What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-07 compared with 2022-08-05 · 120 added, 122 removed, 236 unchanged (51% of the section changed)

44 unchanged sentences

IN FINANCIAL CONDITION

the period ended June 30, 2022 vs.

the period ended September 30, 2022 vs.

December 31, 2021

Company’s cash balance of $30,272,000 on June 30, 2022 decreased $2,641,000 (8.0%) from a $32,913,000 balance at December 31, 2021.

Consistent with prior years, the Company paid a significant amount of cash during the first quarter for obligations that were accrued

as of the end of the preceding year, such as various incentive related compensation and sales promotional incentive programs.

also purchased additional raw materials because of the challenging supply chain environment.

Those cash outflows were partially offset

by income generated from operations and net cash collections from accounts receivables.

See the Company’s Condensed Consolidated

Cash Flow Statements for further details regarding the change in cash.

Receivable was $17,403,000 and $20,726,000 as of June 30, 2022 and December 31, 2021, respectively, decreasing $3,323,000 or 16.0%.

is mostly timing related, associated with greater cash collections resulting from higher sales during the fourth quarter of the previous

year versus the current quarter.

was $21,542,000 and $15,565,000 as of June 30, 2022 and December 31, 2021, respectively, increasing $5,977,000 or 38.4%.

Company’s cash balance of $30,569,000 on September 30, 2022 decreased $2,344,000 (7.1%) from a balance of $32,913,000 as of December

31, 2021 mainly because of dividends paid of $6,258,000 partially offset by cash provided by operating activities of $4,569,000.

the Company’s Condensed Consolidated Cash Flow Statements for further details regarding the change in cash.

was $21,827,000 and $15,565,000 as of September 30, 2022 and December 31, 2021, respectively, increasing $6,262,000 or 40.2%.

is mainly the result of the purchase of inventory to ensure enough materials on hand because of the challenging supply chain environment

and significantly increased costs.

Compensation was $3,178,000 on June 30, 2022, compared to $7,008,000 on December 31, 2021, decreasing $3,830,000 or 54.7%.

Current Assets were $4,615,000 on September 30, 2022, compared to $2,533,000 as of December 31, 2021, increasing $2,082,000 or 82.2%.

The increase is mainly the result of the prepayment of annual business insurance premiums for the upcoming annual period.

Compensation was $2,897,000 on September 30, 2022, compared to $7,008,000 on December 31, 2021, decreasing $4,111,000 or 58.7%.

A significant

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liability was then paid during the first quarter of the following year, or 2022, thus diminishing the balance.

The liability now represents

amounts earned during the current year.

Commissions and Sales Incentives were $3,944,000 and $7,183,000 as of June 30, 2022 and December 31, 2021, respectively, decreasing $3,239,000

A portion of the decrease relates to a lower level of sales during the current quarter in comparison to the fourth quarter

of the previous year, and the resulting commissions and sales incentives that are earned.

Additionally, a portion of the sales incentives

have an annual component which accumulates during the year and are then paid during the first quarter of the following year.

earnings were $54,696,000 and $50,053,000 as of June 30, 2022 and December 31, 2021, respectively, increasing $4,643,000 or 9.3%.

increase was primarily due to net income during the year, as provided on the Company’s Condensed Consolidated Statements of Income,

partially offset by dividends declared during 2022, as discussed in detail in Note 8, Shareholders’ Equity, to the Condensed Consolidated

Financial Statements included in this report.

In the current year there

was a decrease in the incentive compensation liability to align with the changes in the executive management team.

The liability now

represents amounts earned during the current year.

Commissions and Sales Incentives were $4,765,000 and $7,183,000 as of September 30, 2022 and December 31, 2021, respectively, decreasing

$2,418,000 or 33.7%.

A portion of the decrease relates to a lower level of sales during the current quarter in comparison to the fourth

quarter of the previous year, and the resulting commissions and sales incentives that are earned.

Additionally, a portion of the sales

incentives have an annual component which accumulates during the year and are then paid during the first quarter of the following year.

Liabilities were $7,079,000 and $4,864,000 as of September 30, 2022 and December 31, 2021, respectively.

The increase of $2,215,000 or

45.5% mainly relates to accruals for legal and product liability matters which the Company continues to vigorously defend.

earnings were $58,005,000 and $50,053,000 as of September 30, 2022 and December 31, 2021, respectively, increasing $7,952,000 or 15.9%.

The increase was primarily due to net income during the year, as provided on the Company’s Condensed Consolidated Statements of

Income, partially offset by dividends declared during 2022, as discussed in detail in Note 8, Shareholders’ Equity, to the Condensed

Consolidated Financial Statements included in this report.

OF OPERATIONS

months ended June 30, 2022 vs.

June 30, 2021

Company reported comparative results from operations for the three months ended June 30, 2022 and 2021 as follows:

months ended June 30,

(in thousands)

Operating Profit

The Company’s 2022 second quarter sales of $31,748,000 decreased $218,000 or 0.7% compared to the second quarter of

months ended September 30, 2022 vs.

September 30, 2021

Company reported comparative results from operations for the three months ended September 30, 2022 and 2021 as follows:

months ended September 30,

The Company’s 2022 third quarter sales of $31,629,000 decreased $96,000 or 0.3% compared to the third quarter of 2021,

which generated sales of $31,725,000.

The decrease in sales resulted primarily from a decrease in volume which was mainly offset

by pricing actions which the Company took to offset material cost pressure and to protect margins.

The Company’s gross profit margins were 65.5% and 61.6% for the three months ended June 30, 2022 and 2021, respectively.

The increase mainly relates to pricing actions which the Company took to offset material cost pressure and to protect margins.

Although sales are consistent with the previous period, sales unit volumes were lower.

of the lower sales volumes was largely offset by pricing actions to offset material cost pressure and to protect margins.

The Company’s gross profit margins were 62.5% and 63.2% for the three months ended September 30, 2022 and 2021, respectively.

Selling expenses consist primarily of employee salaries and associated overhead costs, commissions, and the cost of marketing

1 unchanged sentence

Selling expense was $5,261,000 and $4,876,000

for the three months ended June 30, 2022 and 2021, respectively, representing an increase of $573,000 or 11.6%.

for the three months ended September 30, 2022 and 2021, respectively, representing an increase of $385,000 or 7.9%.

The increases mostly

related to costs for resumption of travel and other marketing efforts, which were lower in the 2021 period due to the pandemic, commissions,

and staffing related expenses.

Commissions increased partly because of a shift of shipments from third party warehouses, whose shipments

are subject to commission, compared to those directly from the manufacturing facilities, whose shipments are not subject to commission.

Selling expenses increased as a percent of net sales compared to last year, being 17.3% for the three months ended June 30, 2022, and

15.4% for the three months ended June 30, 2021.

related to commissions, staffing related expenses, and costs for resumption of travel and other marketing efforts, which were lower in

the 2021 period due to the pandemic, partially offset by lower freight.

Selling expenses increased as a percent of net sales compared

to last year, being 16.6% for the three months ended September 30, 2022, and 15.4% for the three months ended September 30, 2021.

and Administrative Expenses .

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General and administrative

expenses were $6,753,000 and $5,139,000 for the three months ended June 30, 2022 and 2021, respectively, thus increasing by $1,614,000

Higher items include higher product liability reserves and expenses of $1,918,000 associated primarily with one pending case,

which the Company continues to vigorously defend, and staffing related expenses which are partially offset by lower incentive compensation

and professional fees.

Incentive compensation is derived from two notable components.

There was a decrease in the incentive compensation

component which is aligned with profitability;

and there was a reduction in stock based compensation expense which moves in relation

expenses were $4,754,000 and $5,724,000 for the three months ended September 30, 2022 and 2021, respectively, thus decreasing by $970,000

There was a decrease in the incentive compensation component which is aligned with profitability of $1,774,000 to align with

the changes in the executive management team.

There also was a reduction in stock-based compensation expense which moves in relation

to the Company’s stock price, as detailed in Note 6, Stock-Based Compensation Plans, to the Condensed Consolidated Financial Statements

included in this report.

As a percentage of sales, general and administrative expenses increased to 21.3% for the three months ended

June 30, 2022 from 16.1% for the three months ended June 30, 2021.

Higher items include product liability reserves and expenses, associated primarily with one pending case, which

the Company continues to vigorously defend, and staffing related expenses.

As a percentage of sales, general and administrative expenses

decreased to 15.0% for the three months ended September 30, 2022 from 18.0% for the three months ended September 30, 2021.

Engineering expenses consist of development expenses associated with the development of new products and enhancements to

1 unchanged sentence

Engineering expenses were $1,101,000 and $1,113,000 for the three months ended

June 30, 2022 and 2021, respectively, decreasing by $15,000 or 1.2%.

Engineering expenses as a percentage of sales were 3.8% for the

three months ended June 30, 2022 and 2021.

September 30, 2022 and 2021, respectively, decreasing by $12,000 or 1.1%.

Engineering expenses as a percentage of sales were 3.5% for

the three months ended September 30, 2022 and 2021.

Reflecting all of the factors mentioned above, operating profits were $8,641,000 and $8,326,000 for the three months ended

June 30, 2022 and 2021, respectively, decreasing by $1,077,000 or 12.8%.

September 30, 2022 and 2021, respectively, increasing by $315,000 or 3.8%.

Interest income is recorded on cash investments, and interest expense is recorded at times when the Company has debt amounts

outstanding on its line of credit.

The Company recorded $11,000 of interest income for the three months ended June 30, 2022 and $8,000

for the three months ended June 30, 2021.

The Company recorded $32,000 of interest income for the three months ended September 30, 2022 and

$10,000 for the three months ended September 30, 2021.

Income (Expense) .

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subsidiaries.

a loss of $138,000 recorded during the three months ended June 30, 2022, but income of $7,000 during the three months ended June 30,

The British Pound had weakened during the three months ended June 30, 2022.

losses of $210,000 and $19,000 recorded during the three months ended September 30, 2022 and 2021 respectively.

The British Pound had

weakened during each of the third quarters of 2022 and 2021.

As a percentage of sales, other expenses increased to 0.7% for the three

months ended September 30, 2022 from 0.1% for the three months ended September 30, 2021.

Tax Expense .

Income tax expense was $1,755,000 for the three months ended June 30, 2022, compared to $2,232,000 for the same period

in 2021, decreasing $477,000 or 21.4%, mostly the result of the decrease in income before taxes.

months ended June 30, 2022 vs.

June 30, 2021

Company reported comparative results from operations for the six months ended June 30, 2022 and 2021 as follows:

months ended June 30,

(in thousands)

Operating Profit

The Company’s sales for the first six months of 2022 of $63,041,000 increased $212,000 or 0.3% compared to the first

six months of 2021, which generated sales of $62,829,000.

The increase in sales was two-fold, resulting primarily from pricing actions

which the Company took to offset material cost pressure and to protect margins and, to a lesser extent, by a decrease in unit volume.

The Company’s gross profit margins were 63.3% and 62.5% for the six months ended June 30, 2022 and 2021, respectively.

Income tax expense was $1,924,000 for the three months ended September 30, 2022, compared to $2,160,000 for the same

period in 2021, decreasing $236,000 or 10.9%, mostly because of the reduction of non-deductible incentive compensation to align with

the changes in the executive management team.

months ended September 30, 2022 vs.

September 30, 2021

Company reported comparative results from operations for the nine months ended September 30, 2022 and 2021 as follows:

months ended September 30,

The Company’s sales for the first nine months of 2022 of $94,670,000 increased $116,000 or 0.1% compared to the first

nine months of 2021, which generated sales of $94,554,000.

Although sales are consistent with the previous period, sales unit volumes

The effect of the lower sales volumes was largely offset by pricing actions to offset material cost pressure and to protect

The Company’s gross profit margins were 63.0% and 62.7% for the nine months ended September 30, 2022 and 2021, respectively.

Selling expenses consist primarily of employee salaries and associated overhead costs, commissions, and the cost of marketing

1 unchanged sentence

Selling expense was $16,545,000 and $14,625,000

for the six months ended June 30, 2022 and 2021, respectively, representing an increase of $1,535,000 or 15.7%.

for the nine months ended September 30, 2022 and 2021, respectively, representing an increase of $1,920,000 or 13.1%.

The increases primarily

related to costs for resumption of travel and other marketing efforts, which were lower in the 2021 period due to the pandemic.

freight and staffing related expenses were also higher.

Commissions increased partly because of a shift of shipments from third party

warehouses, whose shipments are subject to commission, compared to those directly from the manufacturing facilities, whose shipments

are not subject to commission.

Freight costs increased because of higher fuel costs and constrained availability.

Selling expenses increased

as a percent of net sales compared to last year, being 17.9% for the six months ended June 30, 2022, and 15.5% for the six months ended

June 30, 2021.

and staffing related expenses were also higher.

Commissions increased partly because of a shift of shipments from third party warehouses,

whose shipments are subject to commission, compared to those directly from the manufacturing facilities, whose shipments are not subject

to commission.

Selling expenses increased as a percent of net sales compared to last year, being 17.5% for the nine months ended September

30, 2022, and 15.5% for the nine months ended September 30, 2021.

and Administrative Expenses .

2 unchanged sentences

General and administrative

expenses were $11,503,000 and $10,557,000 for the six months ended June 30, 2022 and 2021, respectively, thus increasing by $946,000

Higher items higher product liability reserves and expenses of $1,520,000 associated primarily with one pending case, which

the Company continues to vigorously defend, and staffing related expenses which are partially offset by lower incentive compensation

and professional fees.

Incentive compensation is derived from two notable components.

There was a decrease in the incentive compensation

component which is aligned with profitability;

and there was a reduction in stock based compensation expense which moves in relation

to the Company’s stock price, as detailed in Note 6, Stock Based Compensation Plans, to the Condensed Consolidated Financial Statements

expenses were $16,257,000 and $16,281,000 for the nine months ended September 30, 2022 and 2021, respectively, thus decreasing by $24,000

There was a decrease in the incentive compensation component which is aligned with profitability of $2,167,000 to align with

the changes in the executive management team and there was a reduction in stock-based compensation expense which moves in relation to

the Company’s stock price, as detailed in Note 6, Stock-Based Compensation Plans, to the Condensed Consolidated Financial Statements

included in this report.

As a percentage of sales, general and administrative expenses increased to 18.2% for the six months ended June

30, 2022 from 16.8% for the six months ended June 30, 2021.

Higher items higher product liability reserves and expenses of $2,159,000 associated primarily with two pending

cases, which the Company continues to vigorously defend, and staffing related expenses.

As a percentage of sales, general and administrative

expenses were 17.2% for the nine months ended September 30, 2022 and 2021.

Engineering expenses consist of development expenses associated with the development of new products and enhancements to

existing products, and manufacturing engineering costs.

Engineering expenses were $2,413,000 and $2,213,000 for the six months ended

June 30, 2022 and 2021, respectively, increasing by $200,000 or 9.0%, mainly associated with increases in experimental materials and

Engineering expenses increased as a percentage of sales, being 3.8% for the six months ended June 30, 2022, and 3.5% for the

same period in 2021.

Reflecting all of the factors mentioned above, operating profits were $14,708,000 and $16,738,000 for the six months ended

June 30, 2022 and 2021, respectively, decreasing by $2,030,000 or 12.1%.

Engineering expenses were $3,514,000 and $3,326,000 for the nine months ended

September 30, 2022 and 2021, respectively, increasing by $188,000 or 5.7%, mainly associated with increases in experimental materials

Engineering expenses increased as a percentage of sales, being 3.7% for the nine months ended September 30, 2022, and 3.5%

for the same period in 2021.

Reflecting all of the factors mentioned above, operating profits were $23,349,000 and $25,064,000 for the nine months ended

September 30, 2022 and 2021, respectively, decreasing by $1,715,000 or 6.8%.

Interest income is recorded on cash investments, and interest expense is recorded at times when the Company has debt amounts

outstanding on its line of credit.

The Company recorded $20,000 and $17,000 of interest income during the first six months of 2022 and

The Company recorded $52,000 and $27,000 of interest income during the first nine months of 2022 and

2021, respectively.

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subsidiaries.

a loss of $164,000 recorded during the first six months of 2022, but a gain of $25,000 during the first six months of 2021.

Pound had weakened during the first six months of 2022.

a loss of $374,000 recorded during the first nine months of 2022, but a gain of $6,000 during the first nine months of 2021.

Pound had weakened during the first nine months of 2022.

As a percentage of sales, other expenses increased to 0.4% for the nine months

ended September 30, 2022.

Tax Expense .

Income Tax Expense was $3,634,000 for the first six months of 2022, compared to $4,281,000 for the same period in 2021,

decreasing $647,000 or 15.1%, mostly the result of the decrease in income before taxes.

Income Tax Expense was $5,558,000 for the first nine months of 2022, compared to $6,441,000 for the same period in 2021,

decreasing $883,000 or 13.7%, because of the decrease in income before taxes and from the reduction of non-deductible incentive compensation

to align with the changes in the executive management team.

ACCOUNTING POLICIES AND ESTIMATES

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and accordingly, the liability in the Condensed Consolidated Financial Statements primarily represents an accrual for legal costs for

services previously rendered, and outstanding or anticipated settlements for claims, to the extent not expected to be covered by the

Company’s insurance policies.

services previously rendered, settlements for Claims not yet paid, and anticipated settlements for claims within the Company’s

remaining retention under its insurance policies.

Compensation Plans

4 unchanged sentences

The Units follow a vesting

schedule of three years from the grant date and are then paid upon maturity.

schedule over three years from the grant date and are then paid upon maturity.

In accordance with FASB ASC Topic 718, Compensation

5 unchanged sentences

the period the Units are forfeited.

Further details of the Plan are provided in Note 6, Stock-Based Compensation Plans, to the Condensed

Consolidated Financial Statements included in this report.

Any significant changes in the Company’s stock price may have a material

impact upon the valuation of the Units.

Plan has been amended and restated, for all grants made starting January 1, 2023, to set the vesting method to three-year cliff vesting

following the grant date, with full value paid upon maturity.

Additionally, for grants made starting January 1, 2023, upon retirement

at age 67 or greater, and with one year of continuous service prior to retirement, vesting of the issued grant(s) would accelerate on

a pro-rata basis, 1/3 per year from the grant date.

details of the Plan are provided in Note 6, Stock-Based Compensation Plans, to the Condensed Consolidated Financial Statements included

in this report.

Any significant changes in the Company’s stock price may have a material impact upon the valuation of the Units.

Company accounts for tax liabilities in accordance with the FASB ASC Topic 740, Income Taxes .

19 unchanged sentences

generated from operations.

of June 30, 2022, the Company had a cash balance of $30,272,000.

of September 30, 2022, the Company had a cash balance of $30,569,000.

Additionally, the Company has a $15,000,000 line of credit available,

as discussed in detail in Note 4, which had no borrowings outstanding upon it on June 30, 2022.

On December 31, 2021, the Company had

a cash balance of $32,913,000, with no borrowings against the line of credit.

as discussed in detail in Note 4, which had no borrowings outstanding upon it on September 30, 2022.

On December 31, 2021, the Company

had a cash balance of $32,913,000, with no borrowings against the line of credit.

provided or used by operating activities is net income adjusted for certain non-cash items and changes in certain assets and liabilities,

such as those included in working capital.

the six months ended June 30, 2022, the Company’s operating activities provided cash of $873,000, compared to the six months ended

June 30, 2021 which provided cash of $10,980,000, a difference of $10,107,000.

For details of the operating cash flows refer to the Condensed

Consolidated Statements of Cash Flows in Part I – Financial Information on page seven.

the nine months ended September 30, 2022, the Company’s operating activities provided cash of $4,569,000, compared to the nine

months ended September 30, 2021 which provided cash of $13,164,000, a difference of $8,595,000.

For details of the operating cash flows

refer to the Condensed Consolidated Statements of Cash Flows in Part I – Financial Information on page eight.

a general trend, the Company tends to deplete or generate lower amounts of cash early in the year, as significant payments are typically

2 unchanged sentences

during the latter portion of the year.

used in investing activities during the six months ended June 30, 2022 and 2021 was $504,000 and $517,000, respectively for capital expenditures.

used in investing activities during the nine months ended September 30, 2022 and 2021 was $817,000 and $720,000, respectively for capital

expenditures.

financing activities relate to dividend payments, which are detailed in Note 8, Shareholders’ Equity.

Dividend payments through

the first six months of 2022 and 2021 amounted to $3,028,000 and $5,653,000, respectively.

the first nine months of 2022 and 2021 amounted to $6,258,000 and $8,809,000, respectively.

believe our existing cash and cash equivalents, along with our borrowing capacity, will be sufficient to meet our anticipated cash needs

7 unchanged sentences

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 2. Management’s Discussion and Analysis