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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(Address of principal executive offices) | (Zip Code) |
( (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 |
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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 October 28, 2024 was
STANDEX INTERNATIONAL CORPORATION
INDEX
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PART I. FINANCIAL INFORMATION: |
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Item 1. |
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Condensed Consolidated Balance Sheets as of September 30, 2024 and June 30, 2024 (unaudited) |
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Condensed Consolidated Statements of Operations for the three months ended September 30, 2024 and 2023 (unaudited) |
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Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended September 30, 2024 and 2023 (unaudited) |
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Condensed Consolidated Statements of Stockholders’ Equity for the three months ended September 30, 2024 and 2023 (unaudited) |
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Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2024 and 2023 (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 5. |
Other Information |
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Item 6. |
Exhibits |
PART I. FINANCIAL INFORMATION
ITEM 1
STANDEX INTERNATIONAL CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
September 30, | June 30, | |||||||
(In thousands, except per share data) | 2024 | 2024 | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Accounts receivable, less allowance for credit losses of $ and $ at September 30, 2024 and June 30, 2024, respectively | ||||||||
Inventories | ||||||||
Contract assets | ||||||||
Prepaid expenses and other current assets | ||||||||
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 September 30, 2024 and June 30, 2024 | ||||||||
Additional paid-in capital | ||||||||
Retained earnings | ||||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
Treasury shares: and shares at September 30, 2024 and June 30, 2024 | ( | ) | ( | ) | ||||
Total stockholders' equity | ||||||||
Total liabilities and stockholders' equity | $ | $ |
See notes to unaudited condensed consolidated financial statements
STANDEX INTERNATIONAL CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
Three Months Ended |
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September 30, |
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(In thousands, except per share data) |
2024 |
2023 |
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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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(Gain) loss on sale of business |
( |
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Restructuring costs |
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Acquisition related costs |
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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 |
See notes to unaudited condensed consolidated financial statements
STANDEX INTERNATIONAL CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)
Three Months Ended |
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September 30, |
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(In thousands) |
2024 |
2023 |
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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 |
$ | $ | ( |
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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 three month period ended | Additional | Comprehensive | Total | |||||||||||||||||||||||||
September 30, 2024 | Common | Paid-in | Retained | Income | Treasury Stock | Stockholders’ | ||||||||||||||||||||||
(in thousands, except as specified) | Stock | Capital | Earnings | (Loss) | Shares | Amount | Equity | |||||||||||||||||||||
Balance, June 30, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
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, September 30, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
For the three month period ended September 30, 2023 | ||||||||||||||||||||||||||||
(in thousands, except as specified) | ||||||||||||||||||||||||||||
Balance, June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
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, September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ |
See notes to unaudited condensed consolidated financial statements
STANDEX INTERNATIONAL CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
Three Months Ended |
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September 30, |
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(In thousands) |
2024 |
2023 |
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Cash flows from operating activities |
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Net income |
$ | $ | ||||||
Income (loss) from discontinued operations |
( |
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Income from continuing operations |
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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 |
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Non-cash portion of restructuring charge |
( |
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(Gain) loss on sale of business |
( |
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Contributions to defined benefit plans |
( |
) | ( |
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Changes in operating assets and liabilities, net |
( |
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Net cash provided by (used in) operating activities - continuing operations |
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Net cash provided by (used in) operating activities - discontinued operations |
( |
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Net cash provided by (used in) operating activities |
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Cash flows from investing activities |
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Expenditures for property, plant, and equipment |
( |
) | ( |
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Proceeds from sale of business |
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Expenditures for acquisitions, net of cash acquired |
( |
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Other investing activity |
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Net cash provided by (used in) investing activities |
( |
) | ( |
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Cash flows from financing activities |
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Payments of debt |
( |
) | ||||||
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 |
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Cash and cash equivalents at end of period |
$ | $ | ||||||
Supplemental Disclosure of Cash Flow Information: |
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Cash paid during the year for: |
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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 months ended September 30, 2024 and 2023, the cash flows for the three months ended September 30, 2024 and 2023 and the financial position of Standex International Corporation (“Standex”, the “Company”, “we”, “us”, or “our”), at September 30, 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, 2024. The condensed consolidated balance sheet at June 30, 2024 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, 2024. Unless otherwise noted, references to years are to the Company’s fiscal years. Currently the fiscal year end is June 30. For further clarity, the Company's fiscal year 2025 includes the twelve-month period from July 1, 2024 to June 30, 2025.
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 September 30, 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 $
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 unaudited 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.
2) Acquisitions
At the time of the acquisition and as of September 30, 2024, the Company evaluated the significance of each acquisition on a standalone basis and in aggregate, considering both qualitative and quantitative factors.
On October 29, 2024 the Company announced the acquisition, in separate transactions, of privately-held US-based Amran Instrument Transformers and India-based Narayan Powertech Pvt. Ltd. (going forward referred to as "Amran/Narayan Group") in cash and stock transactions. These transactions represent a combined enterprise value of approximately $
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 $
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 $
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 as of March 31, 2024 | Adjustments | Preliminary Allocation as of September 30, 2024 | ||||||||||
Total purchase consideration: | ||||||||||||
Cash payments | $ | $ | - | $ | ||||||||
Holdbacks | - | |||||||||||
Less cash acquired | ( | ) | - | ( | ) | |||||||
Total | $ | $ | - | $ | ||||||||
Identifiable assets acquired and liabilities assumed: | ||||||||||||
Other acquired assets | $ | $ | ( | ) | $ | |||||||
Inventories | ( | ) | ||||||||||
Property, plant, and equipment | ( | ) | ||||||||||
Identifiable intangible assets | ||||||||||||
Goodwill | ||||||||||||
Liabilities assumed | ( | ) | ( | ) | ( | ) | ||||||
Total | $ | $ | $ |
Minntronix
On July 31, 2023, the Company paid $
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 $
The components of the fair value of the Minntronix acquisition, including the final allocation of the purchase price are as follows (in thousands):
Final Allocation as of September 30, 2024 | ||||
Fair value of business combination: | ||||
Cash payments | $ | |||
Less, cash acquired | ( | ) | ||
Total | $ | |||
Identifiable assets acquired and liabilities assumed: | ||||
Other acquired assets | $ | |||
Customer backlog | ||||
Inventories | ||||
Property, plant, & equipment | ||||
Identifiable intangible assets | ||||
Goodwill | ||||
Liabilities assumed | ( | ) | ||
Total | $ |
SEPL
On May 3, 2024, the Company purchased all of the issued and outstanding equity interests of Sanyu Electric Pte Ltd, or SEPL, a privately held company for $
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 September 30, 2024 and 2023 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 segments 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 from disaggregated by product line and segment (in thousands):
Three Months Ended | ||||||||
Revenue by Product Line | September 30, 2024 | September 30, 2023 | ||||||
Electronics | $ | $ | ||||||
Engraving Services | ||||||||
Engraving Products | ||||||||
Total Engraving | ||||||||
Scientific | ||||||||
Engineering Technologies | ||||||||
Hydraulics Cylinders and Systems | ||||||||
Merchandising & Display | ||||||||
Total Specialty Solutions | ||||||||
Total revenue by product line | $ | $ |
The following table presents revenue from continuing operations disaggregated by geography based on the Company’s locations (in thousands):
Three Months Ended | Three Months Ended | |||||||
Net sales | September 30, 2024 | September 30, 2023 | ||||||
United States | $ | $ | ||||||
Asia Pacific | ||||||||
EMEA (1) | ||||||||
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):
Three Months Ended | ||||||||
Timing of Revenue Recognition | September 30, 2024 | September 30, 2023 | ||||||
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):
June 30, 2024 | Additions | Deductions | September 30, 2024 | |||||||||||||
Three months ended September 30, 2024 | ||||||||||||||||
Contract assets: | ||||||||||||||||
Prepaid expenses and other current assets | $ | $ | $ | $ | ||||||||||||
Contract liabilities: | ||||||||||||||||
Customer deposits |
June 30, 2023 | Additions | Deductions | September 30, 2023 | |||||||||||||
Three months ended September 30, 2023 | ||||||||||||||||
Contract assets: | ||||||||||||||||
Prepaid expenses and other current assets | $ | $ | $ | $ |
We recognized the following revenue which was included in the contract liability beginning balances (in thousands):
Three months ended | ||||
Revenue recognized in the period from: | September 30, 2024 | |||
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 September 30, 2024 or June 30, 2024. 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):
September 30, 2024 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Marketable securities - deferred compensation plan | $ | $ | $ | $ | ||||||||||||
Interest rate swaps | ||||||||||||||||
Debt securities | ||||||||||||||||
Equity securities | ||||||||||||||||
Liabilities | ||||||||||||||||
Foreign exchange contracts | $ | $ | $ | $ | ||||||||||||
Contingent consideration (a) |
June 30, 2024 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Marketable securities - deferred compensation plan | $ | $ | $ | $ | ||||||||||||
Interest rate swaps | ||||||||||||||||
Debt securities | ||||||||||||||||
Equity securities | ||||||||||||||||
Liabilities | ||||||||||||||||
Contingent consideration(a) | $ | $ | $ | $ |
(a) The fair value of our contingent consideration arrangement is determined based on our evaluation as to the probability and amount of any deferred compensation that has been earned to date.
The Company is obligated to pay contingent consideration to the sellers of SEPL in the event that certain financial targets are achieved during the two years following acquisition, which occurred in the fourth quarter of fiscal year 2024. As of September 30, 2024, the maximum liability under this arrangement is $
The Company has determined the fair value of the liabilities for the contingent consideration based on a probability-weighted discounted cash flow analysis. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. The fair value of the contingent consideration liability associated with future payments was based on several factors, the most significant of which are the financial performance of the acquired businesses and the risk-adjusted discount rate for the fair value measurement.
Additionally, the Company has financial assets based upon Level 3 inputs, which represent investments in a privately held company.
The Company invested $
In the third quarter of fiscal year 2023, the Company also purchased $
There have been no changes in the fair value of the estimates for the Level 3 assets in fiscal year 2025 other than the impact of foreign exchange, which represents the increase in the fair values from the prior year.
The Company updates its assumptions each reporting period based on new developments and records such amounts at fair value based on the revised assumptions until the agreements expire.
5) Inventories
Inventories from continuing operations are comprised of the following (in thousands):
September 30, 2024 |
June 30, 2024 |
|||||||
Raw materials |
$ | $ | ||||||
Work in process |
||||||||
Finished goods |
||||||||
Total |
$ | $ |
Distribution costs associated with the sale of inventory, which are recorded as a component of selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations were $
6) Goodwill
Changes to goodwill by reportable segment during the period were as follows (in thousands):
June 30, 2024 |
Acquisitions |
Translation Adjustment |
September 30, 2024 |
|||||||||||||
Electronics |
$ | $ | $ | $ | ||||||||||||
Engraving |
||||||||||||||||
Scientific |
||||||||||||||||
Engineering Technologies |
||||||||||||||||
Specialty Solutions |
||||||||||||||||
Total |
$ | $ | $ | $ |
7) Warranty Reserves
September 30, 2024 |
June 30, 2024 |
|||||||
Balance at beginning of year |
$ | $ | ||||||
Acquisitions and other charges |
||||||||
Warranty expense |
||||||||
Warranty claims |
( |
) | ( |
) | ||||
Balance at end of period |
$ | $ |
8) Debt
Long-term debt is comprised of the following (in thousands):
September 30, 2024 | June 30, 2024 | |||||||
Bank credit agreements | $ | $ | ||||||
Total funded debt | ||||||||
Issuance cost | ( | ) | ( | ) | ||||
Total long-term debt | $ | $ |
Bank Credit Agreements
During the third quarter of fiscal year 2023, the Company entered into a Third Amended & Restated Credit Agreement which renewed the existing Credit Agreement for an additional
At September 30, 2024, the Company had standby letters of credit outstanding, primarily for insurance purposes, of $
9) Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
September 30, 2024 | June 30, 2024 | |||||||
Payroll and employee benefits | $ | $ | ||||||
| ||||||||
Warranty reserves | ||||||||
Restructuring costs | ||||||||
Workers' compensation | ||||||||
Contingent consideration | ||||||||
Fair value of derivatives | ||||||||
Other | ||||||||
Total | $ | $ |
10) Derivative Financial Instruments
The Company is exposed to market risks from changes in interest rates, commodity prices and changes in foreign currency rates. The Company selectively uses derivative financial instruments in order to manage certain of these risks. Information about the Company’s derivative financial instruments is as follows:
Interest Rate Swaps
From time to time as dictated by market opportunities, the Company enters into interest rate swap agreements designed to manage exposure to interest rates on the Company’s variable rate indebtedness. The Company recognizes all derivatives on its consolidated balance sheets at fair value. The Company has designated its interest rate swap agreements, including those that may be forward-dated, as cash flow hedges, and changes in the fair value of the swaps are recognized in accumulated other comprehensive income until the hedged items are recognized in earnings. Hedge ineffectiveness, if any, associated with the swaps is reported in earnings within interest expense.
The Company’s effective swap agreements convert the base borrowing rate on $
Effective Date | Notional Amount | Fixed Interest Rate | Maturity | September 30, 2024 | June 30, 2024 | |||||||||||||||||||
February 23, 2023 | % |
| $ | $ | ||||||||||||||||||||
May 25, 2023 | % |
| 480 | |||||||||||||||||||||
February 24, 2023 | % |
| ||||||||||||||||||||||
$ | $ |
The Company reported
Foreign Exchange Contracts
Forward foreign currency exchange contracts are used to limit the impact of currency fluctuations on certain anticipated foreign cash flows, such as collections from customers and loan payments between subsidiaries. The Company enters into such contracts for hedging purposes only. At September 30, 2024 and June 30, 2024, the Company had outstanding forward contracts related to hedges of intercompany loans with net unrealized losses of $
The notional amounts of the Company’s forward contracts, by currency, are as follows (in thousands):
Currency | September 30, 2024 | June 30, 2024 | ||||
USD | ||||||
CAD |
Asset Derivatives | ||||||||||
September 30, 2024 | June 30, 2024 | |||||||||
Derivative designated | Balance Sheet | Balance Sheet | ||||||||
as hedging instruments | Line Item | Fair Value | Line Item | Fair Value | ||||||
Interest rate swaps | Prepaid expenses and other current assets | $ | Prepaid expenses and other current assets | $ |
Liability Derivatives | ||||||||||
September 30, 2024 | June 30, 2024 | |||||||||
Derivative designated | Balance Sheet | Balance Sheet | ||||||||
as hedging instruments | Line Item | Fair Value | Line Item | Fair Value | ||||||
Foreign exchange contracts | Accrued liabilities | $ | Accrued liabilities | $ |
The table below presents the amount of gain (loss) recognized in comprehensive income on our derivative financial instruments (effective portion) designated as hedging instruments and their classification within comprehensive income for the periods ended (in thousands):
Three Months Ended | ||||||||
September 30, | ||||||||
2024 | 2023 | |||||||
Interest rate swaps | $ | ( | ) | $ | ||||
Foreign exchange contracts | ||||||||
$ | ( | ) | $ |
The table below presents the amount reclassified from accumulated other comprehensive income (loss) to net income for the periods ended (in thousands):
Details about Accumulated | Affected line item | ||||||||
Other Comprehensive | Three Months Ended | in the Unaudited | |||||||
Income (Loss) Components | September 30, | Condensed Statements | |||||||
2024 | 2023 | of Operations | |||||||
Interest rate swaps | $ | ( | ) | $ | ( | ) | Interest expense | ||
Foreign exchange contracts | ( | ) | Other non-operating (income) expense, net | ||||||
$ | ( | ) | $ | ( | ) |
11) Retirement Benefits
The Company has defined benefit pension plans covering certain current and former employees both inside and outside of the U.S. The Company’s pension plan for U.S. employees is frozen for substantially all participants and has been replaced with a defined contribution benefit plan.
Net periodic benefit cost for the Company’s U.S. and foreign pension benefit plans for the periods ended consisted of the following components (in thousands):
U.S. Plans | Non-U.S. Plans | |||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||||
Service cost | $ | $ | $ | $ | ||||||||||||
Interest cost | ||||||||||||||||
Expected return on plan assets | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Recognized net actuarial loss | ( | ) | ||||||||||||||
Amortization of prior service cost | ( | ) | ( | ) | ||||||||||||
Net periodic (benefit) cost | $ | $ | $ | $ | ( | ) |
The following table sets forth the amounts recognized for the Company's defined benefit pension plans (in thousands):
Amounts recognized in the consolidated balance sheets consist of: | September 30, 2024 | June 30, 2024 | ||||||
Prepaid benefit cost | $ | $ | ||||||
Current liabilities | ( | ) | ( | ) | ||||
Non-current liabilities | ( | ) | ( | ) | ||||
Net amount recognized | $ | ( | ) | $ | ( | ) |
The contributions made to defined benefit plans are presented below along with remaining contributions to be made for fiscal year 2025 (in thousands):
Fiscal Year 2025 | Remaining | |||||||
Three Months Ended | Contributions | |||||||
Contributions to defined benefit plans | September 30, 2024 | FY 2025 | ||||||
United States, funded plan | $ | $ | ||||||
United States, unfunded plan | ||||||||
Germany, unfunded plan | ||||||||
$ | $ |
12) Income Taxes
The Company's effective tax rate from continuing operations for the first quarter of fiscal year 2025 was
The tax rate was impacted in the current period by the following items: (i) a discrete tax benefit related to equity compensation, (ii) variations in the geographical mix of earnings; (iii) foreign withholding taxes and (iv) tax credits linked to federal research and development activities. The tax rate was impacted in the prior period by the following items: (i) a discrete tax benefit related to equity compensation, (ii) the jurisdictional mix of earnings, (iii) foreign withholding taxes, and (iv) federal research and development tax credits.
13) Earnings Per Share
The Company uses shares acquired through treasury stock repurchases for the issuance of shares of common stock for the settlement of awards under its stock-based compensation plans, with the net effect of these transactions accounting for the change in common stock outstanding.
The following table sets forth a reconciliation of the number of shares (in thousands) used in the computation of basic and diluted earnings per share:
Three Months Ended | ||||||||
September 30, | ||||||||
2024 | 2023 | |||||||
Basic - Average shares outstanding | ||||||||
Dilutive effect of unvested, restricted stock awards | ||||||||
Diluted - Average shares outstanding |
Earnings available to common stockholders are the same for computing both basic and diluted earnings per share. There were
Performance stock units of
14) Accumulated Other Comprehensive Income (Loss)
The components of the Company’s accumulated other comprehensive income (loss) are as follows (in thousands):
September 30, 2024 |
June 30, 2024 |
|||||||
Foreign currency translation adjustment |
$ | ( |
) | $ | ( |
) | ||
Unrealized pension losses, net of tax |
( |
) | ( |
) | ||||
Unrealized gains (losses) on derivative instruments, net of tax |
||||||||
Total |
$ | ( |
) | $ | ( |
) |
15) Contingencies
From time to time, the Company is subject to various claims and legal proceedings, including claims related to environmental remediation, either asserted or unasserted, that arise in the ordinary course of business. While the outcome of these proceedings and claims cannot be predicted with certainty, the Company’s management does not believe that the outcome of any of the currently existing legal matters will have a material impact on the Company’s consolidated financial position, results of operations or cash flow. The Company accrues for losses related to a claim or litigation when the Company’s management considers a potential loss probable and can reasonably estimate such potential loss.
16) Industry Segment Information
The Company has
reportable segments organized around the types of products sold:
• | Electronics – manufactures and sells electronic components for applications throughout the end user market spectrum; | |
• | Engraving – provides mold texturizing, slush molding tools, project management and design services, roll engraving, hygiene product tooling, low observation vents for stealth aircraft, and process machinery for a number of industries; | |
• | Scientific – sells specialty temperature-controlled equipment for the medical, scientific, pharmaceutical, biotech and industrial markets; | |
• | Engineering Technologies – provides net and near net formed single-source customized solutions in the manufacture |