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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 

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

 

For the quarterly period ended March 31, 2024

 

    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 1, 2024 was 11,853,093

1

 

 

 

STANDEX INTERNATIONAL CORPORATION

 

 

INDEX

 

 

 

 

Page No.

PART I.  FINANCIAL INFORMATION:

 

 

 

 

Item 1.

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2024 and June 30, 2023 (unaudited)

3

 

 

 

 

Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 2024 and 2023 (unaudited)

4

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended March 31, 2024 and 2023 (unaudited)

5

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended March 31, 2024 and 2023 (unaudited)

6

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2024 and 2023 (unaudited)

8

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

9

 

 

 

Item 2.

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

27

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

38

 

 

 

Item 4.

Controls and Procedures

39

 

 

 

PART II.  OTHER INFORMATION:

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

40

     

Item 5.

Other Information

40
     

Item 6.

Exhibits

41

 

2

 
 

 

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)

 

2024

  

2023

 

ASSETS

        

Current assets:

        

Cash and cash equivalents

 $138,799  $195,706 

Accounts receivable, less allowance for credit losses of $2,319 and $2,788 at March 31, 2024 and June 30, 2023, respectively

  120,501   123,440 

Inventories

  95,170   98,537 

Prepaid expenses and other current assets

  62,066   64,739 

Income taxes receivable

  2,617   831 

Total current assets

  419,153   483,253 
         

Property, plant, and equipment, net

  135,003   130,937 

Intangible assets, net

  81,881   75,651 

Goodwill

  282,000   264,821 

Deferred tax asset

  15,047   14,602 

Operating lease right-of-use asset

  34,421   33,273 

Other non-current assets

  26,001   22,392 

Total non-current assets

  574,353   541,676 
         

Total assets

 $993,506  $1,024,929 
         

LIABILITIES AND STOCKHOLDERS' EQUITY

        

Current liabilities:

        

Accounts payable

 $58,448  $68,601 

Accrued liabilities

  55,447   62,031 

Income taxes payable

  8,453   10,335 

Total current liabilities

  122,348   140,967 
         

Long-term debt

  148,768   173,441 

Operating lease long-term liabilities

  29,001   25,774 

Accrued pension and other non-current liabilities

  74,407   77,298 

Total non-current liabilities

  252,176   276,513 
         

Contingencies (Note 15)

          
         

Stockholders' equity:

        

Common stock, par value $1.50 per share, 60,000,000 shares authorized, 27,984,278 shares issued, 11,760,187 and 11,744,991 shares outstanding at March 31, 2024 and June 30, 2023

  41,976   41,976 

Additional paid-in capital

  104,753   100,555 

Retained earnings

  1,070,255   1,027,279 

Accumulated other comprehensive loss

  (168,005)  (158,477)

Treasury shares: 16,224,091 and 16,239,287 shares at March 31, 2024 and June 30, 2023

  (429,997)  (403,884)

Total stockholders' equity

  618,982   607,449 
         

Total liabilities and stockholders' equity

 $993,506  $1,024,929 

 

See notes to unaudited condensed consolidated financial statements

 

3

 
 

 

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)

 

2024

  

2023

  

2024

  

2023

 

Net sales

 $177,267  $184,332  $540,441  $552,721 

Cost of sales

  108,977   113,435   327,853   341,251 

Gross profit

  68,290   70,897   212,588   211,470 

Selling, general, and administrative expenses

  41,764   42,954   128,625   127,756 

(Gain) loss on sale of business

  -   (62,105)  (274)  (62,105)

Restructuring costs

  4,037   2,237   7,303   3,330 

Acquisition related costs

  537   21   2,233   487 

Other operating (income) expense, net

  110   (727)  110   (611)

Total operating (income) expenses

  46,448   (17,620)  137,997   68,857 

Income from operations

  21,842   88,517   74,591   142,613 

Interest expense

  949   1,415   3,244   4,168 

Other non-operating (income) expense, net

  627   747   1,805   1,695 

Income from continuing operations before income taxes

  20,266   86,355   69,542   136,750 

Provision for income taxes

  4,327   5,788   15,639   17,783 

Income from continuing operations

  15,939   80,567   53,903   118,967 

Income (loss) from discontinued operations, net of tax

  (141)  (57)  (420)  (144)

Net income

 $15,798  $80,510  $53,483  $118,823 
                 

Basic earnings (loss) per share:

                

Continuing operations

 $1.35  $6.82  $4.58  $10.06 

Discontinued operations

  (0.01)  -   (0.03)  (0.01)

Total

 $1.34  $6.82  $4.55  $10.05 

Diluted earnings (loss) per share:

                

Continuing operations

 $1.35  $6.77  $4.54  $9.98 

Discontinued operations

  (0.02)  -   (0.04)  (0.01)

Total

 $1.33  $6.77  $4.50  $9.97 
                 

Weighted average number of shares:

                

Basic

  11,772   11,811   11,764   11,825 

Diluted

  11,849   11,895   11,876   11,917 

 

See notes to unaudited condensed consolidated financial statements

 

4

 
 

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)

 

2024

  

2023

  

2024

  

2023

 

Net income

 $15,798  $80,510  $53,483  $118,823 

Other comprehensive income (loss):

                

Defined benefit pension plans:

                

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

 $28  $(601) $16  $(587)

Amortization of unrecognized costs, net of tax

  596   712   1,789   2,132 

Derivative instruments:

                

Change in unrealized gains (losses), net of tax

  775   (406)  885   2,220 

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

  (1,275)  (1,134)  (4,056)  (1,212)

Foreign currency translation gains (losses), net of tax

  (12,568)  1,480   (8,162)  3,584 

Other comprehensive income (loss), net of tax

 $(12,444) $51  $(9,528) $6,137 

Comprehensive income

 $3,354  $80,561  $43,955  $124,960 

 

See notes to unaudited condensed consolidated financial statements

 

5

 
 

STANDEX INTERNATIONAL CORPORATION AND SUBSIDIARIES 

Unaudited Condensed Consolidated Statements of Stockholders' Equity 

 

              

Accumulated Other

             

For the three month period ended

    Additional     Comprehensive     Total 

March 31, 2024

 

Common

  

Paid-in

  

Retained

  

Income

  

Treasury Stock

  

Stockholders’

 

(in thousands, except as specified)

 

Stock

  

Capital

  

Earnings

  

(Loss)

  

Shares

  

Amount

  

Equity

 

Balance, December 31, 2023

 $41,976  $101,198  $1,058,069  $(155,561)  16,201  $(425,111) $620,571 

Stock issued under incentive compensation plans and employee purchase plans

  -   (145)  -   -   (11)  281   136 

Stock-based compensation

  -   3,700   -   -   -   -   3,700 

Treasury stock acquired

  -   -   -   -   34   (5,167)  (5,167)

Comprehensive income:

                            

Net income

  -   -   15,798   -   -   -   15,798 

Foreign currency translation adjustment

  -   -   -   (12,568)  -   -   (12,568)

Pension, net of tax of $0.2 million

  -   -   -   624   -   -   624 

Change in fair value of derivatives, net of tax of $0.2 million

  -   -   -   (500)  -   -   (500)

Dividends declared ($0.30 per share)

  -   -   (3,612)  -   -   -   (3,612)

Balance, March 31, 2024

 $41,976  $104,753  $1,070,255  $(168,005)  16,224  $(429,997) $618,982 
                             

For the three month period ended March 31, 2023

                            

(in thousands, except as specified)

                            

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 

 

See notes to unaudited condensed consolidated financial statements

 

6

 

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, 2024

 

Common

  

Paid-in

  

Retained

  

Income

  

Treasury Stock

  

Stockholders’

 

(in thousands, except as specified)

 

Stock

  

Capital

  

Earnings

  

(Loss)

  

Shares

  

Amount

  

Equity

 

Balance, June 30, 2023

 $41,976  $100,555  $1,027,279  $(158,477)  16,239  $(403,884) $607,449 

Stock issued under incentive compensation plans and employee purchase plans

  -   (4,326)  -   -   (221)  5,651   1,325 

Stock-based compensation

  -   8,524   -   -   -   -   8,524 

Treasury stock acquired

  -   -   -   -   206   (31,764)  (31,764)

Comprehensive income:

                            

Net income

  -   -   53,483   -   -   -   53,483 

Foreign currency translation adjustment

  -   -   -   (8,162)  -   -   (8,162)

Pension, net of tax of $0.6 million

  -   -   -   1,805   -   -   1,805 

Change in fair value of derivatives, net of tax of $1.1 million

  -   -   -   (3,171)  -   -   (3,171)

Dividends declared ($0.88 per share)

  -   -   (10,507)  -   -   -   (10,507)

Balance, March 31, 2024

 $41,976  $104,753  $1,070,255  $(168,005)  16,224  $(429,997) $618,982 
                             

For the nine month period ended March 31, 2023

                            

(in thousands, except as specified)

                            

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 

 

See notes to unaudited condensed consolidated financial statements

 

7

 
 

STANDEX INTERNATIONAL CORPORATION AND SUBSIDIARIES

 Unaudited Condensed Consolidated Statements of Cash Flows

 

  

Nine Months Ended

 
  

March 31,

 

(In thousands)

 

2024

  

2023

 

Cash flows from operating activities

        

Net income

 $53,483  $118,823 

Income (loss) from discontinued operations

  (420)  (144)

Income from continuing operations

  53,903   118,967 

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

        

Depreciation and amortization

  21,146   21,275 

Stock-based compensation

  8,524   8,508 

Non-cash portion of restructuring charge

  895   129 

Gain on sale of business

  (274)  (62,105)

Contributions to defined benefit plans

  (8,506)  (151)

Changes in operating assets and liabilities, net

  (11,079)  (36,268)

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

  64,609   50,355 

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

  (497)  (37)

Net cash provided by (used in) operating activities

  64,112   50,318 

Cash flows from investing activities

        

Expenditures for property, plant, and equipment

  (13,765)  (16,648)

Proceeds from sale of business

  7,774   67,023 

Expenditures for acquisitions, net of cash acquired

  (47,696)  - 

Other investing activity

  (270)  (1,321)

Net cash provided by (used in) investing activities

  (53,957)  49,054 

Cash flows from financing activities

        

Proceeds from borrowings

  -   224,500 

Payments of debt

  (25,000)  (226,200)

Contingent consideration payment

  -   (1,167)

Activity under share-based payment plans

  1,325   1,170 

Purchases of treasury stock

  (31,781)  (18,582)

Cash dividends paid

  (10,375)  (9,699)

Net cash provided by (used in) financing activities

  (65,831)  (29,978)

Effect of exchange rate changes on cash and cash equivalents

  (1,231)  1,046 

Net change in cash and cash equivalents

  (56,907)  70,440 

Cash and cash equivalents at beginning of year

  195,706   104,844 

Cash and cash equivalents at end of period

 $138,799  $175,284 
         

Supplemental Disclosure of Cash Flow Information:

        

Cash paid during the year for:

        

Interest

 $3,080  $3,186 

Income taxes, net of refunds

 $19,740  $22,064 

 

See notes to unaudited condensed consolidated financial statements

 

8

 

 

STANDEX INTERNATIONAL CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

 

 

1)     Management Statement

 

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the results of operations for the three and nine months ended March 31, 2024 and 2023, the cash flows for the nine months ended March 31, 2024 and 2023 and the financial position of Standex International Corporation (“Standex”, the “Company”, “we”, “us”, or “our”), at March 31, 2024. 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, 2023. The condensed consolidated balance sheet at June 30, 2023 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, 2023. 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 2024 includes the twelve-month period from July 1, 2023 to June 30, 2024.

 

The preparation of consolidated financial statements in conformity with GAAP requires the use of estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements and for the period then ended. Estimates are based on historical experience, actuarial estimates, current conditions and various other assumptions that are believed to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities when they are not readily apparent from other sources. These estimates assist in the identification and assessment of the accounting treatment necessary with respect to commitments and contingencies. Actual results  may differ from these estimates under different assumptions or conditions. The estimates and assumptions used in the preparation of the consolidated financial statements have considered the implications on the Company as a result of ongoing global events and related economic impacts. As a result, 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, 2024 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. 

 

Research and development expenditures are expensed as incurred. Total research and development costs, which are classified under selling, general, and administrative expenses, were $5.1 million and $4.8 million for the three months ended March 31, 2024 and 2023, respectively. Research and development expenditures were $15.5 million and $12.1 million for the nine months ended  March 31, 2024 and 2023, respectively. 

 

Recently Issued Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that the Company adopts as of the specified effective date. Unless otherwise discussed below, the Company does not believe that the adoption of recently issued standards had or  may have a material impact on its condensed consolidated financial statements or disclosures.

 

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) ("ASU 2023-07"). This update provides, among other things, enhanced segment disclosure requirements including disclosures about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company will review the extent of new disclosures necessary in the coming quarters, prior to implementation during fiscal year 2025. Other than additional disclosure, the Company does not expect a change to its condensed consolidated financial statements upon adoption.

 

9

In December 2023, the FASB issued ASU 2023- 09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. This ASU is expected to enhance the transparency and decision usefulness of income tax disclosures by requiring public business entities on an annual basis to disclose specific categories in the rate reconciliation, additional information for reconciling items that meet a quantitative threshold, and certain information about income taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024. The amendments in this ASU are required to be applied on a prospective basis and retrospective adoption is permitted. The Company is currently evaluating the effect of adopting this new accounting guidance, which would be applicable to fiscal year 2026.

 

 

2)     Acquisitions

 

At the time of the acquisition and March 31, 2024, the Company evaluated the significance of each acquisition on a standalone basis and in aggregate, considering both qualitative and quantitative factors.

 

Subsequent to the end of the third quarter of fiscal year 2024, on May 3, 2024, the Company paid approximately $5.7 million for the purchase of all the issued and outstanding equity interests of a distributor of reed relays, a privately held company. Its results will be reporting within the Electronics segment beginning in the fourth quarter of fiscal year 2024.

 

Sanyu

 

On February 19, 2024, the Company completed the purchase of all the issued and outstanding equity interests of Sanyu Switch Co., Ltd (Sanyu), a privately held company for $20.9 million, net of cash acquired. Sanyu designs and manufactures reed relays for test and measurement and other switching applications.  Products include surface mount relays, high current relays, high insulation relays, high density relays for test boards, and RF relays which are used in semi-conductors, other electronics manufacturing and other switching applications. Sanyu's' results are reported within the Company's Electronics segment. The Company paid $22.2 million in cash in the third quarter of fiscal year 2024 and recorded $2.5 million as holdback amounts.  Holdback amounts are used to withhold a portion of the initial purchase price payment until certain post-closing conditions are satisfied and are expected to be settled within 24 months from the date of acquisition.

 

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 Sanyu's technical and applications expertise, which is highly complementary to the Company's existing business.

 

Identifiable intangible assets of $2.6 million consist primarily of $0.7 million for indefinite lived tradenames and $1.9 million of customer relationships to be amortized over 12 years. The goodwill of $6.7 million created by the transaction is not 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 Sanyu acquisition, including the preliminary allocation of the purchase price are as follows (in thousands): 

 

 

  

Preliminary Allocation March 31, 2024

 

Total purchase consideration:

    

Cash payments

 $22,178 

Holdbacks

  2,464 

Less cash acquired

  (3,711)

Total

 $20,931 

 

10

  

Preliminary Allocation March 31, 2024

 

Identifiable assets acquired and liabilities assumed:

    

Other acquired assets

 $9,453 

Inventories

  5,709 

Property, plant, & equipment

  4,791 

Identifiable intangible assets

  2,600 

Goodwill

  6,696 

Liabilities assumed

  (8,318)

Total

 $20,931 

 

Minntronix

 

On July 31, 2023, the Company paid $29.2 million in cash for the purchase of all the issued and outstanding equity interests of Minntronix, a privately held company. Minntronix designs and manufactures customized as well as standard magnetics components and products including transformers, inductors, current sensors, coils, chokes, and filters. The products are used in applications across cable fiber, smart meters, industrial control and lighting, electric vehicles, and home security markets. Minntronix' results are reported within the Company's Electronics segment.

 

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 Minntronix's technical and applications expertise, which is highly complementary to the Company's existing business.

 

Identifiable intangible assets of $10.7 million consist primarily of $3.2 million for indefinite lived tradenames and $7.5 million of customer relationships to be amortized over 15 years. The goodwill of $13.9 million created by the transaction is not 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 Minntronix acquisition, including the preliminary allocation of the purchase price are as follows (in thousands): 

 

  

Preliminary Allocation March 31, 2024

 

Fair value of business combination:

    

Cash payments

 $33,890 

Less, cash acquired

  (4,661)

Total

 $29,229 

 

  

Preliminary Allocation March 31, 2024

 

Identifiable assets acquired and liabilities assumed:

    

Other acquired assets

 $8,282 

Customer backlog

  1,120 

Inventories

  1,780 

Property, plant, & equipment

  1,039 

Identifiable intangible assets

  10,700 

Goodwill

  13,889 

Liabilities assumed

  (7,581)

Total

 $29,229 

 

11

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, 2024 and 2023 were $0.5 million and less than $0.1 million, respectively. Acquisition related costs for the nine months ended March 31, 2024 and 2023 were $2.2 million and $0.5 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, 2024

  

March 31, 2023

 
         

Electronics

 $80,431  $78,211 
         

Engraving Services

  33,011   35,454 

Engraving Products

  3,286   1,455 

Total Engraving

  36,297   36,909 
         

Scientific

  16,925   18,898 
         

Engineering Technologies

  20,098   18,052 
         

Hydraulics Cylinders and Systems

  14,800   13,548 

Merchandising & Display

  8,716   13,203 

Pumps

  -   5,511 

Total Specialty Solutions

  23,516   32,262 
         

Total revenue by product line

 $177,267  $184,332 

 

12

 
  

Nine Months Ended

 

Revenue by Product Line

 

March 31, 2024

  

March 31, 2023

 
         

Electronics

 $241,538  $225,966 
         

Engraving Services

  110,214   105,259 

Engraving Products

  7,722   4,363 

Total Engraving

  117,936   109,622 
         

Scientific

  51,410   56,646 
         

Engineering Technologies

  58,205   59,244 
         

Hydraulics Cylinders and Systems

  41,410   47,823 

Merchandising & Display

  29,942   32,160 

Pumps

  -   21,260 

Total Specialty Solutions

  71,352   101,243 
         

Total revenue by product line

 $540,441  $552,721 

 

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, 2024

  

March 31, 2023

  

March 31, 2024

  

March 31, 2023

 

United States

 $107,805  $112,002  $332,473  $338,464 

Asia Pacific

  32,139   29,204   96,290   95,858 

EMEA (1)

  34,438   38,953   100,538   106,279 

Other Americas

  2,885   4,173   11,140   12,120 

Total

 $177,267  $184,332  $540,441  $552,721 

 

(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, 2024

  

March 31, 2023

 

Products and services transferred at a point in time

 $157,866  $169,669 

Products transferred over time

  19,401   14,663 

Net sales

 $177,267  $184,332 

 

  

Nine Months Ended

 

Timing of Revenue Recognition

 

March 31, 2024

  

March 31, 2023

 

Products and services transferred at a point in time

 $485,295  $501,090 

Products transferred over time

  55,146   51,631 

Net sales

 $540,441  $552,721 

 

13

Contract Balances

 

Contract assets represent sales recognized in excess of billings related to work completed but not yet shipped for which revenue is recognized over time. Contract assets are recorded as prepaid expenses and other current assets. Contract liabilities are customer deposits for which revenue has not been recognized. Current contract liabilities are recorded as accrued liabilities.

 

The timing of revenue recognition, invoicing and cash collections results in billed receivables, contract assets and contract liabilities on the consolidated balance sheets. When consideration is received from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded. Contract liabilities are recognized as revenue after control of the goods and services are transferred to the customer and all revenue recognition criteria have been met.

 

The following table provides information about contract assets and liability balances (in thousands):

 

  

Balance at Beginning of Period

  

Additions

  

Deductions

  

Balance at End of Period

 

Nine months ended March 31, 2024

                

Contract assets:

                

Prepaid expenses and other current assets

 $31,138  $53,394  $45,274  $39,258 

 

  

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 

 

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

 

There was no liability balance at the beginning of fiscal year 2024.

 

  

March 31, 2023

  

March 31, 2023

 

Revenue recognized in the period from:

 

Three months ended

  

Six months ended

 

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

 $38  $41 

 

14

 

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, 2024 and June 30, 2023. 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, 2024

 
  

Total

  

Level 1

  

Level 2

  

Level 3

 

Assets

                

Marketable securities - deferred compensation plan

 $4,808  $4,808  $-  $- 

Interest rate swaps

  6,011   -   6,011   - 

Debt securities

  2,700   -   -   2,700 

Equity securities

  2,025   -   -   2,025 
                 

 

  

June 30, 2023

 
  

Total

  

Level 1

  

Level 2

  

Level 3

 

Assets

                

Marketable securities - deferred compensation plan

 $3,720  $3,720  $-  $- 

Interest rate swaps

  10,235   -   10,235   - 

Debt securities

  2,729   -   -   2,729 

Equity securities

  2,046   -   -   2,046 
                 

Liabilities

                

Foreign exchange contracts