited)	3

	Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 2023 and 2022 (unaudited)	4

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended March 31, 2023 and 2022 (unaudited)	5

	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended March 31, 2023 and 2022 (unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2023 and 2022 (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

PART I. FINANCIAL INFORMATION

ITEM 1

STANDEX INTERNATIONAL CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

	*March 31,*			*June 30,*
(In thousands, except per share data)	*2023*			*2022*
ASSETS
Current assets:
Cash and cash equivalents	$	175,284		$	104,844
Accounts receivable, less allowance for credit losses of $2,537 and $2,214 at March 31, 2023 and June 30, 2022, respectively		121,161			117,075
Inventories		104,516			105,339
Prepaid expenses and other current assets		56,611			45,210
Income taxes receivable		3,203			6,530
Total current assets		460,775			378,998

Property, plant, and equipment, net		130,638			128,584
Intangible assets, net		79,562			85,770
Goodwill		269,463			267,906
Deferred tax asset		9,213			8,186
Operating lease right-of-use asset		36,069			39,119
Other non-current assets		29,368			25,876
Total non-current assets		554,313			555,441

Total assets	$	1,015,088		$	934,439

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	67,512		$	74,520
Accrued liabilities		55,704			67,773
Income taxes payable		7,371			8,475
Total current liabilities		130,587			150,768

Long-term debt		173,333			174,830
Operating lease long-term liabilities		28,463			31,357
Accrued pension and other non-current liabilities		77,155			78,141
Total non-current liabilities		278,951			284,328

Contingencies (Note 15)

Stockholders' equity:
Common stock, par value $1.50 per share, 60,000,000 shares authorized, 27,984,278 shares issued, 11,791,341 and 11,824,128 shares outstanding at March 31, 2023 and June 30, 2022		41,976			41,976
Additional paid-in capital		97,294			91,200
Retained earnings		1,010,395			901,421
Accumulated other comprehensive loss		(147,175	)		(153,312	)
Treasury shares: 16,192,937 and 16,160,150 shares at March 31, 2023 and June 30, 2022		(396,940	)		(381,942	)
Total stockholders' equity		605,550			499,343

Total liabilities and stockholders' equity	$	1,015,088		$	934,439

See notes to unaudited condensed consolidated financial statements

STANDEX INTERNATIONAL CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

	*Three Months Ended*						*Nine Months Ended*
	*March 31,*						*March 31,*
(In thousands, except per share data)	*2023*			*2022*			*2023*			*2022*
Net sales	$	184,332		$	189,281		$	552,721		$	550,600
Cost of sales		113,435			120,900			341,251			347,210
Gross profit		70,897			68,381			211,470			203,390
Selling, general, and administrative expenses		42,954			42,306			127,756			128,589
(Gain) loss on sale of business		(62,105	)		-			(62,105	)		-
Restructuring costs		2,237			1,186			3,330			2,469
Acquisition related costs		21			419			487			1,561
Other operating (income) expense, net		(727	)		-			(611	)		1,700
Total operating expenses		(17,620	)		43,911			68,857			134,319
Income from operations		88,517			24,470			142,613			69,071
Interest expense		1,415			1,238			4,168			4,484
Other non-operating (income) expense, net		747			340			1,695			651
Income from continuing operations before income taxes		86,355			22,892			136,750			63,936
Provision for income taxes		5,788			5,484			17,783			15,677
Income from continuing operations		80,567			17,408			118,967			48,259
Income (loss) from discontinued operations, net of tax		(57	)		(86	)		(144	)		(135	)
Net income	$	80,510		$	17,322		$	118,823		$	48,124

Basic earnings (loss) per share:
Continuing operations	$	6.82		$	1.45		$	10.06		$	4.02
Discontinued operations		-			(0.01	)		(0.01	)		(0.01	)
Total	$	6.82		$	1.44		$	10.05		$	4.01
Diluted earnings (loss) per share:
Continuing operations	$	6.77		$	1.44		$	9.98		$	3.98
Discontinued operations		-			(0.10	)		(0.01	)		(0.01	)
Total	$	6.77		$	1.34		$	9.97		$	3.97

Weighted average number of shares:
Basic		11,811			11,982			11,825			12,009
Diluted		11,895			12,089			11,917			12,121

See notes to unaudited condensed consolidated financial statements

STANDEX INTERNATIONAL CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)

	*Three Months Ended*						*Nine Months Ended*
	*March 31,*						*March 31,*
(In thousands)	*2023*			*2022*			*2023*			*2022*
Net income	$	80,510		$	17,322		$	118,823		$	48,124
Other comprehensive income (loss):
Defined benefit pension plans:
Actuarial gains (losses) and other changes in unrecognized costs, net of tax	$	(601	)	$	88		$	(587	)	$	189
Amortization of unrecognized costs, net of tax		712			1,103			2,132			3,320
Derivative instruments:
Change in unrealized gains (losses), net of tax		(406	)		4,340			2,220			5,949
Amortization of unrealized gains (losses) into interest expense, net of tax		(1,134	)		627			(1,212	)		2,155
Foreign currency translation gains (losses), net of tax		1,480			(8,018	)		3,584			(17,343	)
Other comprehensive income (loss), net of tax	$	51		$	(1,860	)	$	6,137		$	(5,730	)
Comprehensive income	$	80,561		$	15,462		$	124,960		$	42,394

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*
March 31, 2023	*Common*		*Paid-in*		*Retained*			*Income*			*Treasury Stock*						*Stockholders’*
(in thousands, except as specified)	*Stock*		*Capital*		*Earnings*			*(Loss)*			*Shares*			*Amount*			*Equity*
Balance, December 31, 2022	$	41,976	$	93,359	$	933,233		$	(147,226	)		16,153		$	(391,925	)	$	529,417
Stock issued under incentive compensation plans and employee purchase plans		-		126		-			-			(2	)		50			176
Stock-based compensation		-		3,809		-			-			-			-			3,809
Treasury stock acquired		-		-		-			-			42			(5,065	)		(5,065	)
Comprehensive income:
Net income		-		-		80,510			-			-			-			80,510
Foreign currency translation adjustment		-		-		-			1,480			-			-			1,480
Pension, net of tax of $0.1 million		-		-		-			111			-			-			111
Change in fair value of derivatives, net of tax of $0.5 million		-		-		-			(1,540	)		-			-			(1,540	)
Dividends declared ($0.28 per share)		-		-		(3,348	)		-			-			-			(3,348	)
Balance, March 31, 2023	$	41,976	$	97,294	$	1,010,395		$	(147,175	)		16,193		$	(396,940	)	$	605,550

For the three month period ended March 31, 2022
(in thousands, except as specified)
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

See notes to unaudited condensed consolidated financial statements

STANDEX INTERNATIONAL CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Stockholders' Equity (Continued)

									*Accumulated Other*
For the nine month period ended			*Additional*						*Comprehensive*									*Total*
March 31, 2023	*Common*		*Paid-in*			*Retained*			*Income*			*Treasury Stock*						*Stockholders’*
(in thousands, except as specified)	*Stock*		*Capital*			*Earnings*			*(Loss)*			*Shares*			*Amount*			*Equity*
Balance, June 30, 2022	$	41,976	$	91,200		$	901,421		$	(153,312	)		16,160		$	(381,942	)	$	499,343
Stock issued under incentive compensation plans and employee purchase plans		-		(2,414	)		-			-			(150	)		3,584			1,170
Stock-based compensation		-		8,508			-			-			-			-			8,508
Treasury stock acquired		-		-			-			-			183			(18,582	)		(18,582	)
Comprehensive income:
Net income		-		-			118,823			-			-			-			118,823
Foreign currency translation adjustment		-		-			-			3,584			-			-			3,584
Pension, net of tax of $0.6 million		-		-			-			1,545			-			-			1,545
Change in fair value of derivatives, net of tax of $0.3 million		-		-			-			1,008			-			-			1,008
Dividends declared ($0.82 per share)		-		-			(9,849	)		-			-			-			(9,849	)
Balance, March 31, 2023	$	41,976	$	97,294		$	1,010,395		$	(147,175	)		16,193		$	(396,940	)	$	605,550

For the nine month period ended March 31, 2022
(in thousands, except as specified)
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

See notes to unaudited condensed consolidated financial statements

STANDEX INTERNATIONAL CORPORATION AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

	*Nine Months Ended*
	*March 31,*
(In thousands)	*2023*			*2022*
Cash flows from operating activities
Net income	$	118,823		$	48,124
Income (loss) from discontinued operations		(144	)		(135	)
Income from continuing operations		118,967			48,259
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		21,275			22,411
Stock-based compensation		8,508			8,213
Non-cash portion of restructuring charge		129			595
Gain on sale of business		(62,105	)		-
Contributions to defined benefit plans		(151	)		(157	)
Changes in operating assets and liabilities, net		(36,268	)		(30,693	)
Net cash provided by (used in) operating activities - continuing operations		50,355			48,628
Net cash provided by (used in) operating activities - discontinued operations		(37	)		(375	)
Net cash provided by (used in) operating activities		50,318			48,253
Cash flows from investing activities
Expenditures for property, plant, and equipment		(16,648	)		(13,138	)
Proceeds from sale of business		67,023			-
Expenditures for acquisitions, net of cash acquired		-			(9,902	)
Other investing activity		(1,321	)		5,718
Net cash provided by (used in) investing activities		49,054			(17,322	)
Cash flows from financing activities
Proceeds from borrowings		224,500			-
Payments of debt		(226,200	)		-
Contingent consideration payment		(1,167	)		(1,167	)
Activity under share-based payment plans		1,170			1,318
Purchases of treasury stock		(18,582	)		(21,420	)
Cash dividends paid		(9,699	)		(9,148	)
Net cash provided by (used in) financing activities		(29,978	)		(30,417	)
Effect of exchange rate changes on cash and cash equivalents		1,046			(2,979	)
Net change in cash and cash equivalents		70,440			(2,465	)
Cash and cash equivalents at beginning of year		104,844			136,367
Cash and cash equivalents at end of period	$	175,284		$	133,902

Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest	$	3,186		$	3,791
Income taxes, net of refunds	$	22,064		$	14,797

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 and nine months ended March 31, 2023 and 2022, the cash flows for the nine months ended March 31, 2023 and 2022 and the financial position of Standex International Corporation (“Standex”, the “Company”, “we”, “us”, or “our”), at March 31, 2023. 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 March 31, 2023 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 March 31, 2023, 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 $5.8 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 final allocation of the purchase price are as follows (in thousands):


	*Final Allocation*
Fair value of business combination:
Cash payments	$	10,016
Less cash acquired		(114	)
Total	$	9,902

	Final Allocation
Identifiable assets acquired and liabilities assumed:
Other acquired assets	$	488
Inventories		529
Property, plant, & equipment		420
Identifiable intangible assets		2,780
Goodwill		5,840
Liabilities assumed		(155	)
Total	$	9,902

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 March 31, 2023 and 2022 were less than $0.1 million and $0.4 million, respectively. Acquisition related costs for the nine months ended March 31, 2023 and 2022 were $0.5 million and $1.6 million, respectively.

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, 2023*		*March 31, 2022*

Electronics	$	78,211	$	79,889

Engraving Services		35,454		34,399
Engraving Products		1,455		2,824
Total Engraving		36,909		37,223

Scientific		18,898		18,914

Engineering Technologies		18,052		20,890

Hydraulics Cylinders and Systems		13,548		15,306
Merchandising & Display		13,203		8,438
Pumps		5,511		8,621
Total Specialty Solutions		32,262		32,365

Total revenue by product line	$	184,332	$	189,281

	*Nine Months Ended*
Revenue by Product Line	*March 31, 2023*		*March 31, 2022*

Electronics	$	225,966	$	232,351

Engraving Services		105,259		101,637
Engraving Products		4,363		7,400
Total Engraving		109,622		109,037

Scientific		56,646		65,079

Engineering Technologies		59,244		56,558

Hydraulics Cylinders and Systems		47,823		39,207
Merchandising & Display		32,160		23,548
Pumps		21,260		24,820
Total Specialty Solutions		101,243		87,575

Total revenue by product line	$	552,721	$	550,600

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, 2023*		*March 31, 2022*		*March 31, 2023*		*March 31, 2022*
United States	$	112,002	$	110,076	$	338,464	$	314,657
Asia Pacific		29,204		37,441		95,858		116,842
EMEA (1)		38,953		37,963		106,279		108,841
Other Americas		4,173		3,801		12,120		10,260
Total	$	184,332	$	189,281	$	552,721	$	550,600

_⁽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	*March 31, 2023*		*March 31, 2022*
Products and services transferred at a point in time	$	169,669	$	170,949
Products transferred over time		14,663		18,332
Net sales	$	184,332	$	189,281

	*Nine Months Ended*
Timing of Revenue Recognition	*March 31, 2023*		*March 31, 2022*
Products and services transferred at a point in time	$	501,090	$	510,988
Products transferred over time		51,631		39,612
Net sales	$	552,721	$	550,600

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*		*Deductions*		*Balance at End of Period*
Nine months ended March 31, 2023
Contract assets:
Prepaid expenses and other current assets	$	24,679	$	49,682	$	43,820	$	30,541
Contract liabilities:
Customer deposits		41		13,015		12,750		306

	*Balance at Beginning of Period*		*Additions*		*Deductions*		*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

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

	*March 31, 2023*
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	$	38	$	41

	*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

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 March 31, 2023 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):

	*March 31, 2023*
	*Total*		*Level 1*		*Level 2*		*Level 3*
Assets
Marketable securities - deferred compensation plan	$	3,629	$	3,629	$	-	$	-
Interest rate swaps		9,539		-		9,539		-

Liabilities
Foreign exchange contracts	$	1,064	$	-		1,064	$	-

	*June 30, 2022*
	*Total*		*Level 1*		*Level 2*		*Level 3*
Assets
Marketable securities - deferred compensation plan	$	3,033	$	3,033	$	-	$	-
Foreign exchange contracts		122		-		122		-
Interest rate swaps		8,420		-		8,420		-

Liabilities
Foreign exchange contracts	$	711	$	-	$	711	$	-
Contingent consideration (a)		1,167		-		-		1,167

^(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 acquisition of Renco Electronics. The Company is contractually obligated to pay contingent consideration payments to the Sellers of this business 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 March 31, 2023, 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 Ren