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Item 1. Financial Statements

2023-05-05 compared with 2023-02-07 · 126 added, 98 removed, 538 unchanged (29% of the section changed)

49 unchanged sentences

(Amounts in Thousands, Except for Per Share Data)

Three Months Ended Six Months Ended

December 31 December 31

Three Months Ended Nine Months Ended

March 31 March 31

(Unaudited) 2023 2022 2023 2022

24 unchanged sentences

Three Months Ended Three Months Ended

December 31, 2022 December 31, 2021

March 31, 2023 March 31, 2022

(Unaudited) Pre-tax Tax Net of Tax Pre-tax Tax Net of Tax

8 unchanged sentences

Other comprehensive income (loss) $ 4,166 $ ( 452 ) $ 3,714 $ ( 1,471 ) $ ( 218 ) $ ( 1,689 )

Total comprehensive income (loss) $ 22,917 $ 3,385

Six Months Ended Six Months Ended

December 31, 2022 December 31, 2021

Total comprehensive income $ 20,114 $ 11,949

Nine Months Ended Nine Months Ended

March 31, 2023 March 31, 2022

(Unaudited) Pre-tax Tax Net of Tax Pre-tax Tax Net of Tax

13 unchanged sentences

(Amounts in Thousands)

Six Months Ended

Nine Months Ended

(Unaudited) 2023 2022

24 unchanged sentences

Net change in revolving credit facilities 33,665 21,186

Repurchases of common stock — ( 4,726 )

Payments related to tax withholding for stock-based compensation ( 1,417 ) ( 1,579 )

Debt issuance costs ( 100 ) ( 25 )

Net cash provided by financing activities 107,148 64,856

13 unchanged sentences

The restricted cash included in Prepaid expenses and other current assets on the balance sheet represents funds held by the Company for a foreign subsidiary’s employee savings plan.

(Unaudited) December 31,

(Unaudited) March 31,

2023 June 30,

4 unchanged sentences

KIMBALL ELECTRONICS, INC.

CONDENSED CONSOLIDATED STATEMENT OF SHARE OWNERS’ EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF SHARE OWNERS’ EQUITY

(Amounts in Thousands, Except for Share Data)

2 unchanged sentences

(Unaudited) Additional Paid-In Capital

Amounts at September 30, 2022 $ 310,271 $ 249,731 $ ( 27,089 ) $ ( 76,668 ) $ 456,245

Amounts at December 31, 2022 $ 312,085 $ 260,451 $ ( 14,892 ) $ ( 76,496 ) $ 481,148

Net income 16,400 16,400

2 unchanged sentences

Compensation expense related to stock compensation plans 1,921 1,921

Amounts at March 31, 2023 $ 314,008 $ 276,851 $ ( 11,178 ) $ ( 76,495 ) $ 503,186

Amounts at December 31, 2021 $ 307,996 $ 216,646 $ ( 10,877 ) $ ( 68,598 ) $ 445,167

Amounts at September 30, 2021 $ 306,086 $ 211,533 $ ( 9,149 ) $ ( 68,656 ) $ 439,814

Net income 13,638 13,638

Other comprehensive income (loss) ( 1,689 ) ( 1,689 )

Issuance of non-restricted stock ( 5,000 shares)

Compensation expense related to stock compensation plans 1,515 1,515

Amounts at December 31, 2021 $ 307,996 $ 216,646 $ ( 10,877 ) $ ( 68,598 ) $ 445,167

Six Months Ended

Restricted share units issuance ( 1,000 shares)

( 13 ) 7 ( 6 )

Deferred share issuance ( 3,000 shares)

Repurchase of Common Stock ( 259,000 shares)

( 4,891 ) ( 4,891 )

Amounts at March 31, 2022 $ 309,466 $ 230,284 $ ( 12,566 ) $ ( 73,450 ) $ 453,734

Nine Months Ended

Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Share Owners’ Equity

7 unchanged sentences

( 2,417 ) 1,001 ( 1,416 )

Amounts at December 31, 2022 $ 312,085 $ 260,451 $ ( 14,892 ) $ ( 76,496 ) $ 481,148

Amounts at March 31, 2023 $ 314,008 $ 276,851 $ ( 11,178 ) $ ( 76,495 ) $ 503,186

Amounts at June 30, 2021 $ 308,123 $ 208,969 $ ( 4,883 ) $ ( 70,237 ) $ 441,972

5 unchanged sentences

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

Amounts at December 31, 2021 $ 307,996 $ 216,646 $ ( 10,877 ) $ ( 68,598 ) $ 445,167

Restricted share units issuance ( 2,000 shares)

( 40 ) 22 ( 18 )

Deferred share issuance ( 3,000 shares)

Repurchase of Common Stock ( 259,000 shares)

( 4,891 ) ( 4,891 )

Amounts at March 31, 2022 $ 309,466 $ 230,284 $ ( 12,566 ) $ ( 73,450 ) $ 453,734

See Notes to Condensed Consolidated Financial Statements .

11 unchanged sentences

Basis of Presentation:

The Condensed Consolidated Financial Statements presented herein reflect the consolidated financial position as of December 31, 2022 and June 30, 2022, results of operations for the three and six months ended December 31, 2022 and 2021, cash flows for the six months ended December 31, 2022 and 2021, and share owners’ equity for the three and six months ended December 31, 2022 and 2021.

The Condensed Consolidated Financial Statements presented herein reflect the consolidated financial position as of March 31, 2023 and June 30, 2022, results of operations for the three and nine months ended March 31, 2023 and 2022, cash flows for the nine months ended March 31, 2023 and 2022, and share owners’ equity for the three and nine months ended March 31, 2023 and 2022.

The financial data presented herein is unaudited and should be read in conjunction with the annual Consolidated Financial Statements as of and for the year ended June 30, 2022 and related notes thereto included in our Annual Report on Form 10-K.

12 unchanged sentences

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

The effects of this change in useful life estimate for the three months ended December 31, 2022 were a decrease in depreciation expense of $ 0.6 million, an increase in net income of $ 0.4 million, and an increase to basic and diluted earnings per share by $ 0.02 .

The effects of this change in useful life estimate for the six months ended December 31, 2022 were a decrease in depreciation expense of $ 2.6 million, an increase in net income of $ 2.0 million, and an increase to basic and diluted earnings per share by $ 0.08 .

The effects of this change in useful life estimate for the nine months ended March 31, 2023 were a decrease in depreciation expense of $ 2.6 million, an increase in net income of $ 2.0 million, and an increase to basic and diluted earnings per share by $ 0.08 .

Revenue Recognition:

3 unchanged sentences

Customer purchase orders primarily have a single performance obligation.

Generally, the prices stated in the customer purchase orders are agreed upon prices for the

manufactured product and do not vary over the term of the order, and therefore, the majority of our contracts do not contain variable consideration.

Generally, the prices stated in the customer purchase orders are agreed upon prices for the manufactured product and do not vary over the term of the order, and therefore, the majority of our contracts do not contain variable consideration.

In limited circumstances, we may enter into a contract which contains minimum quantity thresholds to cover our capital costs, and we may offer our customer a rebate for specific volume thresholds or other incentives;

25 unchanged sentences

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.

In the six months ended December 31, 2022 and 2021, we sold, without recourse, $ 225.1 million and $ 125.3 million of accounts receivable, respectively.

Factoring fees were $ 1.5 million and $ 0.3 million for the three months ended December 31, 2022 and 2021, and $ 2.4 million and $ 0.5 million during the six months ended December 31, 2022 and 2021, respectively.

In the nine months ended March 31, 2023 and 2022, we sold, without recourse, $ 357.1 million and $ 201.5 million of accounts receivable, respectively.

Factoring fees were $ 1.4 million and $ 0.4 million for the three months ended March 31, 2023 and 2022, and $ 3.8 million and $ 0.9 million during the nine months ended March 31, 2023 and 2022, respectively.

Factoring fees are recorded in Selling and Administrative Expenses on our Condensed Consolidated Statements of Income.

4 unchanged sentences

Other Intangible Assets consist of capitalized software, customer relationships, technology, and trade name, and are reviewed for impairment, and their remaining useful lives evaluated for revision, when events or circumstances indicate that the carrying value may not be recoverable over the remaining lives of the assets.

As of December 31, 2022, the Company determined there have been no indicators of impairment for goodwill and other intangible assets.

As of March 31, 2023, the Company determined there have been no indicators of impairment for goodwill and other intangible assets.

See Note 11 - Goodwill and Other Intangible Assets of Notes to Condensed Consolidated Financial statements for more information on Goodwill and Other Intangible Assets.

We perform our annual goodwill impairment test of our Global Equipment Services (“GES”) reporting unit in the fourth quarter.

As of March 31, 2023, GES has $ 5.8 million of goodwill.

In our latest annual test performed as of April 30, 2022, the fair value of the GES reporting unit exceeded its carrying value by 9 %.

We are in the process of developing our long-range plan, which will support our annual test.

Our test will consider GES’s recent performance and trends in the semiconductor and consumer electronics capital equipment markets which GES serves.

If our test indicates a decline in GES’s fair value, there could be a non-cash charge for impairment.

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

Operating lease costs and cash payments for operating leases are immaterial to the Condensed Consolidated Statements of Income and our Condensed Consolidated Statements of Cash Flows.

Lease right-of-use assets and lease liabilities each totaled $ 2.6 million at December 31, 2022 and $ 3.1 million at June 30, 2022, respectively.

Lease right-of-use assets and lease liabilities each totaled $ 2.8 million at March 31, 2023 and $ 3.1 million at June 30, 2022, respectively.

Lease right-of-use assets are included in Other Assets and lease liabilities are included in Accrued expenses and Other long-term liabilities on the Condensed Consolidated Balance Sheets.

Other General Income:

Other General Income in the six months ended December 31, 2021 included $ 1.4 million of pre-tax income resulting from payments received related to class action lawsuits in which Kimball Electronics was a class member.

Other General Income in the nine months ended March 31, 2022 included $ 1.4 million of pre-tax income 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.

No Other General Income was recorded in three and six months ended December 31, 2022.

No Other General Income was recorded in three and nine months ended March 31, 2023 and in the three months ended March 31, 2022.

Non-operating Income (Expense), net:

2 unchanged sentences

Components of Non-operating income (expense), net:

Three Months Ended Six Months Ended

December 31 December 31

Three Months Ended Nine Months Ended

March 31 March 31

(Amounts in Thousands) 2023 2022 2023 2022

20 unchanged sentences

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 December 31, 2022 and June 30, 2022, the remaining provision recorded for the one-time deemed repatriation tax was $ 7.8 million and $ 8.9 million, respectively, payable through fiscal year 2026, with the long-term portion recorded in Long-term income taxes payable on the Condensed Consolidated Balance Sheets.

As of December 31, 2022, $ 1.9 million of the remaining deemed repatriation tax is short term and is recorded in Accrued expenses on the Condensed Consolidated Balance Sheet.

As of March 31, 2023 and June 30, 2022, the remaining provision recorded for the one-time deemed repatriation tax was $ 7.8 million and $ 8.9 million, respectively, payable through fiscal year 2026, with the long-term portion recorded in Long-term income taxes payable on the Condensed Consolidated Balance Sheets.

As of March 31, 2023, $ 1.9 million of the remaining deemed repatriation tax is short term and is recorded in Accrued expenses on the Condensed Consolidated Balance Sheet.

Revenue from Contracts with Customers

2 unchanged sentences

Prior year periods have been recast to conform to the current year presentation.

The following table disaggregates our revenue by end market vertical for the three and six months ended December 31, 2022 and 2021.

Three Months Ended Six Months Ended

December 31 December 31

The following table disaggregates our revenue by end market vertical for the three and nine months ended March 31, 2023 and 2022.

Three Months Ended Nine Months Ended

March 31 March 31

(Amounts in Millions) 2023 2022 2023 2022

5 unchanged sentences

Total net sales $ 484.7 $ 368.1 $ 1,327.3 $ 976.0

For the three months ended December 31, 2022 and 2021, approximately 97 % and 95 % 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 we have an enforceable right to payment for performance completed to date.

For the six months ended December 31, 2022 and 2021, approximately 96 % and 95 % of our net sales, respectively, were recognized over time.

For the three months ended March 31, 2023 and 2022, approximately 96 % and 95 % 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 we have an enforceable right to payment for performance completed to date.

For the nine months ended March 31, 2023 and 2022, approximately 96 % and 95 % of our net sales, respectively, were recognized over time.

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

1 unchanged sentence

Contract assets on the Condensed Consolidated Balance Sheets relate to unbilled accounts receivable and occur when revenue is recognized over time as manufacturing services are provided and the billing to the customer has not yet occurred as of the balance sheet date, which are generally transferred to receivables in the next fiscal quarter due to the short-term nature of the manufacturing cycle.

Contract assets were $ 74.9 million and $ 64.1 million as of December 31, 2022 and June 30, 2022, respectively.

Contract assets were $ 75.7 million and $ 64.1 million as of March 31, 2023 and June 30, 2022, respectively.

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 Condensed Consolidated Balance Sheets , which amounted to $ 33.4 million and $ 22.5 million as of December 31, 2022 and June 30, 2022, respectively.

These advance payments are recognized as contract liabilities until the performance obligations are completed and are included in Accrued expenses on the Condensed Consolidated Balance Sheets , which amounted to $ 36.0 million and $ 22.5 million as of March 31, 2023 and June 30, 2022, respectively.

Our performance obligations are short term in nature and therefore our contract liabilities are all expected to be settled within twelve months.

1 unchanged sentence

Inventory components were as follows:

(Amounts in Thousands) December 31, 2022 June 30, 2022

(Amounts in Thousands) March 31, 2023 June 30, 2022

Finished products $ 485 $ 525

3 unchanged sentences

Accumulated Other Comprehensive Income (Loss)

During the six months ended December 31, 2022 and 2021, the changes in the balances of each component of Accumulated Other Comprehensive Income (Loss), net of tax, were as follows:

During the nine months ended March 31, 2023 and 2022, the changes in the balances of each component of Accumulated Other Comprehensive Income (Loss), net of tax, were as follows:

Accumulated Other Comprehensive Income (Loss)

6 unchanged sentences

Net current-period other comprehensive income (loss) 5,427 3,350 ( 283 ) 8,494

Balance at December 31, 2022

Balance at March 31, 2023

$ ( 11,922 ) $ 1,147 $ ( 403 ) $ ( 11,178 )

4 unchanged sentences

Net current-period other comprehensive income (loss) ( 7,912 ) 459 ( 230 ) ( 7,683 )

Balance at December 31, 2021

Balance at March 31, 2022

$ ( 10,135 ) $ ( 1,968 ) $ ( 463 ) $ ( 12,566 )

The following reclassifications were made from Accumulated Other Comprehensive Income (Loss) to the Condensed Consolidated Statements of Income:

Reclassifications from Accumulated Other Comprehensive Income (Loss) Three Months Ended Six Months Ended Affected Line Item in the Condensed Consolidated Statements of Income

December 31 December 31

Reclassifications from Accumulated Other Comprehensive Income (Loss) Three Months Ended Nine Months Ended Affected Line Item in the Condensed Consolidated Statements of Income

March 31 March 31

(Amounts in Thousands) 2023 2022 2023 2022

18 unchanged sentences

Product warranty liability is recorded in Accrued expenses and Other long-term liabilities on the Condensed Consolidated Balance Sheets.

Changes in the product warranty liability for the six months ended December 31, 2022 and 2021 were as follows:

Six Months Ended

Changes in the product warranty liability for the nine months ended March 31, 2023 and 2022 were as follows:

Nine Months Ended

(Amounts in Thousands) 2023 2022

6 unchanged sentences

Borrowing Capacity at Borrowings Outstanding at Borrowings Outstanding at

(Amounts in Millions, in U.S Dollar Equivalents) December 31, 2022 December 31, 2022 June 30, 2022

(Amounts in Millions, in U.S Dollar Equivalents) March 31, 2023 March 31, 2023 June 30, 2022

Primary credit facility (1)

$ 20.6 $ 279.0 $ 171.4

Secondary credit facility (2)

Thailand overdraft credit facility (3)

1 unchanged sentence

Netherlands revolving credit facility 0.6 9.3 9.2

Poland revolving credit facility (5)

Vietnam credit facility (6)

Total credit facilities $ 98.1 $ 289.4 $ 180.6

22 unchanged sentences

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 credit facility at both December 31, 2022 and June 30, 2022.

The Company had $ 0.4 million in letters of credit contingently committed against the credit facility at both March 31, 2023 and June 30, 2022.

(2) The Company entered into a 364-day multi-currency revolving credit facility agreement on February 3, 2023 (the “secondary credit facility”), which allows for borrowings up to $ 50 million, among the Company, as borrower, certain subsidiaries of the Company as guarantors, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and Bank of America, N.A., as Documentation Agent.

The secondary credit facility has a maturity date of February 2, 2024.

The proceeds of the loans are to be used for working capital and general corporate purposes of the Company.

A commitment fee on the unused portion of principal amount of this secondary credit facility is payable at 30.0 basis points per annum.

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 a Revolving Commitment Term Benchmark spread of 175.0 basis points;

• 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 a Revolving Commitment Term Benchmark spread of 175.0 basis points;

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

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);

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

plus a Revolving Commitment ABR spread of 75.0 basis points.

The Company’s financial covenants under this secondary credit facility are the same as the financial covenants for its primary credit facility.

(3) During the first quarter of fiscal year 2023, the Company expanded the borrowing capacity of the Thailand credit facility to $ 10.1 million.

(4) The Company entered into a foreign credit facility for its EMS operation in China during the first quarter of fiscal year 2023 which allows for borrowings up to $ 7.5 million.

The facility is scheduled to mature on June 30, 2023.

(5) The Company entered into a foreign credit facility for its operation in Poland which allows for borrowings up to 5.0 million Euro (approximately $ 5.4 million equivalent).

(6) The Company entered into a foreign credit facility for its operation in Vietnam which allows for borrowings up to $ 5.0 million.

(7) 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 May 4, 2027.

The weighted-average interest rate on borrowings outstanding under the credit facilities at December 31, 2022 and June 30, 2022 were 5.9 % and 2.7 %, respectively.

Subsequent to December 31, 2022, the Company entered into a 364-day multi-currency revolving credit facility (the “secondary credit facility”) on February 3, 2023 , which allows for borrowings up to $ 50.0 million, with a maturity date of February 2, 2024.

See Note 1 4 - Subsequent Event of Notes to Condensed Consolidated Financial Statements for further information on the secondary credit facility.

Also subsequent to December 31, 2022, the Company entered into a foreign credit facility for its operation in Poland which allows for borrowings up to 5.0 million Euro (approximately $ 5.4 million equivalent).

The weighted-average interest rate on borrowings outstanding under the credit facilities at March 31, 2023 and June 30, 2022 were 6.6 % and 2.7 %, respectively.

The Company categorizes assets and liabilities measured at fair value into three levels based upon the assumptions (inputs) used to price the assets or liabilities.

5 unchanged sentences

Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.

There were no changes in the inputs or valuation techniques used to measure fair values during the six months ended December 31, 2022.

There were no changes in the inputs or valuation techniques used to measure fair values during the nine months ended March 31, 2023.

For more information on inputs and fair valuation techniques used, refer to our Annual Report on Form 10-K for the year ended June 30, 2022.

Recurring Fair Value Measurements:

As of December 31, 2022 and June 30, 2022, the fair values of financial assets and liabilities that are measured at fair value on a recurring basis using the market approach are categorized as follows:

December 31, 2022

As of March 31, 2023 and June 30, 2022, the fair values of financial assets and liabilities that are measured at fair value on a recurring basis using the market approach are categorized as follows:

March 31, 2023

(Amounts in Thousands) Level 1 Level 2 Total

15 unchanged sentences

Total liabilities at fair value $ — $ 3,522 $ 3,522

We had no level 3 assets or liabilities at December 31, 2022 and June 30, 2022, or any activity in Level 3 assets or liabilities during the six months ended December 31, 2022.

We had no level 3 assets or liabilities at March 31, 2023 and June 30, 2022, or any activity in Level 3 assets or liabilities during the nine months ended March 31, 2023.

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

3 unchanged sentences

Financial instruments that are not reflected in the Condensed Consolidated Balance Sheets at fair value that have carrying amounts which approximate fair value include notes receivable and borrowings under credit facilities.

There were no changes to the inputs and valuation techniques used to assess the fair value of these financial instruments during the six months ended December 31, 2022.

There were no changes to the inputs and valuation techniques used to assess the fair value of these financial instruments during the nine months ended March 31, 2023.

For more information on inputs and fair valuation techniques used, refer to our Annual Report on Form 10-K for the year ended June 30, 2022.

9 unchanged sentences

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 December 31, 2022, we had outstanding foreign exchange contracts to hedge currencies against the U.S.

As of March 31, 2023, we had outstanding foreign exchange contracts to hedge currencies against the U.S.

dollar in the aggregate notional amount of $ 18.0 million and to hedge currencies against the Euro in the aggregate notional amount of 58.4 million Euro.

6 unchanged sentences

The gain or loss associated with derivative instruments that are not designated as hedging instruments or that cease to meet the criteria for hedging under FASB guidance is reported immediately in Non-operating income (expense), net on the Condensed Consolidated Statements of Income.

Based on fair values as of December 31, 2022, we estimate that approximately $ 1.2 million of pre-tax derivative gain deferred in Accumulated Other Comprehensive Loss will be reclassified into earnings, along with the earnings effects of related forecasted transactions, within the next 12 months.

Based on fair values as of March 31, 2023, we estimate that approximately $ 3.4 million of pre-tax derivative gain deferred in Accumulated Other Comprehensive Loss will be reclassified into earnings, along with the earnings effects of related forecasted transactions, within the next 12 months.

Gains on foreign exchange contracts are generally offset by losses in operating income in the income statement when the underlying hedged transaction is recognized in earnings.

Because gains or losses on foreign exchange contracts fluctuate partially based on currency spot rates, the future effect on earnings of the cash flow hedges alone is not determinable, but in conjunction with the underlying hedged transactions, the result is expected to be a decline in currency risk.

The maximum length of time we had hedged our exposure to the variability in future cash flows was 12 months as of both December 31, 2022 and June 30, 2022.

The maximum length of time we had hedged our exposure to the variability in future cash flows was 12 months as of both March 31, 2023 and June 30, 2022.

See Note 7 - Fair Value of Notes to Condensed Consolidated Financial Statements for further information regarding the fair value of derivative assets and liabilities and Note 4 - Accumulated Other Comprehensive Income (Loss) of Notes to Condensed Consolidated Financial Statements for the changes in deferred derivative gains and losses.

3 unchanged sentences

Fair Value As of Fair Value As of

(Amounts in Thousands) Balance Sheet Location December 31,

(Amounts in Thousands) Balance Sheet Location March 31,

2023 June 30,

2022 Balance Sheet Location December 31,

2022 Balance Sheet Location March 31,

2023 June 30,

5 unchanged sentences

The Effect of Derivative Instruments on Other Comprehensive Income (Loss)

Three Months Ended Six Months Ended

December 31 December 31

Three Months Ended Nine Months Ended

March 31 March 31

(Amounts in Thousands) 2023 2022 2023 2022

2 unchanged sentences

The Effect of Derivative Instruments on Condensed Consolidated Statements of Income

Three Months Ended Six Months Ended

(Amounts in Thousands) December 31 December 31

Three Months Ended Nine Months Ended

(Amounts in Thousands) March 31 March 31

Derivatives in Cash Flow Hedging Relationships Location of Gain or (Loss) 2023 2022 2023 2022

11 unchanged sentences

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

As of December 31, 2022, both total investments and obligations under SERP were $ 8.2 million, of which $ 0.3 million were short term and $ 7.9 million were long term.

As of March 31, 2023, both total investments and obligations under SERP were $ 8.4 million, of which $ 2.7 million were short term and $ 5.7 million were long term.

As of June 30, 2022, both total investments and obligations under SERP were $ 10.4 million, of which $ 2.6 million were short term and $ 7.8 million were long term.

1 unchanged sentence

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.

The change in net unrealized holding gains for both the six months ended December 31, 2022 and 2021 was approximately $( 0.2 ) million.

The change in net unrealized holding gains for both the nine months ended March 31, 2023 and 2022 was approximately $ 0.1 million and $( 1.1 ) million, respectively.

The Company established and maintains severance plans for all domestic employees and other postemployment plans for certain foreign subsidiaries.

2 unchanged sentences

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

Net periodic benefit costs were not material for the six months ended December 31, 2022 and 2021.

Net periodic benefit costs were not material for the nine months ended March 31, 2023 and 2022.

Stock Compensation Plans

7 unchanged sentences

For more information on the Plan and the Deferral Plan, refer to our Annual Report on Form 10-K for the year ended June 30, 2022.

During the first six months of fiscal year 2023, the following stock compensation was granted under the Plan and the Deferral Plan.

During the first nine months of fiscal year 2023, the following stock compensation was granted under the Plan and the Deferral Plan.

Stock Compensation Granted Quarter Granted Shares/Units Grant Date Fair Value (2)

9 unchanged sentences

2nd Quarter 38,925 $ 23.07

Unrestricted Shares (5)

3rd Quarter 108 $ 23.30

Deferred Share Units (6)

3rd Quarter 107 $ 23.30

Long-Term Performance Shares (1)

3rd Quarter 92,072 $ 25.51

Restricted Shares (3)

3rd Quarter 23,017 $ 25.51

Total Shareholder Return Performance Shares (7)

3rd Quarter 42,626 $ 16.88

(1) Long-term performance share awards were granted to officers and other key employees.

These annual performance share awards were approved by the Compensation and Governance Committee of the Board.

These annual performance share awards were approved by the Talent, Culture, and Compensation Committee of the Board.

The awards granted in fiscal year 2023 will cliff vest at the third anniversary of the award date in fiscal year 2026.

4 unchanged sentences

(3) Restricted shares were granted to officers and other key employees.

These restricted shares were approved by the Compensation and Governance Committee of the Board.

These restricted shares were approved by the Talent, Culture, and Compensation Committee of the Board.

The contractual life of the restricted shares is three years , with one-third of the interest in the restricted shares vested after year one of the grant, another one-third after year two of the grant, and the final one-third after year three of the grant.

10 unchanged sentences

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 .

(7) Total shareholder return (“TSR”) performance shares were awarded to our CEO during fiscal year 2023.

This award was approved by the Talent, Culture, and Compensation Committee of the Board.

The participant will earn from 0 % to 100 % of the target award based on the total shareholder return ranking of the Company compared to the performance peer group at the end of the three -year performance period.

The shares will vest on March 1, 2026.

Goodwill and Other Intangible Assets

A summary of goodwill is as follows:

(Amounts in Thousands) December 31,

(Amounts in Thousands) March 31,

2023 June 30,

3 unchanged sentences

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

December 31, 2022 June 30, 2022

March 31, 2023 June 30, 2022

(Amounts in Thousands) Cost Accumulated

6 unchanged sentences

Other Intangible Assets $ 51,164 $ ( 37,954 ) $ 13,210 $ 50,144 $ ( 35,437 ) $ 14,707

During the three months ended December 31, 2022 and 2021, amortization expense of other intangible assets was $ 0.8 million and $ 0.9 million, respectively.

During the six months ended December 31, 2022 and 2021, amortization expense of other intangible assets was $ 1.7 million.

During the three months ended March 31, 2023 and 2022, amortization expense of other intangible assets was $ 0.9 million and $ 0.8 million, respectively.

During the nine months ended March 31, 2023 and 2022, amortization expense of other intangible assets was $ 2.6 million.

The estimated useful life of internal-use software ranges from 3 years to 10 years.

5 unchanged sentences

The Plan has no expiration date but may be suspended or discontinued at any time.

During the six months ended December 31, 2022, the Company had no share repurchases under the Plan.

During the nine months ended March 31, 2023, the Company had no share repurchases under the Plan.

Since the inception of the Plan, the Company has repurchased $ 88.8 million of common stock at an average cost of $ 15.27 per share.

1 unchanged sentence

Basic and diluted earnings per share were calculated as follows under the two-class method:

Three Months Ended Six Months Ended

December 31 December 31

Three Months Ended Nine Months Ended

March 31 March 31

(Amounts in thousands, except per share data) 2023 2022 2023 2022

9 unchanged sentences

Diluted $ 0.65 $ 0.54 $ 1.46 $ 0.84

Subsequent Event

We entered into a 364-day multi-currency revolving credit facility agreement on February 3, 2023 (the “secondary credit facility”), which allows for borrowings up to $ 50 million, among the Company, as borrower, certain subsidiaries of the Company as guarantors, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and Bank of America, N.A., as Documentation Agent.

The secondary credit facility has a maturity date of February 2, 2024.

The proceeds of the loans are to be used for working capital and general corporate purposes of the Company.

A commitment fee on the unused portion of principal amount of this secondary credit facility is payable at 30.0 basis points per annum.

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.

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

◦ 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);

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

plus a Revolving Commitment ABR spread of 75.0 basis points.

The Company’s financial covenants under this secondary credit facility are the same as the financial covenants for its primary credit facility.

See Note 6 - Credit Facilities of Notes to Condensed Consolidated Financial Statements for further information on the financial covenants.

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-Q

Item 1. Financial Statements