UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
Commission File Number
STANDEX INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
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| (State of incorporation) | (IRS Employer Identification No.) |
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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| Accelerated filer ☐ |
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| Non-accelerated filer ☐ | Smaller reporting company |
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| Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of shares of Registrant's Common Stock outstanding on May 3, 2022 was
STANDEX INTERNATIONAL CORPORATION
INDEX
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Page No. |
| PART I. FINANCIAL INFORMATION: |
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| Item 1. |
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Condensed Consolidated Balance Sheets as of March 31, 2022 and June 30, 2021 (unaudited) |
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Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 2022 and 2021 (unaudited) |
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Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended March 31, 2022 and 2021 (unaudited) |
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Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended March 31, 2022 and 2021 (unaudited) |
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Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2022 and 2021 (unaudited) |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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| Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
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| Item 3. |
Quantitative and Qualitative Disclosures about Market Risk |
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| Item 4. |
Controls and Procedures |
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| PART II. OTHER INFORMATION: |
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| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
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| Item 6. |
Exhibits |
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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 | $ | $ | ||||||
| Accounts receivable, less allowance for credit losses of $ and $ at March 31, 2022 and June 30, 2021, respectively | ||||||||
| Inventories | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Income taxes receivable | ||||||||
| Total current assets | ||||||||
| Property, plant, and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Deferred tax asset | ||||||||
| Operating lease right-of-use asset | ||||||||
| Other non-current assets | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Income taxes payable | ||||||||
| Total current liabilities | ||||||||
| Long-term debt | ||||||||
| Operating lease long-term liabilities | ||||||||
| Accrued pension and other non-current liabilities | ||||||||
| Total non-current liabilities | ||||||||
| Contingencies (Note 15) | ||||||||
| Stockholders' equity: | ||||||||
| Common stock, par value $ per share, shares authorized, shares issued, and shares outstanding at March 31, 2022 and June 30, 2021 | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Treasury shares: and shares at March 31, 2022 and June 30, 2021 | ( | ) | ( | ) | ||||
| Total stockholders' equity | ||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||
See notes to unaudited condensed consolidated financial statements
STANDEX INTERNATIONAL CORPORATION
Unaudited Condensed Consolidated Statements of Operations
| Three Months Ended |
Nine Months Ended |
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| March 31, |
March 31, |
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| (In thousands, except per share data) |
2022 |
2021 |
2022 |
2021 |
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| Net sales |
$ | $ | $ | $ | ||||||||||||
| Cost of sales |
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| Gross profit |
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| Selling, general, and administrative expenses |
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| Loss on sale of business |
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| Restructuring costs |
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| Acquisition related costs |
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| Other operating (income) expense, net |
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| Total operating expenses |
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| Income from operations |
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| Interest expense |
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| Other non-operating (income) expense, net |
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| Income from continuing operations before income taxes |
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| Provision for income taxes |
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| Income from continuing operations |
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| Income (loss) from discontinued operations, net of tax |
( |
) | ( |
) | ( |
) | ( |
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| Net income |
$ | $ | $ | $ | ||||||||||||
| Basic earnings (loss) per share: |
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| Continuing operations |
$ | $ | $ | $ | ||||||||||||
| Discontinued operations |
( |
) | ( |
) | ( |
) | ( |
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| Total |
$ | $ | $ | $ | ||||||||||||
| Diluted earnings (loss) per share: |
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| Continuing operations |
$ | $ | $ | $ | ||||||||||||
| Discontinued operations |
( |
) | ( |
) | ( |
) | ( |
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| Total |
$ | $ | $ | $ | ||||||||||||
| Weighted average number of shares: |
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| Basic |
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| Diluted |
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See notes to unaudited condensed consolidated financial statements
STANDEX INTERNATIONAL CORPORATION
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)
| Three Months Ended |
Nine Months Ended |
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| March 31, |
March 31, |
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| (In thousands) |
2022 |
2021 |
2022 |
2021 |
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| Net income |
$ | $ | $ | $ | ||||||||||||
| Other comprehensive income (loss): |
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| Defined benefit pension plans: |
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| Actuarial gains (losses) and other changes in unrecognized costs, net of tax |
$ | $ | $ | $ | ( |
) | ||||||||||
| Amortization of unrecognized costs, net of tax |
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| Derivative instruments: |
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| Change in unrealized gains (losses), net of tax |
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| Amortization of unrealized gains (losses) into interest expense, net of tax |
( |
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| Foreign currency translation gains (losses), net of tax |
( |
) | ( |
) | ( |
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| Other comprehensive income (loss), net of tax |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||
| Comprehensive income |
$ | $ | ( |
) | $ | $ | ||||||||||
See notes to unaudited condensed consolidated financial statements
STANDEX INTERNATIONAL CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Stockholders' Equity
| Accumulated Other | ||||||||||||||||||||||||||||
| For the 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 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
| Stock issued under incentive compensation plans and employee purchase plans | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Treasury stock acquired | ( | ) | ( | ) | ||||||||||||||||||||||||
| Comprehensive income: | ||||||||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||||||
| Foreign currency translation adjustment | ( | ) | - | ( | ) | |||||||||||||||||||||||
| Pension, net of tax of $ million | - | |||||||||||||||||||||||||||
| Change in fair value of derivatives, net of tax of $ million | - | |||||||||||||||||||||||||||
| Dividends declared ($ per share) | ( | ) | - | ( | ) | |||||||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
| For the nine month period ended March 31, 2021 | ||||||||||||||||||||||||||||
| (in thousands, except as specified) | ||||||||||||||||||||||||||||
| Balance, June 30, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
| Stock issued under incentive compensation plans and employee purchase plans | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Treasury stock acquired | ( | ) | ( | ) | ||||||||||||||||||||||||
| Comprehensive income: | - | |||||||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | |||||||||||||||||||||||||||
| Pension, net of tax of $ million | - | |||||||||||||||||||||||||||
| Change in fair value of derivatives, net of tax of $ million | - | |||||||||||||||||||||||||||
| Dividends declared ($ per share) | ( | ) | - | ( | ) | |||||||||||||||||||||||
| Balance, March 31, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
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 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
| Stock issued under incentive compensation plans and employee purchase plans | ( | ) | ||||||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Treasury stock acquired | 112 | ( | ) | ( | ) | |||||||||||||||||||||||
| Comprehensive income: | ||||||||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||||||
| Foreign currency translation adjustment | ( | ) | - | ( | ) | |||||||||||||||||||||||
| Pension, net of tax of $ million | - | |||||||||||||||||||||||||||
| Change in fair value of derivatives, net of tax of $ million | - | |||||||||||||||||||||||||||
| Dividends declared ($ per share) | ( | ) | - | ( | ) | |||||||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
| For the three month period ended March 31, 2021 | ||||||||||||||||||||||||||||
| (in thousands, except as specified) | ||||||||||||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
| Stock issued under incentive compensation plans and employee purchase plans | ( | ) | ||||||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Treasury stock acquired | ( | ) | ( | ) | ||||||||||||||||||||||||
| Comprehensive income: | ||||||||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||||||
| Foreign currency translation adjustment | ( | ) | - | ( | ) | |||||||||||||||||||||||
| Pension, net of tax of $ million | - | |||||||||||||||||||||||||||
| Change in fair value of derivatives, net of tax of $ million | - | |||||||||||||||||||||||||||
| Dividends declared ($ per share) | ( | ) | - | ( | ) | |||||||||||||||||||||||
| Balance, March 31, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
STANDEX INTERNATIONAL CORPORATION
Unaudited Condensed Consolidated Statements of Cash Flows
| Nine Months Ended |
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| March 31, |
||||||||
| (In thousands) |
2022 |
2021 |
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| Cash flows from operating activities |
||||||||
| Net income |
$ | $ | ||||||
| Income (loss) from discontinued operations |
( |
) | ( |
) | ||||
| Income from continuing operations |
||||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
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| Depreciation and amortization |
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| Stock-based compensation |
||||||||
| Non-cash portion of restructuring charge |
( |
) | ||||||
| Loss on sale of business |
||||||||
| Contributions to defined benefit plans |
( |
) | ( |
) | ||||
| Changes in operating assets and liabilities, net |
( |
) | ( |
) | ||||
| Net cash provided by operating activities - continuing operations |
||||||||
| Net cash provided by (used in) operating activities - discontinued operations |
( |
) | ||||||
| Net cash provided by operating activities |
||||||||
| Cash flows from investing activities |
||||||||
| Expenditures for property, plant, and equipment |
( |
) | ( |
) | ||||
| Expenditures for acquisitions, net of cash acquired |
( |
) | ( |
) | ||||
| Proceeds from sale of business |
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| Other investing activity |
( |
) | ||||||
| Net cash provided by (used in) investing activities |
( |
) | ( |
) | ||||
| Cash flows from financing activities |
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| Proceeds from borrowings |
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| Payments of debt |
( |
) | ||||||
| Contingent consideration payment |
( |
) | ||||||
| Activity under share-based payment plans |
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| Purchases of treasury stock |
( |
) | ( |
) | ||||
| Cash dividends paid |
( |
) | ( |
) | ||||
| Net cash provided by (used in) financing activities |
( |
) | ( |
) | ||||
| Effect of exchange rate changes on cash and cash equivalents |
( |
) | ||||||
| Net change in cash and cash equivalents |
( |
) | ( |
) | ||||
| Cash and cash equivalents at beginning of year |
||||||||
| Cash and cash equivalents at end of period |
$ | $ | ||||||
| Supplemental Disclosure of Cash Flow Information: |
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| Cash paid during the year for: |
||||||||
| Interest |
$ | $ | ||||||
| Income taxes, net of refunds |
$ | $ | ||||||
See notes to unaudited condensed consolidated financial statements
STANDEX INTERNATIONAL CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements
1) Management Statement
In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the results of operations for the three 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.
The Company paid $
Identifiable intangible assets of $
The components of the fair value of the Sensor Solutions acquisition, including the preliminary allocation of the purchase price at March 31, 2022, are as follows (in thousands):
| Preliminary Allocation as of March 31, 2022 |
||||
| Fair value of business combination: |
||||
| Cash payments |
$ | |||
| Less cash acquired |
) | |||
| Total |
$ | |||
| Preliminary Allocation as of March 31, 2022 |
||||
| Identifiable assets acquired and liabilities assumed: |
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| Other acquired assets |
$ | |||
| Inventories |
||||
| Property, plant, & equipment |
||||
| Identifiable intangible assets |
||||
| Goodwill |
||||
| Liabilities assumed |
) | |||
| Total |
$ | |||
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 $
Identifiable intangible assets of $
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 |
$ | |||
| Less, cash acquired |
) | |||
| Fair value of contingent consideration |
||||
| Total |
$ | |||
| Final Allocation |
||||
| Identifiable assets acquired and liabilities assumed: |
||||
| Other acquired assets |
$ | |||
| Inventories |
||||
| Property, plant, & equipment |
||||
| Identifiable intangible assets |
||||
| Goodwill |
||||
| Debt assumed |
( |
) | ||
| Liabilities assumed |
) | |||
| Total |
$ | |||
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 $
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 |
$ | $ | ||||||
| Engraving Services |
||||||||
| Engraving Products |
||||||||
| Total Engraving |
||||||||
| Scientific |
||||||||
| Engineering Technologies |
||||||||
| Hydraulics Cylinders and Systems |
||||||||
| Merchandising & Display |
||||||||
| Pumps |
||||||||
| Total Specialty Solutions |
||||||||
| Total revenue by product line |
$ | $ | ||||||
The following table presents revenue disaggregated by product line and segment (in thousands):
| Nine Months Ended |
||||||||
| Revenue by Product Line |
March 31, 2022 |
March 31, 2021 |
||||||
| Electronics |
$ | $ | ||||||
| Engraving Services |
||||||||
| Engraving Products |
||||||||
| Total Engraving |
||||||||
| Scientific |
||||||||
| Engineering Technologies |
||||||||
| Hydraulics Cylinders and Systems |
||||||||
| Merchandising & Display |
||||||||
| Pumps |
||||||||
| Total Specialty Solutions |
||||||||
| Total revenue by product line |
$ | $ | ||||||
The following table presents revenue from continuing operations disaggregated by geography based on company’s locations (in thousands):
| Three Months Ended |
Three Months Ended |
Nine Months Ended |
Nine Months Ended |
|||||||||||||
| Net sales |
March 31, 2022 |
March 31, 2021 |
March 31, 2022 |
March 31, 2021 |
||||||||||||
| United States |
$ | $ | $ | $ | ||||||||||||
| Asia Pacific |
||||||||||||||||
| EMEA (1) |
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| Other Americas |
||||||||||||||||
| Total |
$ | $ | $ | $ | ||||||||||||
(1) EMEA consists primarily of Europe, Middle East and S. Africa.
The following table presents revenue from continuing operations disaggregated by timing of recognition (in thousands) for the three months ended:
| Three Months Ended |
||||||||
| Timing of Revenue Recognition |
March 31, 2022 |
March 31, 2021 |
||||||
| Products and services transferred at a point in time |
$ | $ | ||||||
| Products transferred over time |
||||||||
| Net sales |
$ | $ | ||||||
| Nine Months Ended |
||||||||
| Timing of Revenue Recognition |
March 31, 2022 |
March 31, 2021 |
||||||
| Products and services transferred at a point in time |
$ | $ | ||||||
| Products transferred over time |
||||||||
| Net sales |
$ | $ | ||||||
Contract Balances
Contract assets represent sales recognized in excess of billings related to work completed but not yet shipped for which revenue is recognized over time. Contract assets are recorded as prepaid expenses and other current assets. Contract liabilities are customer deposits for which revenue has not been recognized. Current contract liabilities are recorded as accrued liabilities.
The timing of revenue recognition, invoicing and cash collections results in billed receivables, contract assets and contract liabilities on the consolidated balance sheets. When consideration is received from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded. Contract liabilities are recognized as revenue after control of the goods and services are transferred to the customer and all revenue recognition criteria have been met.
The following table provides information about contract assets and liability balances (in thousands):
| Balance at Beginning of Period |
Additions |
Amount Recognized |
Balance at End of Period |
|||||||||||||
| Nine months ended March 31, 2022 |
||||||||||||||||
| Contract assets: |
||||||||||||||||
| Prepaid expenses and other current assets |
$ | $ | $ | $ | ||||||||||||
| Contract liabilities: |
||||||||||||||||
| Customer deposits |
||||||||||||||||
| Balance at Beginning of Period |
Additions |
Amount Recognized |
Balance at End of Period |
|||||||||||||
| Nine months ended March 31, 2021 |
||||||||||||||||
| Contract assets: |
||||||||||||||||
| Prepaid expenses and other current assets |
$ | $ | $ | $ | ||||||||||||
| Contract liabilities: |
||||||||||||||||
| Customer deposits |
||||||||||||||||
We recognized the following revenue which was included in the contract liability beginning balances (in thousands):
| 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 |
$ | $ | ||||||
| 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 |
$ | $ | ||||||
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, 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 |
$ | $ | $ | $ | ||||||||||||
| Foreign exchange contracts |
||||||||||||||||
| Interest rate swaps |
||||||||||||||||
| Liabilities |
||||||||||||||||
| Foreign exchange contracts |
$ | $ | $ | |||||||||||||
| Interest rate swaps |
||||||||||||||||
| Contingent acquisition payments (a) |
||||||||||||||||
| June 30, 2021 |
||||||||||||||||
| Total |
Level 1 |
Level 2 |
Level 3 |
|||||||||||||
| Assets |
||||||||||||||||
| Marketable securities - deferred compensation plan |
$ | $ | $ | $ | ||||||||||||
| Foreign exchange contracts |
||||||||||||||||
| Liabilities |
||||||||||||||||
| Foreign exchange contracts |
$ | $ | $ | $ | ||||||||||||
| Interest rate swaps |
||||||||||||||||