What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-08-30 compared with 2021-08-27 · 122 added, 138 removed, 881 unchanged (23% of the section changed)

2 unchanged sentences

Management’s Report on Internal Control Over Financial Reporting

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB No.

Consolidated Balance Sheets as of June 30, 2022 and 2021

19 unchanged sentences

August 30, 2022

Vice President,

Chief Financial Officer

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We also have audited the Company’s internal control over financial reporting as of June 30, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2021, in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2022, in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

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Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

3 unchanged sentences

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audits of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

13 unchanged sentences

The majority of the Company’s revenue is recognized over time as manufacturing services are performed when the Company manufactures a product to customer specifications with no alternative use and for which the Company has an enforceable right to payment for performance completed to date.

The Company generally recognizes revenue over time using costs based input methods to depict the Company’s progress towards meeting its performance obligations, in which judgement is required to evaluate assumptions including the anticipated margins to estimate the corresponding amount of revenue to recognize.

The Company generally recognizes revenue over time using cost-based input methods to depict the Company’s progress towards meeting its performance obligations, in which judgment is required to evaluate assumptions including the anticipated margins to estimate the corresponding amount of revenue to recognize.

The timing differences of revenue recognition, billings to the Company’s customers, and cash collections from the Company’s customers result in billed accounts receivable and unbilled accounts receivable.

5 unchanged sentences

Our audit procedures related to management’s estimates of the anticipated margins used to recognize revenue over time and record contract assets included the following, among others:

• We tested the effectiveness of controls over the Company’s recognition of revenues over time and the related contract asset balance, including management’s process for estimating the anticipated margins for products manufactured to customer specifications for which the Company has an enforceable right to payment for performance completed to date.

• We tested the effectiveness of controls over the Company’s recognition of revenue over time and the related contract asset balance, including management’s process for estimating the anticipated margins for products manufactured to customer specifications for which the Company has an enforceable right to payment for performance completed to date.

• We evaluated management’s ability to estimate revenue accurately by comparing actual margins to management’s historical estimates for completed contracts.

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▪ Compared the transaction prices to the consideration expected to be received based on current rights and obligations under the contracts and any modifications that were agreed upon with the customers.

◦ Tested the accuracy and completeness of the costs incurred to date for the respective performance obligations, by comparing the quantities on hand and standard cost per the calculation to the Company’s perpetual inventory information.

▪ Tested the accuracy and completeness of the costs incurred to date for the respective performance obligations by comparing the quantities on hand and standard cost per the calculation to the Company’s perpetual inventory information and testing any manufacturing variances and purchase price adjustments.

▪ Evaluated the calculation of the amount of revenue to recognize for the performance obligation by:

2 unchanged sentences

• We tested the mathematical accuracy of management’s calculation of revenue recognized over time and the related contract asset balance.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP

Indianapolis, Indiana

August 30, 2022

/s/ Deloitte & Touche LLP

We have served as the Company’s auditor since 2014.

96 unchanged sentences

Net income $ 31,253 $ 56,791 $ 18,196

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

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

Depreciation and amortization 29,411 34,020 30,872

Loss (gain) on sales of assets 66 69 ( 4 )

Deferred income tax and other deferred charges ( 5,783 ) ( 1,070 ) ( 1,541 )

Deferred tax valuation allowance 165 979 20

Loss on sales of assets 90 66 69

Deferred income taxes 772 ( 6,305 ) ( 450 )

Goodwill impairment — — 7,925

9 unchanged sentences

Accrued expenses and taxes payable 3,336 12,854 ( 2,703 )

Net cash provided by (used for) operating activities 130,095 72,808 ( 6,748 )

Net cash (used for) provided by operating activities ( 83,178 ) 130,095 72,808

Cash Flows From Investing Activities:

1 unchanged sentence

Proceeds from sales of assets 456 513 158

Payments for acquisitions, net of cash acquired — — ( 43,889 )

Purchases of capitalized software ( 757 ) ( 970 ) ( 385 )

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Debt issuance costs ( 652 ) — ( 45 )

Net cash (used for) provided by financing activities ( 53,078 ) ( 17,934 ) 79,430

Net cash provided by (used for) financing activities 103,741 ( 53,078 ) ( 17,934 )

Effect of Exchange Rate Change on Cash and Cash Equivalents ( 2,356 ) 3,231 ( 678 )

Net Increase in Cash and Cash Equivalents 41,452 15,714 2,848

Net (Decrease) Increase in Cash and Cash Equivalents ( 56,591 ) 41,452 15,714

Cash and Cash Equivalents at Beginning of Year 106,442 64,990 49,276

Cash and Cash Equivalents at End of Year $ 49,851 $ 106,442 $ 64,990

Supplemental Disclosure of Cash Flow Information

Cash paid during the year for:

Income taxes $ 14,329 $ 13,358 $ 9,096

Interest expense $ 2,328 $ 2,531 $ 4,934

Non-cash investing activity:

Unpaid purchases of property and equipment at the end of the year $ 4,538 $ 3,667 $ 4,764

See Notes to Consolidated Financial Statements

6 unchanged sentences

Other comprehensive income (loss) ( 2,923 ) ( 2,923 )

Cumulative effect of accounting change 3,050 3,050

Issuance of non-restricted stock ( 4,000 shares)

2 unchanged sentences

( 3,047 ) 2,061 ( 986 )

Deferred share issuance ( 3,000 shares)

Repurchase of Common Stock ( 623,000 shares)

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( 3,126 ) 1,566 ( 1,560 )

Restricted share units issuance ( 2,000 shares)

( 40 ) 22 ( 18 )

Deferred share issuance ( 3,000 shares)

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We provide contract electronics manufacturing services (“EMS”) and diversified manufacturing services, including engineering and supply chain support, to customers in the automotive, medical, industrial, and public safety end markets.

We offer a package of value that begins with our core competency of producing durable electronics and includes our set of robust processes and procedures that help us ensure that we deliver the highest levels of quality, reliability, and service throughout the entire life cycle of our customers’ products.

We further offer diversified contract manufacturing services for non-electronic components, medical devices, medical disposables, precision molded plastics, and production automation, test, and inspection equipment.

We deliver a package of value that begins with our core competency of producing durable electronics and has expanded into diversified contract manufacturing services for non-electronic components, medical disposables, precision molded plastics, and production automation, test, and inspection equipment.

Our design and manufacturing expertise coupled with robust processes and procedures help us ensure that we deliver the highest levels of quality, reliability, and service throughout the entire life cycle of our customers’ products.

We deliver award-winning service across our highly integrated global footprint, which is enabled by our largely common operating system, procedures, and standardization.

We are well recognized by customers and industry trade publications for our excellent quality, reliability, and innovative service.

The Company acquired GES Holdings, Inc., Global Equipment Services and Manufacturing, Inc., and its subsidiaries (collectively referred to as “GES”) on October 1, 2018, which specialize in design, production, and servicing of automation, test, and inspection equipment for industrial applications in the semiconductor, electronics, and life sciences industries.

Principles of Consolidation:

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All significant intercompany balances and transactions have been eliminated in the consolidation.

The operating results of the GES acquisition are included in the Consolidated Financial Statements beginning as of the acquisition date of October 1, 2018.

Certain amounts for the years ended June 30, 2021 and 2020 have been reclassified to conform to current period presentation in the Consolidated Statements of Cash Flow within the Cash Flows from Operating Activities section.

Deferred tax valuation allowance is now included with Deferred income taxes while the other deferred charges have been reclassified to Other, net.

Use of Estimates:

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These estimates may change as new events occur and more information is obtained.

Change in Estimates:

The Company reviews the estimated useful lives of its fixed assets on an ongoing basis.

In evaluating useful lives, the Company considers how long assets will remain functionally efficient and effective, given levels of technology, competitive factors, and the economic environment.

If the assessment indicates that the assets will continue to be used for a shorter or longer period than previously anticipated, the useful life of the assets is revised, resulting in a change in estimate.

Changes in estimates are accounted for on a prospective basis by depreciating the assets’ current carrying values over their revised remaining useful lives.

The review performed by the Company in the current year indicated that Surface Mount Technology production equipment had actual lives that were longer than previously estimated.

As a result of these findings, the Company changed its estimates of useful lives on these assets to 10 years, from lives of 5 or 7 years.

The change was effective and accounted for prospectively beginning on November 1, 2021.

The effects of this change in useful life estimate for the fiscal year ended June 30, 2022 were a decrease in depreciation expense of $ 6.3 million, an increase in net income of $ 4.9 million, and an increase to basic and diluted earnings per share by $ 0.19 .

Segment Information:

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Our policy for estimating the allowance for credit losses on trade accounts receivable includes analysis of such items as aging, credit worthiness, payment history, and historical bad debt experience.

Management uses these specific analyses in conjunction with an evaluation of the general economic and market conditions to estimate expected credit losses.

Management uses these

specific analyses in conjunction with an evaluation of the general economic and market conditions to estimate expected credit losses.

Management believes that historical loss information generally provides a basis for its assessment of expected credit losses.

Trade accounts receivable are written off after exhaustive collection efforts occur and the receivable is deemed uncollectible.

See section entitled “New Accounting Standards” below for information on the adoption of the new accounting standard for the measurement of credit losses.

Adjustments to the allowance for credit losses are recorded in Selling and Administrative Expenses on our Consolidated Statements of Income.

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These arrangements in all cases do not contain recourse provisions which would obligate us in the event of our customers’ failure to pay.

Receivables are considered sold

when they are transferred beyond the reach of Kimball Electronics and its creditors, the purchaser has the right to pledge or exchange the receivables, and we have surrendered control over the transferred receivables.

Receivables are considered sold when they are transferred beyond the reach of Kimball Electronics and its creditors, the purchaser has the right to pledge or exchange the receivables, and we have surrendered control over the transferred receivables.

During fiscal years 2022, 2021, and 2020, we sold, without recourse, $ 303.4 million, $ 306.3 million, and $ 280.7 million of accounts receivable, respectively.

3 unchanged sentences

The Company has the ability to sell the drafts at a discount or transfer the drafts in settlement of current accounts payable prior to the scheduled maturity date.

These drafts, which totaled less than $ 0.1 million at June 30, 2021 and $ 7.1 million at June 30, 2020, are reflected in Receivables on the Consolidated Balance Sheets until the banker’s drafts are sold at a discount, transferred in settlement of current accounts payable, or cash is received at maturity.

Banker’s acceptance drafts sold at a discount or transferred in settlement of current accounts payable during fiscal years 2021, 2020, and 2019 were $ 1.8 million, $ 6.8 million, and $ 2.7 million, respectively.

We did not hold any drafts at June 30, 2022, and the drafts totaled less than $ 0.1 million at June 30, 2021.

These drafts were reflected in Receivables on the Consolidated Balance Sheets until the banker’s drafts are sold at a discount, transferred in settlement of current accounts payable, or cash is received at maturity.

Banker’s acceptance drafts sold at a discount or transferred in settlement of current accounts payable during fiscal years 2022, 2021, and 2020 were less than $ 0.1 million, $ 1.8 million, and $ 6.8 million, respectively.

See Note 6 - Commitments and Contingent Liabilities of Notes to Consolidated Financial Statements for more information on banker’s acceptance drafts.

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In the Market Approach, fair value is determined using transactional evidence for similar publicly traded equity.

See Note 6 - Goodwill and Other Intangible Assets of Notes to Consolidated Financial Statements for more information on our goodwill impairment tests.

See Note 5 - Goodwill and Other Intangible Assets of Notes to Consolidated Financial Statements for more information on our goodwill.

Other Intangible Assets:

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We have not recognized impairment on other intangible assets during fiscal years 2022, 2021, or 2020.

The Company leases certain office, manufacturing, and warehouse facilities under operating leases, in addition to land on which certain office and manufacturing facilities resides.

The Company leases certain office, manufacturing, and warehouse facilities under operating leases, in addition to land on which certain office and manufacturing facilities reside.

These operating leases expire from fiscal year 2023 to 2057.

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These audits can involve complex uncertain tax positions, which may require an extended period of time to resolve.

A tax benefit from an uncertain tax position may be recognized only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position.

A tax benefit from an uncertain tax position may be recognized only if it is more likely than not that the tax position will be sustained on examination by taxing

authorities, based on the technical merits of the position.

We maintain a liability for uncertain income tax and other tax positions, including accrued interest and penalties on those positions.

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Other General Income:

Other General Income in fiscal years 2021 and 2019 consisted of $ 0.4 million and $ 0.3 million, respectively, resulting from payments received related to class action lawsuits in which Kimball Electronics was a class member, partially offset by lawsuit settlement accruals and payments in fiscal year 2021.

Other General Income in fiscal years 2022 and 2021 consisted of $ 1.4 million and $ 0.4 million, respectively, resulting from payments received related to class action lawsuits in which Kimball Electronics was a class member.

These lawsuits alleged that certain suppliers to the EMS industry conspired over a number of years to raise and fix the prices of electronic components, resulting in overcharges to purchasers of those components.

The fiscal year 2021 amount was partially offset by lawsuit settlement accruals and payments.

We recorded no Other General Income during fiscal year 2020.

2 unchanged sentences

The gain or loss on SERP investments is offset by a change in the SERP liability that is recognized in Selling and Administrative Expense.

Non-operating loss in fiscal year 2022 included $ 4.2 million in net losses from foreign currency rate movements and related derivative gain or loss.

Non-operating income in fiscal year 2021 included $ 4.8 million in net gains from foreign currency rate movements and related derivative gain or loss.

Non-operating expense in fiscal year 2020 included a $ 3.8 million net working capital adjustment recorded after the end of the measurement period of the GES acquisition that was determined through the dispute resolution procedure provided for under the terms of the asset purchase agreement.

See Note 2 - Acquisition of Notes to Consolidated Financial Statements for more information on the net working capital adjustment.

Foreign Currency Translation:

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dollar, the translation of functional currency statements to U.S.

dollar statements uses end-of-period exchange rates for assets and liabilities, weighted average exchange rates for revenue and expenses, and historical rates for equity.

dollar statements uses end-of-period exchange rates for assets and liabilities, weighted average exchange rates for revenue

and expenses, and historical rates for equity.

The resulting currency translation adjustment is recorded in Accumulated Other Comprehensive Income (Loss), as a component of Share Owners’ Equity .

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Hedge accounting permits gains and losses on derivative instruments to be deferred in Accumulated Other Comprehensive Income (Loss) and subsequently included in earnings in the periods in which earnings are affected by the hedged item.

We use derivatives primarily for forward purchases of foreign currency to manage exposure to the variability of cash flows, primarily related to the foreign exchange rate risks

inherent in forecasted transactions denominated in foreign currency.

For transactions and balances denominated in currencies other than functional currencies, we use forward purchases to manage exposure to the variability of cash flows and foreign exchange contracts to hedge intercompany balances and other balance sheet positions.

Cash receipts and cash payments related to derivative instruments are recorded in the same category as the cash flows from the items being hedged on the Consolidated Statements of Cash Flows.

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Adopted in Fiscal Year 2022:

In June 2016, the Financial Accounting Standards Board (“FASB”) issued guidance on the Measurement of Credit Losses on Financial Instruments, which replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimate credit losses.

We adopted this standard effective July 1, 2020, the beginning of our first quarter of fiscal year 2021, and the adoption did not have a material effect on our Consolidated Financial Statements.

In August 2018, the FASB issued guidance on Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.

This new guidance amends the accounting for implementation, setup, and other upfront costs incurred in a cloud computing hosting arrangement.

The amendment aligns the requirement for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

The amendment also requires companies to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement, including options to extend the agreement that is in control of the customer.

We adopted this standard prospectively during the first quarter of fiscal year 2021, and the adoption did not have a material effect on our Consolidated Financial Statements.

Not Yet Adopted:

In December 2019, the FASB issued guidance on Simplifying the Accounting for Income Taxes, intended to simplify various aspects related to the accounting for income taxes.

We will adopt this standard effective July 1, 2021, and the adoption of this guidance will not have a material impact on our consolidated financial statements.

Note 2 Acquisition

On October 1, 2018 , the Company completed the acquisition of GES Holdings, Inc., Global Equipment Services and Manufacturing, Inc., and its subsidiaries (collectively referred to as “GES”).

The acquisition included purchasing substantially all of the assets and assuming certain liabilities of GES Holdings, Inc., Global Equipment Services and Manufacturing, Inc., GES Infotek Pvt.

Ltd., (India), GES Japan KK, Global Equipment Services and Manufacturing (Suzhou) Co., Ltd., (China), Suzhou Global Equipment Services and Trading Co., Ltd.

(China), and acquiring 100% of the capital stock of Global Equipment Services & Manufacturing Vietnam Company Limited.

This acquisition supported the Company’s strategy for growth and diversification into a multifaceted manufacturing solutions company.

GES specializes in design, production, and servicing of automation, test, and inspection equipment for industrial applications in the semiconductor, electronics, and life sciences industries.

Incremental costs expensed as incurred directly related to the acquisition included $ 0.8 million and $ 0.5 million during the fiscal years ended June 30, 2020 and 2019, respectively.

These costs were recorded in Selling and Administrative Expenses on our Consolidated Statements of Income.

The operating results of this acquisition are included in the Company’s consolidated financial statements beginning on the acquisition date of October 1, 2018.

The GES acquisition was accounted for as a business combination.

The Company recorded a net adjusted purchase price of $ 42.4 million which included a reduction for a net working capital adjustment of $ 7.6 million.

The net working capital adjustment was disputed by the sellers, and in July 2020, it was determined, through the dispute resolution procedure provided for under the terms of the asset purchase agreement, the final net working capital adjustment to be $ 3.8 million.

As a result, for fiscal year 2020, after the end of the twelve-month measurement period, the Company recorded a $ 3.8 million pre-tax charge in the Non-operating expense line on the Consolidated Statements of Income.

The twelve-month measurement period ended on September 30, 2019.

We adopted this standard effective July 1, 2021, the beginning of our first quarter of fiscal year 2022, and the adoption did not have a material effect on our Consolidated Financial Statements.

Note 2 Revenue from Contracts with Customers

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Total net sales $ 1,349.5 $ 1,291.8 $ 1,200.6

For fiscal years 2021, 2020, and 2019, approximately 89 %, 78 %, and 70 % of our net sales, respectively, were recognized over time as manufacturing services were performed under a customer contract on a product with no alternative use and for which we have an enforceable right to payment for performance completed to date.

For fiscal years 2022, 2021, and 2020, approximately 95 %, 89 %, and 78 % of our net sales, respectively, were recognized over time as manufacturing services were performed under a customer contract on a product with no alternative use and for which

we have an enforceable right to payment for performance completed to date.

The remaining sales revenues were recognized at a point in time when the customer obtained control of the products.

2 unchanged sentences

Contract assets were $ 64.1 million and $ 45.9 million as of June 30, 2022 and 2021, respectively.

In limited circumstances, the Company may receive payments from customers in advance of the satisfaction of performance obligations primarily for tooling or other miscellaneous services or costs.

In limited circumstances, the Company may receive payments from customers in advance of the satisfaction of performance obligations primarily for material price variances, tooling, or other miscellaneous services or costs.

These advance payments are recognized as contract liabilities until the performance obligations are completed and are included in Accrued expenses on the Consolidated Balance Sheets, which amounted to $ 22.5 million and $ 7.6 million as of June 30, 2022 and 2021, respectively.

31 unchanged sentences

Goodwill, net 12,011

Purchase Accounting Adjustments 1,832

Impairment ( 7,925 )

Balance as of June 30, 2021

6 unchanged sentences

Goodwill, net $ 12,011

We acquired $ 13.7 million in goodwill resulting from the GES acquisition, with $ 1.8 million added in fiscal year 2020 as a result of fair value measurement period adjustments.

See Note 2 - Acquisition of Notes to Consolidated Financial Statements for more information on this acquisition.

During fiscal years 2022 and 2021, no goodwill impairment was recognized.

During fiscal year 2020, $ 7.9 million of goodwill impairment was recognized at the GES reporting unit.

GES’s annual goodwill impairment test date is April 30th.

Subsequent to our annual test date in fiscal year 2020, we identified an indicator of impairment related to future anticipated revenues, which triggered an additional impairment test as of June 30, 2020.

The June 30, 2020 test (the “GES impairment test”) resulted in a $ 7.9 million goodwill impairment charge, partially offset by a $ 1.0 million reduction in income tax expense associated with the deferred tax asset established for the deductible portion of the impaired goodwill.

For the GES impairment test, we used an independent, third-party valuation specialist to assist in the determination of fair value for the GES reporting unit.

We used a combination of the Income Approach, using a discounted cash flow model, and the Market Approach, based on projected fiscal year 2021 results.

We also used the independent, third-party valuation specialist to assist in the GES annual impairment test for fiscal year 2021, using a combination of the Income Approach and the Market Approach to determine fair value.

The GES reporting unit fair value exceeded the carrying value by 35 % as of April 30, 2021;

therefore, no goodwill impairment was recognized in fiscal year 2021.

The impact to net income also included a $ 1.0 million reduction in income tax expense associated with the deferred tax asset established for the deductible portion of the impaired goodwill.

The balance of goodwill at the GES reporting unit was $ 5.8 million at both June 30, 2022 and 2021.

A summary of other intangible assets subject to amortization is as follows:

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If a transferee were to exercise its available recourse rights, the draft would revert back to our China operation and we would be required to satisfy the obligation with the transferee.

At June 30, 2021 and 2020, the drafts transferred and outstanding totaled $ 0.1 million and $ 0.4 million, respectively.

We did not have any drafts transferred and outstanding at June 30, 2022, and the drafts transferred and outstanding at June 30, 2021 totaled $ 0.1 million.

No transferee has exercised their recourse rights against us.

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Credit facilities consisted of the following:

Unused Borrowings at Borrowings Outstanding at Borrowings Outstanding at

Available Borrowing Capacity at Borrowings Outstanding at Borrowings Outstanding at

(Amounts in Millions, in U.S Dollar Equivalents) June 30, 2022 June 30, 2022 June 30, 2021

3 unchanged sentences

Netherlands revolving credit facility (3)

Poland revolving credit facility (4)

Total credit facilities $ 128.7 180.6 66.2

2 unchanged sentences

$ 145.0 $ 40.0

(1) The Company maintains a U.S.

primary credit facility (the “primary credit facility”) among the Company, the lenders party thereto, and JPMorgan Chase Bank, National Association, as Administrative Agent, and Bank of America, N.A., as Documentation Agent, scheduled to mature July 27, 2023.

(1) The Company maintained a U.S.

primary credit facility which was scheduled to mature on July 23, 2023.

On May 4, 2022, the Company entered into an amended and restated credit agreement (the “primary credit facility”) among the Company, the lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent, and Bank of America, N.A., as Documentation Agent, and the primary credit facility is now scheduled to mature May 4, 2027.

The primary credit facility provides for $ 300 million in borrowings, with an option to increase the amount available for borrowing to $ 450 million at the Company’s request, subject to the consent of each lender participating in such increase.

This facility is maintained for working capital and general corporate purposes of the Company including capital expenditures and acquisitions.

This facility is maintained for working capital and general corporate purposes of the Company.

The Company incurred $ 0.6 million of debt issuance costs associated with the amended and restated credit agreement.

A commitment fee is payable on the unused portion of the credit facility which was immaterial to our operating results in fiscal years 2022, 2021, and 2020.

The commitment fee on the unused portion of principal amount of the credit facility is payable at a rate that ranges from 20.0 to 25.0 basis points per annum as determined by the Company’s ratio of consolidated total indebtedness to adjusted consolidated EBITDA, as defined in the primary facility.

Types of borrowings available on the primary facility include revolving loans, multi-currency term loans, and swingline loans.

The interest rate on borrowings is dependent on the type of borrowings and will be one of the following two options:

• the London Interbank Offered Rate (“LIBOR”) in effect two business days prior to the advance (adjusted upwards to reflect bank reserve costs) for such interest period as defined under the primary credit facility, plus the Eurocurrency Loans spread which can range from 125.0 to 175.0 basis points based on the Company’s ratio of consolidated total indebtedness to adjusted consolidated EBITDA;

The commitment fee on the unused portion of principal amount of the credit facility is payable at a rate that ranges from 10.0 to 25.0 basis points per annum as determined by the Company’s ratio of consolidated total indebtedness to adjusted consolidated EBITDA, as defined in the primary credit facility.

Types of borrowings available on the primary credit facility include revolving loans, multi-currency term loans, and swingline loans.

The interest rate on borrowings is dependent on the type of borrowings and will be one of the following options:

• any Term Benchmark borrowing denominated in U.S.

Dollars will utilize the Secured Overnight Financing Rate (“SOFR”), which is a rate per annum equal to the secured overnight financing rate for such business day published by the SOFR Administrator, the Federal Reserve Bank of New York, on the immediately succeeding business day, plus the Revolving Commitment Term Benchmark spread which can range from 100.0 to 175.0 basis points based on the Company’s ratio of consolidated total indebtedness to adjusted consolidated EBITDA;

• any Term Benchmark borrowing denominated in Euros will utilize the Euro Interbank Offered Rate (“EURIBOR”) in effect two target days prior to the advance (adjusted upwards to reflect bank reserve costs) for such interest period as defined in the agreement, plus the Revolving Commitment Term Benchmark spread which can range from 100.0 to 175.0 basis points based on the Company’s ratio of consolidated total indebtedness to adjusted consolidated EBITDA;

• the Alternate Base Rate (“ABR”), which is defined as the highest of the fluctuating rate per annum equal to the higher of:

JPMorgan’s prime rate;

1 % per annum above the Adjusted LIBO Rate (as defined under the primary credit facility);

Prime Rate in the U.S.

last quoted by the Wall Street Journal, and if this is ceased to be quoted, the highest bank prime loan rate or similar loan rate quoted by the Federal Reserve Board;

1/2 of 1% per annum above the Federal Funds Effective Rate (as defined under the primary credit facility);

plus the ABR Loans spread which can range from 25.0 to 75.0 basis points based on the Company’s ratio of consolidated total indebtedness to adjusted consolidated EBITDA.

1 % per annum above the Adjusted SOFR Rate (as defined under the primary credit facility);

plus the Revolving Commitment ABR spread which can range from 0.0 to 75.0 basis points based on the Company’s ratio of consolidated total indebtedness to adjusted consolidated EBITDA.

The Company’s financial covenants under the primary credit facility require:

• a ratio of consolidated total indebtedness minus unencumbered U.S.

• a fixed charge coverage ratio, determined as of the end of each of its fiscal quarters for the then most recently ended four fiscal quarters, to not be less than 1.10 to 1.00.

cash on hand in the United States in excess of $ 15 million to adjusted consolidated EBITDA, determined as of the end of each of its fiscal quarters for the then most recently ended four fiscal quarters, to not be greater than 3.0 to 1.0 provided, however, that for each fiscal quarter end during the four quarter period following a material permitted acquisition, as defined in the Credit Agreement, the Company will not permit this financial covenant to be greater than 3.5 to 1.0 for each such fiscal quarter end, and,

• an interest coverage ratio, defined as that ratio of consolidated EBITDA for such period to cash interest expense for such period, for any period of four consecutive fiscal quarters, to be less than 3.5 to 1.0.

The Company had $ 0.4 million in letters of credit contingently committed against the primary credit facility at both June 30, 2022 and 2021.

8 unchanged sentences

Interest on borrowing under this facility is charged at a rate of interest dependent on the denomination of the currency borrowed.

The facility matures on June 22, 2022.

(4) The Company also maintains an uncommitted revolving credit facility for our Poland operation, which allows for borrowings up to 5 million Euro (approximately $ 5.9 million at June 30, 2021 exchange rates) that can be drawn in Euro, U.S.

dollars, or Polish Zloty.

The availability of funds under this uncommitted facility is at the sole discretion of the bank.

Proceeds from the facility are to be used for general working capital purposes.

Interest on borrowing under this facility is charged at a rate of interest dependent on the denomination of the currency borrowed.

The facility matures on December 20, 2021.

The facility is scheduled to mature in July 2023.

(4) The amount of Long-term debt under credit facilities, less current maturities reflects the borrowings on the primary credit facility that the Company intends, and has the ability, to refinance for a period longer than twelve months.

The primary credit facility matures on July 27, 2023.

The primary credit facility matures on May 4, 2027.

The weighted-average interest rate on borrowings outstanding under the credit facilities at June 30, 2022 and June 30, 2021 were 2.7 % and 2.0 %, respectively.

Cash payments for interest on borrowings in fiscal years 2021, 2020, and 2019 were, in millions, $ 2.5 , $ 4.9 , and $ 3.0 , respectively.

Capitalized interest expense was immaterial during fiscal years 2022, 2021, and 2020.

Subsequent to June 30, 2022, the Company expanded the borrowing capacity of the Thailand credit facility to $ 10 million and entered into a foreign credit facility for its EMS operation in China which allows for borrowings up to $ 7.5 million.

Note 8 Employee Benefit Plans

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The Company maintains a trusteed defined contribution retirement plan which is in effect for substantially all domestic employees meeting the eligibility requirements.

Beginning January 1, 2022, the Company matches 50% of eligible employee contributions up to 6%.

The Company also provides a discretionary employer contribution determined annually by the Compensation and Governance Committee of the Company’s Board of Directors.

Total expense related to employer contributions to the domestic retirement plans was, in millions, $ 4.2 , $ 1.9 , and $ 2.4 for fiscal years 2022, 2021, and 2020, respectively.

The Company also maintains a supplemental employee retirement plan (“SERP”) for executives and other key employees which enables them to defer cash compensation on a pre-tax basis in excess of IRS limitations.

The SERP is structured as a rabbi trust, and therefore, assets in the SERP portfolio are subject to creditor claims in the event of bankruptcy.

The discretionary employer contribution for domestic employees is determined annually by the Compensation and Governance Committee of the Company’s Board of Directors.

Total expense related to employer contributions to the domestic retirement plans was, in millions, $ 1.9 , $ 2.4 , and $ 2.1 for fiscal years 2021, 2020, and 2019, respectively.

See Note 14 - Investments of Notes to Consolidated Financial Statements for further information regarding SERP.

Defined Benefit Postemployment Plans:

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Benefits are paid using available cash on hand when eligible employees meet plan qualifications for payment.

As of June 30, 2021 and 2020, total obligations under these plans were $ 5.4 million and $ 4.2 million, respectively, of which $ 4.6 million and $ 3.6 million were long term and $ 0.8 million and $ 0.6 million were short term.

Of the total obligation at June 30, 2021 and 2020, domestic plans were $ 1.2 million and $ 1.1 million and foreign plans were $ 4.2 million and $ 3.1 million, respectively.

As of both June 30, 2022 and 2021, total obligations under these plans were $ 5.4 million, of which $ 4.6 million were long term and $ 0.8 million were short term.

Of the total obligation at both June 30, 2022 and 2021, domestic plans were $ 1.2 million and foreign plans were $ 4.2 million.

Actuarial (gain) loss is recorded in Accumulated Other Comprehensive (Income) Loss and amortized into net period benefit cost on a straight-line basis over the average remaining service period of employees expected to receive benefits under the plans.

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The annual performance share awards are approved by the Compensation and Governance Committee of the Board.

Under these awards, shares will be issued to each participant based upon a combination of the bonus percentage attainment component, calculated as a three-year average bonus percentage under the Company’s profit sharing incentive bonus plan, and a growth attainment component, which is the Company’s growth in sales revenue based on comparison of its three-year compounded annual growth rate (“CAGR”) with the Electronics Manufacturing Services Industry’s three-year CAGR.

Performance shares are vested when shares of the Company’s Common Stock are issued shortly after the end of the fiscal year in which the performance measurement period is complete.

Certain outstanding performance shares are applicable to performance measurement periods in future fiscal years and will be measured at fair value when the performance targets are established in future fiscal years.

The contractual life of performance shares is three years .

Beginning with awards granted in fiscal year 2022 that will vest in fiscal year 2025, awards cliff vest at the third anniversary of the award date.

To avoid a gap in the vesting of awards due to the transition from grants that vested annually in three equal installments to ones that vest after three years , two smaller bridge awards were also granted for fiscal year 2022 and fiscal year 2022-2023 performance periods.

The bridge award for the fiscal year 2022 performance period cliff vests at the first anniversary of the grant.

The bridge award for the fiscal year 2022-2023 performance period cliff vests at the second anniversary of the grant.

The award for the fiscal year 2022-2024 performance period, and future performance share awards, cliff vest at the third anniversary of the grant.

Under these awards, a number of shares will be issued to each participant based upon a combination of a profitability attainment component, based on the Company’s operating income plan, and a growth attainment component, based on the Company’s growth in sales revenue, comparing its three-year compounded annual growth rate (“CAGR”) with the Electronics Manufacturing Services Industry’s three-year CAGR.

The number of shares issued will be less than the targeted shares issuable if the Company does not reach 100 % of one or both of the above-mentioned performance metrics, and could be zero if the

Company does not reach the required minimum thresholds of either metric.

The number of shares issued will exceed the number of targeted shares issuable (up to a maximum of 125 %) if the Company exceeds 100 % of one or both of the above-mentioned incentive metrics.

If a participant is not employed on the date shares are issued, the performance share award is forfeited, except in the case of death, retirement at age 62 or older, total permanent disability, or certain other circumstances described in the Plan.

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As of June 30, 2022, there was approximately $ 6.0 million of unrecognized compensation cost related to performance shares, based on the latest estimated attainment of performance goals.

That cost is expected to be recognized over annual performance periods ending August 2021 through August 2023, with a weighted average vesting period of eleven months .

That cost is expected to be recognized over performance periods ending August 2022 through August 2024, with a weighted average vesting period of 1.2 years.

The fair value of performance shares is based on the stock price at the date of grant.

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Unrestricted Share Grants:

Unrestricted shares may be granted to employees and members of the Board as consideration for services rendered.

Unrestricted shares may be granted to key employees and non-employee members of the Board as consideration for services rendered.

Unrestricted share grants do not have vesting periods, holding periods, restrictions on sale, or other restrictions.

The fair value of unrestricted shares is based on the stock price at the date of the award.

During fiscal years 2021, 2020, and 2019, respectively, the Company granted a total of 4,235 , 4,258 , and 4,236 unrestricted shares at an average grant date fair value of $ 15.35 , $ 16.99 , and $ 17.69 for a total fair value of $ 0.1 million for each of these fiscal years.

Unrestricted shares were awarded to non-employee members of the Board as compensation for director’s fees, including directors’ elections to receive unrestricted shares in lieu of cash payment.

During fiscal years 2022, 2021, and 2020, respectively, the Company granted a total of 6,777 , 4,235 , and 4,258 unrestricted shares at an average grant date fair value of $ 23.10 , $ 15.35 , and $ 16.99 for a total fair value of $ 0.2 million, $ 0.1 million, and $ 0.1 million.

Unrestricted shares are awarded to non-employee members of the Board as compensation for director’s fees, including directors’ elections to receive unrestricted shares in lieu of cash payment.

Director’s fees are expensed over the period that directors earn the compensation.

Unrestricted shares were also awarded to a key employee which were expensed immediately.

Unrestricted shares that are awarded to key employees are expensed immediately.

Restricted Share Units:

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If the employment of a holder of an RSU terminates before the RSU has vested for any reason other than death, retirement, or total permanent disability, the RSU will be forfeited.

During fiscal year 2021, the Company granted 3,322 RSUs to new key employees at an average grant date fair value of $ 19.63 for a total fair value of $ 0.1 million.

During fiscal year 2021, the Company granted 3,322 RSUs to new key employees at an average grant date fair value of $ 19.63 for a total fair value of $ 0.1 million, and these RSUs vested in fiscal year 2022 as the contractual life of the RSUs were one year or less.

No RSUs were granted during fiscal years 2022 and 2020.

The contractual life of the RSUs is one year or less.

Deferred Share Units:

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Deferred share units are participating securities and are payable in common stock in a lump sum or installments in accordance with deferral elections upon a director’s retirement or termination from the Board or death.

During fiscal years 2021, 2020, and 2019, respectively, 37,132 , 32,950 , and 32,758 deferred share units were granted to non-employee members of the Board at an average grant date fair value of $ 15.35 , $ 17.30 , and $ 17.40 for a total fair value of $ 0.6 million for each of these fiscal years.

During fiscal years 2022, 2021, and 2020, respectively, 34,480 , 37,132 , and 32,950 deferred share units were granted to non-employee members of the Board at an average grant date fair value of $ 24.87 , $ 15.35 , and $ 17.30 for a total fair value of $ 0.9 million, $ 0.6 million, and $ 0.6 million.

During fiscal year 2022, 2,753 shares of common stock were issued under the Deferral Plan to a former non-employee member of the Board in accordance with their deferral election at an average fair value of $ 17.55 .

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tax code, for which complete guidance may have not yet been issued.

Tax Reform, in addition to other changes, required a one-time transition tax on certain unremitted earnings of foreign subsidiaries that is payable over an eight-year period.

As of both June 30, 2021 and 2020, the remaining provision recorded for the one-time deemed repatriation tax was $ 9.8 million, payable through fiscal year 2026, with the long-term portion recorded in Long-term income taxes payable on the Consolidated Balance Sheets.

As of June 30, 2021, $ 0.9 million of the remaining deemed repatriation tax is short term and is recorded in Accrued expenses on the Consolidated Balance Sheet.

Tax Reform required a one-time transition tax on certain unremitted earnings of foreign subsidiaries that is payable over an eight-year period.

As of June 30, 2022 and 2021, the remaining provision recorded for the one-time deemed repatriation tax were $ 8.9 million and $ 9.8 million respectively, payable through fiscal year 2026, with the long-term portion recorded in Long-term income taxes payable on the Consolidated Balance Sheets.

As of June 30, 2022 and 2021, $ 1.0 million and $ 0.9 million of the remaining deemed repatriation tax is short term and is recorded in Accrued expenses on the Consolidated Balance Sheet.

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

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Net operating loss carryforward 2,664 2,037

Net foreign currency losses 477 —

Miscellaneous 6,957 5,496

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Income tax benefits associated with tax credit carryforwards primarily expire from fiscal year 2025 to 2031.

A valuation allowance was provided as of June 30, 2021 and 2020 for deferred tax assets related to certain state credits of, in millions, $ 1.8 and $ 1.6 , respectively.

A valuation allowance was provided as of June 30, 2022 and 2021 for deferred tax assets related to certain state credits of $ 3.5 million and $ 1.8 million, respectively.

Except as reserved for in the valuation allowance, we believe our tax credit and net operating loss carryforwards are more likely than not to be realized in the future.

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Most of these accumulated unremitted foreign earnings have been invested in active non-U.S.

business operations, and we expect we may only repatriate a minor amount of these earnings to the United States in a tax-efficient manner.

business operations, and it is not anticipated such earnings will be remitted to the United States.

Our intent is to permanently reinvest these funds outside of the United States, and our current plans do not demonstrate a need to repatriate these funds to our U.S.

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Research credit ( 1,094 ) ( 2.5 ) ( 996 ) ( 1.4 ) ( 1,056 ) ( 4.2 )

Deemed repatriation — — — — ( 416 ) ( 1.1 )

Revaluation of net deferred tax assets — — — — ( 10 ) —

Global intangible low tax income 165 0.4 181 0.3 607 2.4

Non-deductible compensation 489 1.1 10 — 10 —

Other - net ( 663 ) ( 1.6 ) ( 643 ) ( 1.0 ) 297 1.4

Total provision for income taxes $ 12,478 28.5 % $ 13,263 18.9 % $ 6,961 27.7 %

Net cash payments for income taxes were, in thousands, $ 13,358 , $ 9,096 and $ 10,172 in fiscal years 2021, 2020, and 2019, respectively.

Changes in the unrecognized tax benefit, excluding accrued interest and penalties, during fiscal years 2022, 2021, and 2020 were as follows:

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Expenses related to interest and penalties in fiscal years 2022, 2021, and 2020 were not material.

Liabilities for unrecognized tax benefits, including interest and penalties, have been recorded as a result of the GES acquisition related to pre-closing tax periods of Global Equipment Services & Manufacturing Vietnam Company Limited.

This reflects management’s best assessment of the estimated taxes, interest, and penalties that are more likely than not to be paid under the applicable laws in the various jurisdictions.

Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities.

The Company or its wholly-owned subsidiaries file U.S.

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We are subject to income tax examinations by various, state, local, and foreign jurisdiction tax authorities for years after June 30, 2016.

Global Equipment Services & Manufacturing Vietnam Company Limited is subject to U.S.

federal tax examinations and various state and local jurisdictions by tax authorities for years after December 31, 2007 and for various foreign jurisdictions for years after December 31, 2009 relating to periods prior to the acquisition date.

Global Equipment Services & Manufacturing Vietnam Company Limited is subject to tax examinations for various foreign jurisdictions for years after December 31, 2011 relating to periods prior to the acquisition date.

Note 11 Share Owners’ Equity

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Total liabilities at fair value $ — $ 1,702 $ 1,702

We had no Level 3 assets or liabilities during fiscal years 2021 and 2020.

We had no Level 3 assets or liabilities as of June 30, 2022 and 2021, or any activity in Level 3 assets or liabilities during fiscal years 2022, 2021, and 2020.

The nonqualified supplemental employee retirement plan (“SERP”) assets consist primarily of equity funds, balanced funds, bond funds, and a money market fund.

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We use forward contracts designated as cash flow hedges to protect against foreign currency exchange rate risks inherent in forecasted transactions denominated in a foreign currency.

Foreign exchange contracts are also used to hedge against foreign currency exchange rate risks related to intercompany balances denominated in currencies other than the functional currencies.

Non-designated foreign exchange contracts are also used to hedge against foreign currency exchange rate risks related to intercompany balances and other balance sheet positions denominated in currencies other than the functional currencies.

As of June 30, 2022, we had outstanding foreign exchange contracts to hedge currencies against the U.S.

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Depending on the type of exposure hedged, we may either purchase a derivative contract in the opposite position of the undesignated hedge or may retain the hedge until it matures if the hedge continues to provide an adequate offset in earnings against the currency revaluation impact of foreign currency denominated liabilities.

The fair value of outstanding derivative instruments is recognized on the balance sheet as a derivative asset or liability.

The fair value of outstanding derivative instruments is recognized on the Consolidated Balance Sheets as a derivative asset or liability and presented within Prepaid expenses and other current assets and Accrued expenses, respectively.

When derivatives are settled with the counterparty, the derivative asset or liability is relieved and cash flow is impacted for the net settlement.

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Foreign exchange contracts Cost of Sales $ 279 $ ( 814 ) $ 64

Foreign exchange contracts Non-operating income (expense) — — 5

Total $ 279 $ ( 814 ) $ 64

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A SERP liability of the same amount is recorded on the balance sheet representing an obligation to distribute SERP funds to participants.

The SERP investment assets are classified as trading, and accordingly, realized and unrealized gains and losses are recognized in income in the Other Income (Expense) category.

The SERP investment assets are classified as trading, and accordingly, realized and unrealized gains and losses are recognized in income in the Other Income (Expense) category on our Consolidated Statements of Income.

Adjustments made to revalue the SERP liability are also recognized in income as selling and administrative expenses and offset valuation adjustments on SERP investment assets.

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Long-lived assets include property and equipment and capitalized software.

At or For the Year Ended June 30

Year Ended June 30

(Amounts in Thousands) 2022 2021 2020

United States $ 337,815 $ 359,839 $ 346,376

Poland 268,129 244,107 251,635

Mexico 316,884 265,476 232,135

Poland 234,057 268,129 244,107

China 204,851 180,405 159,746

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Total net sales $ 1,349,535 $ 1,291,807 $ 1,200,550

(Amounts in Thousands) 2022 2021

Long-Lived Assets:

United States $ 47,499 $ 48,190 $ 43,887

Mexico $ 78,178 $ 43,792

United States 47,353 47,499

Poland 25,924 31,412

Romania 15,273 17,707 19,546

Thailand 21,694 8,639

China 19,531 15,228

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$ 279 $ ( 814 ) Cost of Sales

— — Non-operating income (expense), net

( 206 ) 101 Benefit (Provision) for Income Taxes

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data