What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-08-13 compared with 2020-08-25 · 1023 added, 530 removed, 1209 unchanged (56% of the section changed)

Financial Statements and Supplementary Data

Standex International Corporation and Subsidiaries

Consolidated Balance Sheets

As of June 30 (in thousands, except share data)

Current assets:

Cash and cash equivalents  

$ 136,367  

$ 118,809  

Accounts receivable, net  

109,883  

98,157  

Inventories  

91,862  

85,031  

Prepaid expenses and other current assets  

23,504  

18,870  

Income taxes receivable  

Current assets-Discontinued Operations  

Income taxes receivable

12,750  

Current assets-discontinued operations

Total current assets

1 unchanged sentence

331,997  

Property, plant and equipment, net  

132,533  

Property, plant and equipment, net

133,373  

Intangible assets, net  

132,533  

Intangible assets, net

98,929  

Goodwill  

106,412  

278,054  

Deferred tax asset  

271,221  

Deferred tax asset

17,322  

Operating lease right-of-use asset  

37,276  

Other non-current assets  

44,788  

Other non-current assets

30,659  

Long-term assets-Discontinued Operations  

26,605  

6 unchanged sentences

Current liabilities:

Accounts payable  

$ 54,910  

Accounts payable

$ 74,756  

Accrued liabilities  

$ 54,910  

Accrued liabilities

61,717  

Income taxes payable  

Current liabilities-Discontinued Operations  

59,929  

Income taxes payable

Current liabilities- discontinued operations

Total current liabilities

1 unchanged sentence

122,877  

Long-term debt  

199,490  

199,150  

Operating lease long-term liabilities  

29,041  

Accrued pension and other non-current liabilities  

36,293  

Accrued pension and other non-current liabilities

83,558  

Non-current liabilities-Discontinued Operations  

110,926  

Total non-current liabilities

1 unchanged sentence

346,369  

Commitments and Contingencies (Note 12)

Contingencies (Note 12)

Stockholders' equity:

Common stock, par value $ 1.50 per share - 60,000,000 shares authorized, 27,984,278 issued, 12,235,786 and 12,334,607 shares outstanding in 2020 and 2019  

Common stock, par value $1.50 per share - 60,000,000 shares authorized, 27,984,278 issued, 12,044,405 and 12,235,786 shares outstanding in 2021 and 2020

41,976  

Additional paid-in capital  

80,788  

72,752  

Retained earnings  

852,489  

827,656  

Accumulated other comprehensive loss  

( 116,140 )  

Treasury shares ( 15,748,492 shares in 2020 and 15,649,671 shares in 2019)  

Treasury shares ( 15,939,873 shares in 2021 and 15,748,492 shares in 2020)

( 352,688 )  

6 unchanged sentences

See notes to consolidated financial statements.

Consolidated Statements of Operations

Standex International Corporation and Subsidiaries

Consolidated Statements of Operations

For the Years Ended June 30

(in thousands, except per share data)

$ 656,232  

$ 604,535  

$ 639,931  

Cost of sales

Selling, general and administrative

( 414,971 )  

( 389,080 )  

241,261  

215,455  

234,667  

Selling, general and administrative expenses

163,063  

148,499  

150,327  

Restructuring costs

Loss on sale of business

14,624  

Acquisition related expenses

1 unchanged sentence

Income from operations

59,165  

60,528  

79,476  

Interest expense

10,760  

Other non-operating (income) expense, net

( 1,021 )  

Income from continuing operations before income taxes

52,700  

54,074  

66,974  

Provision for income taxes

( 14,157 )  

( 13,060 )  

Income from continuing operations

38,543  

41,014  

48,286  

Income (loss) from discontinued operations, net of tax

( 2,070 )  

( 20,826 )  

19,628  

$ 36,473  

$ 20,188  

$ 67,914  

Basic earnings per share:

Income (loss) from continuing operations

Income (loss) from discontinued operations

Diluted earnings per share:

Income (loss) from continuing operations

$ 3.17  

$ 3.33  

$ 3.84  

Income (loss) from discontinued operations

See notes to consolidated financial statements.

Consolidated Statements of Comprehensive Income

Standex International Corporation and Subsidiaries

For the Years Ended June 30 (in thousands)

Net income  

( 0.17 )  

1 unchanged sentence

$ 3.00  

Other comprehensive income (loss):

Defined benefit pension plans:

Actuarial gains (losses) and other changes in unrecognized costs  

$ 1.64  

$ 5.40  

Diluted earnings per share:

Income (loss) from continuing operations

$ 3.14  

Amortization of unrecognized costs  

Derivative instruments:

Change in unrealized gains and (losses)  

$ 3.31  

$ 3.83  

Amortization of unrealized gains and (losses) into interest expense  

Income (loss) from discontinued operations

( 0.17 )  

Foreign currency translation gains (losses)  

( 1.68 )  

$ 2.97  

Other comprehensive income (loss) before tax

$ 1.63  

$ 5.38  

See notes to consolidated financial statements.

Standex International Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

For the Years Ended June 30 (in thousands)

$ 36,473  

Income tax (provision) benefit:

Defined benefit pension plans:

Actuarial gains (losses) and other changes in unrecognized costs  

$ 20,188  

$ 67,914  

Amortization of unrecognized costs  

Other comprehensive income (loss):

Defined benefit pension plans:

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

$ 12,425  

$ ( 6,864 )  

Amortization of unrecognized costs, net of tax

Derivative instruments:

Change in unrealized gains and (losses)  

( 419 )  

Amortization of unrealized gains and (losses) into interest expense  

Change in unrealized gains and (losses), net of tax

( 3,501 )  

Income tax (provision) benefit to other comprehensive income (loss)

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

( 991 )  

Foreign currency translation gains (losses), net of tax

( 3,388 )  

2 unchanged sentences

$ ( 10,381 )  

11,292  

Comprehensive income

3 unchanged sentences

See notes to consolidated financial statements.

Consolidated Statements of Stockholders' Equity

Standex International Corporation and Subsidiaries

Consolidated Statements of Stockholders' Equity

Accumulated  

Comprehensive

11 unchanged sentences

$ 450,795  

Stock issued for employee stock option and purchase plans, including related income tax benefit and other  

( 417 )  

Stock issued under incentive compensation plans and employee purchase plans

( 163 )  

Stock-based compensation  

Treasury stock acquired  

( 67 )  

Adoption of ASU 2018-02  

Stock-based compensation

Treasury stock acquired

( 33,394 )  

Adoption of ASC 606

( 1,107 )  

Comprehensive income:

Net Income  

67,914  

Foreign currency translation adjustment  

Pension and OPEB adjustments, net of tax of $ 2.9 million  

Change in fair value of derivatives, net of tax of $ 0.4 million  

Dividends declared ($ 0.70 per share)  

Foreign currency translation adjustment

( 2,645 )  

Balance, June 30, 2018

Pension, net of tax of $3.7 million

( 12,268 )  

Change in fair value of derivatives, net of tax of $0.7 million

( 506 )  

Dividends declared ( $0.78 per share)

( 9,955 )  

Balance, June 30, 2019

$ 41,976  

2 unchanged sentences

$ ( 137,278 )  

Stock issued for employee stock option and purchase plans and other  

15,650  

$ ( 324,182 )  

Stock-based compensation  

Treasury stock acquired  

$ 464,313  

Adoption of ASC 606  

Stock issued under incentive compensation plans and employee purchase plans

( 74 )  

Stock-based compensation

Treasury stock acquired

( 10,437 )  

Adoption of ASC 606

( 55 )  

Comprehensive income:

Net Income  

20,188  

Foreign currency translation adjustment  

( 3,388 )  

Pension and OPEB adjustments, net of tax of $ 3.7 million  

Pension, net of tax of $0.9 million

( 2,500 )  

Change in fair value of derivatives, net of tax of $ 0.7 million  

Change in fair value of derivatives, net of tax of $1.6 million

( 4,493 )  

9 unchanged sentences

$ 461,632  

Stock issued for employee stock option and purchase plans and other  

Stock issued under incentive compensation plans and employee purchase plans

( 332 )  

Stock-based compensation  

Treasury stock acquired  

( 76 )  

Adoption of ASC 606  

Stock-based compensation

Treasury stock acquired

( 21,200 )  

Comprehensive income:

Net Income  

36,473  

Foreign currency translation adjustment  

( 3,388 )  

Pension and OPEB adjustments, net of tax of $ 0.9 million  

Foreign currency translation adjustment

Pension, net of tax of $5.6 million

17,508  

Change in fair value of derivatives, net of tax of $ 1.6 million  

17,508  

Dividends declared ($ 0.86 per share)  

Change in fair value of derivatives, net of tax of $0.9 million

Dividends declared ( $0.94 per share)

( 11,640 )  

Balance, June 30, 2020  

Balance, June 30, 2021

$ 41,976  

6 unchanged sentences

See notes to consolidated financial statements.

Standex International Corporation and Subsidiaries

Consolidated Statements of Cash Flows

1 unchanged sentence

Cash Flows from Operating Activities

$ 36,473  

$ 20,188  

$ 67,914  

Income (loss) from discontinued operations

Income (loss) from continuing operations

( 2,070 )  

( 20,826 )  

19,628  

Income from continuing operations

38,543  

41,014  

48,286  

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

Depreciation and amortization

33,241  

32,294  

29,288  

Stock-based compensation

Non-cash portion of restructuring charge

(Gain) loss on disposal of real estate and equipment

( 489 )  

Loss on sale of business

14,624  

Gain from extinguishment of debt - PPP loan

( 713 )  

Deferred income taxes

Life insurance benefit

( 1,302 )  

Increase/(decrease) in cash from changes in assets and liabilities, net of effects from discontinued operations and business acquisitions:

Accounts receivables, net

( 5,542 )  

( 7,717 )  

( 9,050 )  

Contributions to defined benefit plans

Prepaid expenses and other

( 8,120 )  

( 4,040 )  

Prepaid expenses and other assets

( 8,000 )  

( 10,960 )  

Accounts payable

Accrued payroll, employee benefits and other liabilities

17,612  

Accrued liabilities, pension and other liabilities

Income taxes payable

( 5,697 )  

( 11,167 )  

Net cash provided by operating activities from continuing operations

Net cash used for operating activities from discontinued operations

81,866  

54,677  

72,929  

Net cash provided by (used for) operating activities from discontinued operations

( 7,435 )  

Net cash provided by operating activities

83,582  

47,242  

73,346  

Cash Flows from Investing Activities

Expenditures for capital assets

Expenditures for property, plant and equipment

( 21,752 )  

( 21,521 )  

Expenditures for acquisitions, net of cash acquired

( 27,406 )  

( 622 )  

Expenditures for executive life insurance policies

( 243 )  

( 281 )  

Proceeds from sale of business

11,678  

Proceeds from sale of real estate and equipment

Other investing activity

( 1,485 )  

Net cash (used for) investing activities from continuing operations

( 39,091 )  

( 20,620 )  

Net cash provided by investing activities from discontinued operations

20,003  

107,973  

Net cash provided by (used for) investing activities

( 39,091 )  

( 617 )  

Cash Flows from Financing Activities

Proceeds from borrowings

17,000  

106,500  

241,950  

Payments of debt

( 17,000 )  

( 105,300 )  

Contingent consideration payment

Stock issued under employee stock option and purchase plans

( 356 )  

( 872 )  

Activity under share-based payment plans

Purchase of treasury stock

( 21,200 )  

( 10,437 )  

Cash dividends paid

Net cash provided by (used for) financing activities

( 11,449 )  

( 10,606 )  

Net cash (used for) financing activities

( 31,732 )  

( 18,977 )  

Effect of exchange rate changes on cash

( 1,984 )  

Net change in cash and cash equivalents

17,558  

25,664  

Cash and cash equivalents at beginning of year

118,809  

93,145  

109,602  

Cash and cash equivalents at end of year

$ 136,367  

$ 118,809  

$ 93,145  

Supplemental Disclosure of Cash Flow Information:

Cash paid during the year for:

$ 4,904  

$ 6,324  

$ 9,471  

Income taxes, net of refunds

$ 17,185  

$ 18,737  

$ 23,969  

See notes to consolidated financial statements.

4 unchanged sentences

Standex International Corporation (“Standex”

or the “Company”) is a diversified manufacturing company with operations in the United States, Europe, Asia, Africa, and Latin America.

or the “Company”) is a diversified industrial manufacturer in five broad business segments:

Electronics, Engraving, Scientific, Engineering Technologies, and Specialty Solutions with operations in the United States, Europe, Canada, Japan, Singapore, Mexico, Brazil, Turkey, South Africa, India, and China.

The accompanying consolidated financial statements include the accounts of Standex International Corporation and its subsidiaries and are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

8 unchanged sentences

Actual results may differ from these estimates under different assumptions or conditions. 

The estimates and assumptions used in the preparation of the consolidated financial statements have considered the implications on the Company as a result of the onset of the COVID- 19 pandemic and its related economic impacts. As a result of the COVID 19 pandemic,  there is heightened volatility and uncertainty in customer demand and the worldwide economy.

The estimates and assumptions used in the preparation of the consolidated financial statements have considered the implications on the Company as a result of the COVID- 19 pandemic and its related economic impacts. As a result of the COVID 19 pandemic, there is heightened volatility and uncertainty in customer demand and the worldwide economy.

However, the magnitude of such impact on the Company’s business and its duration is uncertain.

The Company is not aware of any specific event or circumstance that would require an update to its estimates or adjustments to the carrying value of its assets and liabilities as of June 

30, 2020 and the issuance date of this Annual Report on Form 10 -K

The Company is not aware of any specific event or circumstance that would require an update to its estimates or adjustments to the carrying value of its assets and liabilities as of June 30, 2021  and the issuance date of this Annual Report on Form 10 -K.

Cash and Cash Equivalents

1 unchanged sentence

These investments are carried at cost, which approximates fair value.

At June 30, 2020 

and 2019  the C ompany’s cash was comprised solely of cash on deposit.

At June 30, 2021  and 2020 , the C ompany’s cash was comprised solely of cash on deposit.

Trading Securities

1 unchanged sentence

These investments are classified as trading and reported at fair value.

The investments generally consisting of mutual funds, are included in other non-current assets and amounted to $ 2.1 million at June 30, 2020 and $ 2.4 million at June 30, 2019.

The investments, generally consisting of mutual funds, are included in other non-current assets and amounted to $ 3.0 million at 

June 30, 2021  and $ 2.1 million at June 30, 2020 .

Gains and losses on these investments are recorded as other non-operating (income) expense, net in the Consolidated Statements of Operations.

Accounts Receivable Allowances

The Company has provided an allowance for doubtful accounts reserve which represents the best estimate of probable loss inherent in the Company’s account receivables portfolio.

This estimate is derived from the Company’s knowledge of its end markets, customer base, products, and historical experience.

The changes in the allowances for uncollectible accounts during 2020 , 2019 , and 

The Company has provided an allowance for credit losses. 

All trade account receivables are reported net of allowances for expected credit losses.

The allowances for expected credit losses represent management’s best estimate of the credit losses expected from our trade account receivables over the life of the underlying assets.

Assets with similar risk characteristics are pooled together for determination of their current expected credit losses.

The Company regularly performs detailed reviews of its pooled assets to evaluate the collectability of receivables based on a combination of past, current, and future financial and qualitative factors that may affect customers’

ability to pay.

In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations, a specific reserve is recorded against amounts due to reduce the recognized receivable to the amount reasonably expected to be collected.

The changes in the allowances for credit losses accounts during 2021 , 2020 , and 

2019 were as follows (in thousands):

Balance at beginning of year

$ 1,250  

$ 1,590  

$ 1,131  

Acquisitions and other  

Provision charged to expense

( 48 )  

Write-offs, net of recoveries

( 153 )  

( 358 )  

Balance at end of year

$ 2,113  

$ 1,250  

$ 1,590  

Inventories are stated at the lower of ( first -in, first -out) cost or market.

21 unchanged sentences

Major improvements, including those made to leased facilities, are capitalized.

At the inception of an arrangement, we determined whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement.

Leases with a term greater than 

one  year are recognized on the balance sheet as right-of-use assets and short-term and long-term lease liabilities, as applicable.

We do not  have material financing leases.

Operating lease liabilities and their corresponding right-of-use assets are initially recorded based on the present value of lease payments over the expected remaining lease term.

The interest rate implicit in lease contracts is typically 

not  readily determinable.

As a result, we utilize our incremental borrowing rate to discount lease payments, which reflects the fixed rate at which we could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

To estimate our incremental borrowing rate, a credit rating applicable to the Company is estimated using a synthetic credit rating analysis since we do not  currently have a rating agency-based credit rating.

We have elected 

not  to recognize leases with an original term of 

one  year or less on the balance sheet.

We typically only include an initial lease term in our assessment of a lease arrangement.

Options to renew a lease are 

not  included in the Company’s assessment unless there is reasonable certainty that the Company will renew.

Goodwill and Identifiable Intangible Assets

All business combinations are accounted for using the acquisition method.

Goodwill and identifiable intangible assets with indefinite lives, are not amortized, but are reviewed annually for impairment or more frequently if impairment indicators arise.

Identifiable intangible assets that are not deemed to have indefinite lives are amortized over the following useful lives:

Goodwill and identifiable intangible assets with indefinite lives are not amortized, but are reviewed annually for impairment or more frequently if impairment indicators arise.

Definite lived identifiable intangible assets are amortized over the following useful lives:

Customer relationships (years)

5 unchanged sentences

10 to 20  

Indefinite life

Trade names are considered to have an indefinite life and are not amortized. 

See discussion of the Company’s assessment of impairment in Note 6  –

9 unchanged sentences

Level 1 –

Quoted prices in active markets for identical assets and liabilities.

Quoted prices (unadjusted) in active markets for identical assets and liabilities.

The Company’s deferred compensation plan assets consist of shares in various mutual funds (for the deferred compensation plan, investments are participant-directed) which invest in a broad portfolio of debt and equity securities.

11 unchanged sentences

Unobservable inputs based upon the Company’s best estimate of what market participants would use in pricing the asset or liability.

The Company did not have any transfers of assets and liabilities among levels of the fair value measurement hierarchy during the years ended June 30, 2020 or 2019 .

The Company did not have any transfers of assets and liabilities among levels of the fair value measurement hierarchy during the years ended June 30, 2021 or 2020 . 

The Company’s policy is to recognize transfers between levels as of the date they occur.

Cash and cash equivalents, accounts receivable, accounts payable and debt are carried at cost, which approximates fair value.

4 unchanged sentences

$ 2,988  

Interest rate swaps

Foreign exchange contracts

Financial Liabilities

3 unchanged sentences

Interest rate swaps

Contingent acquisition payments (a)

Contingent consideration (a)

Financial Assets

8 unchanged sentences

Interest rate swaps

Contingent acquisition payments(a)

Contingent consideration(a)

(a) The fair value of our contingent consideration arrangement is determined based on our evaluation as to the probability and amount of any deferred compensation that has been earned to date.

The Company’s financial liabilities based upon Level 3 inputs include contingent consideration arrangements relating to its acquisition of Horizon Scientific, Piazza Rosa and GS Engineering.

The Company’s financial liabilities based upon Level 3 inputs include contingent consideration arrangements relating to its acquisition of Piazza Rosa, GS Engineering, and Renco Electronics.

The Company is contractually obligated to pay contingent consideration payments to the Sellers of these businesses based on the achievement of certain criteria. 

Contingent consideration payable to the Horizon seller is based on continued employment of the seller on the second and third anniversary of the closing date of the acquisition.

The Company is contractually obligated to pay contingent consideration payments in connection with the Horizon Scientific acquisition based on the criteria of continued employment of the seller on the 

second  and 

third  anniversary of the closing date of the acquisition.

The seller of Horizon remained employed on the 

second  and 

third  anniversaries of the closing date and payments were made to the seller in the 

second  quarters of fiscal year 

2019  and 

 This obligation is considered settled as of 

June 30, 2020.

The Company is contractually obligated to pay contingent consideration payments in connection with the Piazza Rosa acquisition based on the achievement of certain revenue targets during each of the 

three  years following acquisition.

Contingent acquisition payments are payable in euros and can be paid in periods through fiscal year 2021.

Contingent acquisition payments were payable in euros and could be paid in periods through fiscal year 2021.

 Piazza Rosa exceeded the defined revenue targets during the 

4 unchanged sentences

second  quarter of fiscal year 

As of June 30, 2020, the Company could be required to pay up to $ 0.8  million for contingent consideration arrangements if the revenue targets are met.

The final revenue target was not achieved in the second quarter of fiscal year 2021.

This obligation is considered settled as of December 31, 2020.

The Company is also obligated to pay contingent consideration to the sellers of GS Engineering in the event that certain revenue and gross margin targets are achieved during the five years following acquisition.

The targets set in the GS stock purchase agreement were not met for the first year, which concluded in the fourth quarter of fiscal year 2020.

As of June 30, 2020, the Company could be required to pay up to $ 12.8 million for contingent consideration arrangements if the revenue and gross margin targets are met in fiscal years 2021 through 2024.

The targets set in the GS stock purchase agreement were not met for the first or second year, which concluded in the fourth quarter of fiscal years 2020 and 2021, respectively. 

As of June 30, 2021, the Company could be required to pay up to $ 12.8 million for contingent consideration arrangements if the revenue and gross margin targets are met in fiscal years 2022  through 2024.

The Company is also obligated to pay contingent consideration to the sellers of Renco Electronics in the event that certain earnings targets are achieved during the three years following acquisition.

Contingent acquisition payments are scheduled to be paid in periods through fiscal year 2024.

As of June 30, 2021, the Company could be required to pay up to $ 3.5 million for contingent consideration arrangements if the earnings targets are met.

During the first quarter of fiscal year 2022, the Company paid $ 1.2 million to the sellers as Renco exceeded the defined revenue targets during the first year of the measurement period.

The Company has determined the fair value of the liabilities for the contingent consideration based on a probability-weighted discounted cash flow analysis.

This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy.

The fair value of the contingent consideration liability associated with future payments was based on several factors, the most significant of which are continued employment of the seller and the risk-adjusted discount rate for the fair value measurement.

As of June 30, 2020, the range of outcomes nor the assumptions used to develop the estimates had changed.

The fair value of the contingent consideration liability associated with future payments was based on several factors, the most significant of which are the financial performance of the acquired businesses and the risk-adjusted discount rate for the fair value measurement.

The Company will update its assumptions each reporting period based on new developments and record such amounts at fair value based on the revised assumptions until the agreements expire. 

Concentration of Credit Risk

3 unchanged sentences

Revenue Recognition

In general, the Company recognizes revenue at the point in time control transfers to their customer based on predetermined shipping terms.

Revenue recognized under long-term contracts within the Engineering Technologies group for highly customized customer products that have no alternative use and in which the contract specifies the Company has a right to payment for its costs, plus a reasonable margin are recognized over time.

For products recognized over time, the transfer of control is measured pro rata, based upon current estimates of costs to complete such contracts.

In general, the Company recognizes revenue at the point in time control transfers to its customer based on predetermined shipping terms.

Revenue is recognized over time under certain long-term contracts within the Engineering Technologies and Engraving groups for highly customized customer products that have no alternative use and in which the contract specifies the Company has a right to payment for its costs, plus a reasonable margin.

For products manufactured over time, the transfer of control is measured pro rata, based upon current estimates of costs to complete such contracts.

Losses on contracts are fully recognized in the period in which the losses become determinable.

11 unchanged sentences

Research and development expenditures are expensed as incurred.

Total research and development costs, which are classified under selling, general, and administrative expenses, were $ 6.9  million, $ 6.3  million, and $ 3.9  million for the years ended June 

Total research and development costs, which are classified under selling, general, and administrative expenses, were $ 9.6 million, $ 6.9  million, and $ 6.3 million for the years ended June 

30, 2021 , 2020 , and 2019 , respectively.

3 unchanged sentences

Adjustments to initial obligations for warranties are made as changes in the obligations become reasonably estimable.

The changes in continuing operations warranty reserve, which are recorded as accrued liabilities, during 2020 , 2019 , and 

The changes in the continuing operations warranty reserve, which are recorded as accrued liabilities, during 2021 , 2020 , and 

2019 were as follows (in thousands):

Balance at beginning of year  

$ 1,911  

Balance at beginning of year

$ 1,781  

$ 1,911  

Acquisitions and other charges  

$ 1,849  

Acquisitions and other charges

( 86 )  

Warranty expense  

Warranty claims  

Warranty expense

Warranty claims

( 1,770 )  

4 unchanged sentences

$ 1,911  

The decrease in warranty expense during 2020  compared to 2019  is primarily due to better warranty claim experience in the Specialty Solutions Group.

The increase in warranty expense during 2021  compared to 2020 is primarily due to increased claim experience in Scientific primarily as a result of sales volume increases during the most recent fiscal year.

Stock-Based Compensation Plans

Restricted stock awards, including performance based awards, generally vest over a three -year period.

Restricted stock awards, including performance based awards, generally vest over terms from one to three years.

Compensation expense associated with these awards is recorded based on their grant-date fair value and is generally recognized on a straight-line basis over the vesting period. Compensation cost for an award with a performance condition is based on the probable outcome of that performance condition.

24 unchanged sentences

or “TCJA”) was passed which, among other things, reduces the federal corporate tax rate to 21.0% effective for taxable years starting on or after January 1, 2018. 

For the years ended June 30, 2020 and 2019, the Company recorded federal taxes using a federal rate of 21.0 %. 

The provision for fiscal year ending June 30, 2020 and 2019 was impacted by several law changes implemented by the Act such as the interest deduction limitation and Global Intangible Low Taxed Income (GILTI). 

As allowed under US GAAP, the Company has elected to treat any taxes due on future U.S.

For the years ended June 30, 2021  and 2020 , and 2019 the Company recorded federal taxes using a federal rate of 21.0 %. 

The provision for fiscal year ending June 30, 2021 , 

and 2019 was impacted by several law changes implemented by the Act such as the interest deduction limitation and Global Intangible Low Taxed Income (GILTI). 

As allowed under U.S.

GAAP, the Company has elected to treat any taxes due on future U.S.

inclusions in taxable income under the GILTI provision as a current-period expense when incurred. 

The Company will continue to monitor guidance regarding these changes and their impact on the financial statements in later periods. 

The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2020 was $ 13.1 million, or an effective rate of 24.3 % compared to $ 18.7 million, or an effective rate of 27.9 % for the year ended June 30, 2019, and $ 38.0  million, or an effective rate of 55.5 % for the year ended June 30, 2018.

Changes in the effective tax rates from period to period may be significant as they depend on many factors including, but not limited to, the amount of the Company's income or loss, the mix of income earned in the US versus outside the US, the effective tax rate in each of the countries in which we earn income, and any one -time tax issues which occur during the period.

The Company's income tax provision from continuing operations for the fiscal years ended June 30, 2021 , 2020 , and 

2019 was $ 14.2  million, $ 13.1  million, and $ 18.7  million, respectively, or an effective rate of 26.9 %, 

24.3 %, and 27.9 %, respectively. Changes in the effective tax rates from period to period may be significant as they depend on many factors including, but not limited to, the amount of the Company's income or loss, the mix of income earned in the US versus outside the US, the effective tax rate in each of the countries in which we earn income, and any one -time tax issues which occur during the period.

The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2021 was impacted by the following items:

(i) a tax provision of $ 5.1 million due to the mix of income in various jurisdictions, (ii) a tax benefit of $ 1.0 million from our 2019 and 2020 tax losses that the CARES Act allows to be carried back to 2014 and 2015, when the U.S.

federal income tax rate was 35%, (iii) a tax benefit of $ 0.8 million related to Federal R&D credit and Foreign Tax Credit, (iv) a tax benefit of $ 1.7 million related to return to provision adjustments, and (v) the tax expense of $ 1.2 million attributable to the divestiture of the Enginetics Corporation during the year.

The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2020 was impacted by the following items:

(i) a tax benefit of $ 1.2 million related to the Federal R&D credit, (ii) a tax provision of $ 1.4 million due to the mix of income in various jurisdictions, (iii) a tax benefit of $ 0.7 million related to the release of uncertain tax provision reserves, and (iv) a tax provision of $ 0.8 million related to GILTI.

3 unchanged sentences

162 (m) of the Internal Revenue Code, and (iii) a tax provision related to expected foreign withholding taxes on cash repatriation of $ 2.1 million.

The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2018 was impacted by the following items:

(i) a tax provision related to the impact of the Sec.

965 toll tax of $ 11.7 million, (ii) a tax provision related to a revaluation of deferred taxes due to the federal rate reduction of $ 1.3 million, and (iii) a tax provision related to expected foreign withholding taxes on cash repatriation of $ 7.8 million.

Earnings Per Share

1 unchanged sentence

Basic –

Average Shares Outstanding  

12,156  

2 unchanged sentences

Effect of Dilutive Securities –

Stock Options and Restricted Stock Awards  

Diluted –

4 unchanged sentences

Both basic and diluted income is the same for computing earnings per share. 

There were 32,000 outstanding instruments that had an anti-dilutive effect at June 30, 2020.

There were no outstanding instruments that had an anti-dilutive effect at June 30,2021.

There were 

32,000  outstanding instruments that had an anti-dilutive effect at June 30, 

There were no outstanding instruments that had an anti-dilutive effect at June 30,  

2019 and 2018 .

Recently Issued Accounting Pronouncements

10 unchanged sentences

2020 - 04  on our consolidated financial statements.

June 2016, 

the FASB issued ASU 

2016 - 13 ,  

Financial Instruments –

Credit Losses (Topic 

In June 2016, the FASB issued ASU 2016 - 13, Financial Instruments –

Credit Losses (Topic 326 ):

Measurement of Credit Losses on Financial Instruments , which modifies the measurement approach for credit losses on financial assets measured on an amortized cost basis from an “incurred loss”

method to “an expected loss”

November 2019, 

the FASB issued ASU 

2019 - 11,  Codification Improvements to Topic 

326,  Financial Instruments –

November 2019, the FASB issued ASU 2019 - 11, Codification Improvements to Topic 326, Financial Instruments –

Credit Losses .

2019 - 11  is an accounting pronouncement that amends ASU 

 This amendment provides clarity and improves the codification to ASU 

 The pronouncements are concurrently effective for fiscal years beginning after 

December 15, 2019 

and interim periods therein.

The Company is currently assessing the potential impact of the adoption of ASU 

2016 - 13  and ASU 

2019 - 11  on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017 - 04, Simplifying the Test for Goodwill Impairment , which simplifies the accounting for goodwill impairments by eliminating step two from the goodwill impairment test. 

Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. 

ASU 2017 - 04 also clarifies the requirements for excluding and allocating foreign currency translation adjustments to reporting units related to an entity's testing of reporting units for goodwill impairment. 

It further clarifies that an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. 

ASU 2017 - 04 is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. 

ASU 2019 - 11 is an accounting pronouncement that amends ASU 2016 - 13.

This amendment provides clarity and improves the codification to ASU 2016 - 13.

The pronouncements are concurrently effective for fiscal years beginning after 

December 15, 2019 and interim periods therein.

The Company adopted ASU 2016 - 13 in fiscal year 2021.

In August 2018, the FASB issued ASU No.

2018 - 14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715 - 20 ) .

The amendments in ASU- 14 remove, modify and add various disclosure requirements around the topic in order to clarify and improve the cost-benefit nature of disclosures.

This ASU is effective for annual reporting periods, and interim periods with those reporting periods, beginning after December 15, 2020 with early adoption permitted.

The amendments must be applied on a retrospective basis for all periods presented.

The company is currently evaluating the impacts the adoption of this ASU will have on its Consolidated Financial Statements.

 The adoption did not have a material impact on the consolidated financial statements.

As a result of the adoption of ASU 2016 - 13, the Company has updated its critical accounting policy related to trade account receivables and allowances for credit losses.

Accounts Receivable Allowances 

The Company’s recent acquisitions are strategically significant to the future growth prospects of the Company. 

At the time of the acquisition and June 

30, 2020, the Company evaluated the significance of each acquisition on a standalone basis and in aggregate, considering both qualitative and quantitative factors.

Subsequent to the end of the fiscal year, during July of 2020, the Company acquired Renco Electronics, a designer and manufacturer of customized standard magnetics components and products including transformers, inductors, chokes and coils for power and RF applications. 

Renco’s results will be reported within the Electronics segment beginning in fiscal year 2021.

At the time of the acquisition and June 30, 2021 , the Company evaluated the significance of each acquisition on a standalone basis and in aggregate, considering both qualitative and quantitative factors.

Renco Electronics

During the first quarter of fiscal year 2021, the Company acquired Renco Electronics, a designer and manufacturer of customized standard magnetics components and products including transformers, inductors, chokes and coils for power and RF applications. 

Renco’s end markets and customer base in areas such as consumer and industrial applications are highly complementary to our existing business with the potential to further expand key account relationships and capitalize on cross selling opportunities between the two companies. 

Renco operates one manufacturing facility in Florida and is supported by contract manufacturers in Asia.

Renco’s results are reported within our Electronics segment.

The Company paid $ 27.4 million in cash for all of the issued and outstanding equity interests of Renco Electronics.

The preliminary purchase price was allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on a preliminary estimate of their fair values on the closing date. 

The Company commenced a formal valuation of the acquired assets and liabilities and have updated the preliminary intangible assets based on the final valuation results.

Goodwill recorded from this transaction is attributable to Renco’s significant engineering and technical expertise in end markets supported by strong engineer-to-engineer relationships.

In addition, Renco’s end markets and customer base in areas such as consumer and industrial are highly complementary to the Company’s existing business.

Intangible assets of $ 10.4 million consist primarily of $ 3.6 million for indefinite lived tradenames, and $ 6.8 million of customer relationships to be amortized over 12 years.

The goodwill of $ 14.0 million created by the transaction is deductible for income tax purposes. Allocations of the purchase price for acquisitions are based on estimates of the fair value of the net assets acquired and are subject to adjustment upon the finalization of the purchase price allocations.

The accounting for business combinations requires estimates and judgments regarding expectations for future cash flows of the acquired business, and the allocations of those cash flows to identifiable tangible and intangible assets, in determining the assets acquired and liabilities assumed.

The fair values assigned to tangible and intangible assets acquired and liabilities assumed, including contingent consideration, are based on management’s best estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. 

In connection with the acquisition, the Company entered into two lease arrangements and recorded right-of-use assets and short-term and long-term liabilities at inception.

The Company signed a new lease agreement with a related party, an entity in which the Renco Electronics President is a shareholder, on July 15, 2020.

The lease is for three years and is subject to renewal, at the Company’s option under similar terms and conditions.

The Company recorded a fair value adjustment of $ 0.1 million in connection with this lease, which is included in other acquired assets in the table below.

The Company recorded right of use assets of $ 3.3 million, current lease liabilities of $ 1.8 million and non-current lease liabilities of $ 1.5 million, related to two operating leases in connection with the acquisition of Renco.

Renco does not have material financing leases.

The components of the fair value of the Renco Electronics acquisition, including the final allocation of the purchase price at June 30, 2021 , are as follows (in thousands):

Preliminary Allocation September 30, 2020

Final Allocation

Fair value of business combination:

Cash payments

$ 29,530  

$ 29,613  

Less, cash acquired

( 2,132 )  

( 75 )  

Fair value of contingent consideration

$ 30,398  

$ 30,406  

Identifiable assets acquired and liabilities assumed:

Other acquired assets

$ 4,762  

$ ( 240 )  

$ 4,522  

Property, plant, & equipment

Identifiable intangible assets

10,400  

14,153  

( 162 )  

13,991  

( 712 )  

Liabilities assumed

( 3,651 )  

$ 30,398  

$ 30,406  

GS Engineering

43 unchanged sentences

The New Hampshire based, privately held company is a provider of high-reliability magnetics to customers in the semiconductor, military, aerospace, healthcare, and general industrial industries. 

The Company has included the results of Agile in its Electronics segment in the consolidated financial statements.

The Company included the results of Agile in its Electronics segment in the consolidated financial statements.

The Company paid $ 39.2 million in cash for all of the issued and outstanding equity interests of Agile. 

3 unchanged sentences

The goodwill of $ 16.4 million recorded in connection with the transaction is deductible for income tax purposes.  

The components of the fair value of the Agile acquisition, including the final allocation of the purchase price are as follows (in thousands):

Preliminary Allocation September 30, 2019  

Final Allocation  

 The components of the fair value of the Agile acquisition, including the final allocation of the purchase price are as follows (in thousands):

Preliminary Allocation September 30, 2019

Final Allocation

Fair value of business combination:

5 unchanged sentences

$ 39,193  

Preliminary Allocation September 30, 2019  

Final Allocation  

Preliminary Allocation September 30, 2019

Final Allocation

Identifiable assets acquired and liabilities assumed:

21 unchanged sentences

The Michigan based privately held company is a provider of chemical and laser texturing services for the automotive, medical, packaging, and consumer products markets. 

The Company has included the results of Tenibac in its Engraving segment in the condensed consolidated financial statements.

The Company included the results of Tenibac in its Engraving segment in the condensed consolidated financial statements.

The Company paid $ 57.3 million in cash for all of the issued and outstanding equity interests of Tenibac. 

5 unchanged sentences

The components of the fair value of the Tenibac acquisition, including the final allocation of the purchase price are as follows (in thousands):

Preliminary Allocation September 30, 2019  

Final Allocation  

Preliminary Allocation September 30, 2019

Final Allocation

Fair value of business combination:

6 unchanged sentences

$ 56,726  

Preliminary Allocation September 30, 2019  

Final Allocation  

Preliminary Allocation September 30, 2019

Final Allocation

Identifiable assets acquired and liabilities assumed:

17 unchanged sentences

$ 56,726  

Piazza Rosa Group

During the first quarter of fiscal year 2018, the Company acquired the Piazza Rosa Group. 

The Italy-based privately held company is a leading provider of mold and tool treatment and finishing services for the automotive and consumer products markets. 

We have included the results of the Piazza Rosa Group in our Engraving segment.

The Company paid $ 10.1 million in cash for all of the issued and outstanding equity interests of the Piazza Rosa Group and also paid $ 2.8 million subsequent to closing in order to satisfy assumed debt of the entity at the time of acquisition. 

The Company has estimated that total cash consideration will be adjusted by $ 2.6 million based upon achievement of certain revenue metrics over the three years following acquisition. 

The Company made the first payment of $ 0.9 million during the first quarter of 2019 based on achievement of the revenue metrics during the first year.

The purchase price was allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values on the closing date. 

Goodwill recorded from this transaction is attributable to potential revenue increases from the combined competencies with Standex Engraving’s worldwide presence and Piazza Rosa Group’s texturizing capabilities. 

The combined companies create a global tool finishing service leader and open additional opportunities in the broader surface engineering market.

Intangible assets of $ 4.1 million were preliminarily recorded, consisting of $ 2.3 million of customer relationships to be amortized over a period of eight years, $ 1.6 million for trademarks, and $ 0.2 million of other intangibles assets. 

The Company finalized its purchase accounting for this acquisition in the first quarter of fiscal year 2019 and reduced the identifiable intangible asset estimate by $ 0.6 million at that time. 

The goodwill of $ 7.1 million created by the transaction is not deductible for income tax purposes.

The components of the fair value of the Piazza Rosa Group acquisition, including the final allocation of the purchase price are as follows (in thousands):

Preliminary Allocation September 30, 2018  

Final Allocation  

Fair value of business combination:

Total cash consideration

$ 10,056  

Fair value of contingent consideration

$ 10,056  

$ 2,617  

$ 12,673  

Preliminary Allocation September 30, 2018  

Final Allocation  

Identifiable assets acquired and liabilities assumed:

Other acquired assets

$ 2,678  

$ 1,664  

$ 4,342  

Property, plant, and equipment

Identifiable intangible assets

( 615 )  

Liabilities assumed

( 7,387 )  

Deferred taxes

( 1,182 )  

$ 10,056  

$ 2,617  

$ 12,673  

Acquisition-Related Costs

1 unchanged sentence

These costs consist of (i) deferred compensation and (ii) acquisition-related professional service fees and expenses, including financial advisory, legal, accounting, and other outside services incurred in connection with acquisition activities, and regulatory matters related to acquired entities. 

These costs do not include purchase accounting expenses, which we define as acquired backlog and the step-up of inventory to fair value, or the amortization of the acquired intangible assets.

These costs do not include purchase accounting expenses, which the Company define as acquired backlog and the step-up of inventory to fair value, or the amortization of the acquired intangible assets.

Deferred compensation costs relate to payments due to the Horizon Scientific seller of $ 2.8  million on the second anniversary and $ 5.6 million on the third anniversary of the closing date of the purchase. 

For the fiscal years ended June 30, 2020 and 2019, we recorded deferred compensation costs of $ 1.2 million and $ 2.8 million, respectively, related to estimated deferred compensation earned by the Horizon Scientific seller to date. 

For the fiscal years ended June 30, 2020 and 2019, the Company recorded deferred compensation costs of $ 1.2 million and $ 2.8 million, respectively, related to estimated deferred compensation earned by the Horizon Scientific seller to date. 

The payments were contingent on the seller remaining an employee of the Company, with limited exceptions, at each anniversary date.

The final payment due to the seller was made during the second quarter of fiscal year 2020, and this liability is now considered settled. 

The final payment due to the seller was made during the second quarter of fiscal year 2020, and this liability is considered settled. 

Acquisition related costs consist of miscellaneous professional service fees and expenses for our recent acquisitions.

The components of acquisition-related costs are as follows (in thousands):

Deferred compensation arrangements  

$ 1,170  

$ 2,810  

Acquisition-related costs  

$ 1,759  

1 unchanged sentence

REVENUE FROM CONTRACTS WITH CUSTOMERS

Effective July 1, 2018, the Company adopted the new accounting standard, ASU No.

2014 - 09, “Revenue from Contracts with Customers”

(ASC 606 ) using the modified retrospective method to contracts that were not completed as of June 30, 2018.

We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings, whereby the cumulative impact of all prior periods is recorded in retained earnings or other impacted balance sheet line items upon adoption.

The comparative information has not been adjusted and continues to be reported under ASC 605.

The impact on the Company’s consolidated income statements, balance sheets, equity or cash flows as of the adoption date as a result of applying ASC 606 have been reflected within those respective financial statements.

Most of the Company’s contracts have a single performance obligation which represents the product or service being sold to the customer.

Some contracts include multiple performance obligations such as a product and the related installation and/or extended warranty.

Additionally, most of the Company’s contracts offer assurance type warranties in connection with the sale of a product to customers.

Assurance type warranties provide a customer with assurance that the product complies with agreed-upon specifications.

Assurance type warranties do not represent a separate performance obligation.

In general, the Company recognizes revenue at the point in time control transfers to its customer based on predetermined shipping terms.

For products manufactured over time, the transfer of control is measured pro rata, based upon current estimates of costs to complete such contracts.

Losses on contracts are fully recognized in the period in which the losses become determinable.

Revisions in profit estimates are reflected on a cumulative basis in the period in which the basis for such revision becomes known.

Disaggregation of Revenue from Contracts with Customers

Financial information for fiscal year 2017 has not been restated and continued to be reported under the guidance in effect prior to the adoption of ASC 606.

The following table presents revenue disaggregated by product line and segment (in thousands):

3 unchanged sentences

June 30, 2019

253,369  

185,294  

204,073  

Engraving Services

137,159  

132,586  

139,769  

Engraving Products

11,150  

Total Engraving

147,016  

143,736  

149,693  

79,421  

57,523  

57,621  

Engineering Technologies

75,562  

104,047  

105,270  

Hydraulics Cylinders and System

48,776  

51,722  

53,943  

Merchandising & Display

26,049  

31,488  

34,532  

26,039  

30,725  

34,799  

Total Specialty Solutions

100,864  

113,935  

123,274  

Total Revenue by Product Line

$ 656,232  

$ 604,535  

$ 639,931  

The following table presents revenue from continuing operations disaggregated by geography based on company’s locations (in thousands):

3 unchanged sentences

United States

$ 386,829  

$ 364,188  

$ 370,235  

125,516  

98,665  

108,667  

129,908  

128,037  

144,636  

Other Americas

13,979  

13,645  

16,393  

$ 656,232  

$ 604,535  

$ 639,931  

EMEA consists primarily of Europe, Middle East and S.

3 unchanged sentences

June 30, 2020

June 30, 2019

Products and services transferred at a point in time

$ 619,029  

$ 569,426  

$ 607,980  

Products transferred over time

37,203  

35,109  

31,951  

$ 656,232  

$ 604,535  

$ 639,931  

Contract Balances

Contract assets represent sales recognized in excess of billings related to work completed but not yet shipped for which revenue is recognized over time.

Contract assets are recorded as accounts receivable.

Contract liabilities are customer deposits for which revenue has not been recognized. 

Contract assets are recorded as prepaid expenses and other current assets.

Contract liabilities are customer deposits for which revenue has not been recognized.

Current contract liabilities are recorded as accrued expenses.

The following table provides information about contract assets and liability balances as of June 30, 2020 and 2019 (in thousands):

Balance at Beginning of Period

Balance at End of Period

The timing of revenue recognition, invoicing and cash collections results in billed receivables, contract assets and contract liabilities on the consolidated balance sheets.

When consideration is received from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded. 

Contract liabilities are recognized as revenue after control of the goods and services are transferred to the customer and all revenue recognition criteria have been met.

The following table provides information about contract assets and liability balances as of June 30, 2021 and 2020  (in thousands):

Year ended June 30, 2021

Balance at Beginning of Period  

Additions  

Deductions  

Balance at End of Period  

Contract assets:

Prepaid and other current assets

Prepaid expenses and other current assets

$ 9,140  

30,773  

24,900  

$ 15,013  

Contract liabilities:

Customer deposits

Balance at Beginning of Period

Balance at End of Period

$ 2,298  

11,739  

Year ended June 30, 2020

Balance at Beginning of Period  

Additions  

Deductions  

Balance at End of Period  

Contract assets:

Prepaid and other current assets

Prepaid expenses and other current assets

$ 8,418  

41,462  

40,740  

$ 9,140  

Contract liabilities:

Customer deposits

During the years ended June 30, 2020 and 2019, we recognized the following revenue as a result of changes in the contract liability balances (in thousands):

$ 1,358  

11,939  

10,999  

$ 2,298  

During the years ended June 30, 2021  and 2020 , we recognized the following revenue which was included in the contract liability beginning balances (in thousands):

Revenue recognized in the period from:

1 unchanged sentence

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

$ 2,298  

Revenue recognized in the period from:

1 unchanged sentence

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

The timing of revenue recognition, invoicing and cash collections results in billed receivables, contract assets and contract liabilities on the consolidated balance sheets.

When consideration is received from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded. 

Contract liabilities are recognized as revenue after control of the goods and services are transferred to the customer and all revenue recognition criteria have been met.

$ 1,358  

Inventories are comprised of (in thousands):

Raw materials

$ 47,000  

$ 37,257  

Work in process

22,539  

25,527  

Finished goods

Distribution costs associated with the sale of inventory are recorded as a component of selling, general and administrative expenses and were $ 9.0 million, $ 9.7  million, and $ 8.7 million in 2020, 2019 and 2018, respectively.

22,323  

22,247  

$ 91,862  

$ 85,031  

Distribution costs associated with the sale of inventory are recorded as a component of selling, general and administrative expenses and were $ 11.0 million, $ 9.0  million, and $ 9.7 million in 2021 , 2020  and 

2019  respectively.

Property, plant and equipment

1 unchanged sentence

Land, buildings and leasehold improvements

$ 73,785  

$ 69,869  

Machinery, equipment and other

210,594  

203,258  

284,379  

273,127  

Less accumulated depreciation

( 151,006 )  

Property, plant and equipment, net

Depreciation expense for the years ended June 30, 2020, 2019, and 2018  totaled $ 19.2  million, $ 17.5  million, and $ 15.9  million, respectively.

$ 133,373  

$ 132,533  

Depreciation expense totaled $ 19.2 million, $ 19.2 million, and $ 17.5 million, respectively for the years ended June 30, 2021 , 2020  and 

Goodwill and certain indefinite-lived intangible assets are not amortized, but instead are tested for impairment at least annually and more frequently whenever events or changes in circumstances indicate that the fair value of the asset may be less than its carrying amount.

The Company’s annual test for impairment is performed using a May 31st measurement date.

The Company has identified its reporting units for impairment testing as its seven  operating segments, which are aggregated into five reporting segments as disclosed in Note 17  –

Industry Segment Information. 

The Company has identified seven reporting units for impairment testing:

Electronics, Engraving, Scientific, Engineering Technologies, Procon, Federal, and Hydraulics.

The Specialty Solutions segment includes Procon, Federal and Hydraulics.

As quoted market prices are not available for the Company’s reporting units, the fair value of the reporting units is determined using a discounted cash flow model (income approach). 

4 unchanged sentences

If the estimates of future cash flows for each reporting unit may be insufficient to support the carrying value of the reporting units, the Company will reassess its conclusions related to fair value and the recoverability of goodwill. 

In connection with the planned divestiture of the Refrigerated Solutions Group, the Company compared the fair value of each reporting unit, Master-Bilt and NorLake, to its carrying value as of March 31, 2020. 

In connection with the divestiture of Enginetics, the Company determined that, based on the net realizable value of the operations divested, the goodwill of the Engineering Technologies reporting unit was impaired.

As such, the Company recognized $ 7.6 million in impairment charges during the third quarter of fiscal year 2021.

As a result of the Enginetics divestiture, the Company completed an interim goodwill impairment assessment for its other reporting units in the third quarter of fiscal year 2021.

As a result of the assessment in the third quarter, the Company determined that there were no indications of impairment, therefore, 

no additional impairment charges were recorded.

In connection with the divestiture of the Refrigerated Solutions Group, the Company compared the fair value of each reporting unit, Master-Bilt and NorLake, to its carrying value as of March 31, 2020. 

This resulted in an asset impairment charge in the third quarter of fiscal year 2020 of $ 7.7  million in discontinued operations, which represented the full amount of goodwill associated with both reporting units.

2 unchanged sentences

Therefore, no additional impairment charges were recorded in connection with the third quarter 2020 assessment. 

The Company completed its annual impairment testing as of May 31, 2020, and determined that the fair value of each of its reporting units substantially exceeded each unit’s respective carrying value, therefore, no impairment charges were recorded in connection with the testing and assessment during the fourth quarter of 2020.

 The Company completed its annual impairment testing as of May 31, 2019, and determined that the fair value of each reporting unit substantially exceeded each unit’s respective carrying value, therefore, no impairment charges were recorded in connection with the testing and assessment during 2019.

Changes to goodwill associated with continuing operations during the years ended June 30, 2020 

and 2019  are as follows (in thousands):

Balance at beginning of year

Foreign currency translation

Balance at end of year

The Company completed its annual impairment testing as of May 31, in each of the last two fiscal years and determined that the fair value of each of its reporting units substantially exceeded each unit’s respective carrying value, therefore, no impairment charges were recorded in connection with the testing and assessment. 

Changes to goodwill by segment associated with continuing operations during the years ended June 30, 2021  and 2020  are as follows (in thousands):

June 30, 2020

Translation Adjustment

June 30, 2021

$ 131,582  

$ 13,991  

$ ( 741 )  

$ 144,832  

77,195  

77,378  

15,454  

Engineering Technologies

43,685  

( 7,600 )  

37,085  

Specialty Solutions

$ 271,221  

$ 13,991  

$ ( 7,600 )  

$ 278,054  

Intangible Assets

2 unchanged sentences

June 30, 2021

$ 57,970  

$ 22,273  

$ 53,721  

$ 3,812  

$ 137,776  

Accumulated amortization

( 19,038 )  

( 16,768 )  

( 3,041 )  

Balance, June 30, 2021

$ 38,932  

$ 22,273  

$ 36,953  

$ 98,929  

June 30, 2020

$ 74,104  

$ 19,916  

$ 55,164  

$ 3,980  

$ 153,164  

Accumulated amortization

( 31,003 )  

( 13,006 )  

( 2,743 )  

Balance, June 30, 2020

Amortization expense from continuing operations for the years ended June 30, 2020, 2019, and 2018, totaled $ 11.6  million, $ 10.5  million, and $ 8.1  million, respectively.

At June 30, 2020, aggregate amortization expense is estimated to be $ 11.0  million in fiscal 2021, $ 10.4  million in fiscal 2022, $ 9.6  million in fiscal 2023, $ 8.7  million in fiscal 2024, $ 8.2  million in fiscal 2025, and $ 38.6  million thereafter.

$ 43,101  

$ 19,916  

$ 42,158  

$ 1,237  

$ 106,412  

Amortization expense from continuing operations totaled $ 11.8 million, $ 11.6 million, and $ 10.5 million, respectively for the years ended June 30, 2021 , 2020 , and 

At June 30, 2021 , aggregate amortization expense is estimated to be (in thousands):

33,632  

$ 76,656  

Long-term debt is comprised of the following at June 30 ( in thousands):

Bank credit agreements

$ 200,000  

Total funded debt

200,000  

Issuance Cost

( 510 )  

Total long-term debt

Long-term debt is due as follows (in thousands):

2024 (matures December 2023)

Issuance costs

Debt, net issuance cost

$ 199,490  

$ 199,150  

The Company's long-term debt matures in December 2023. 

Bank Credit Agreements

1 unchanged sentence

This five -year Credit Facility expires in December 2023 and has a borrowing limit of $ 500 million, which can be increased by an amount of up to $ 250 million, in accordance with specified conditions contained in the agreement. 

The facility also includes a $ 10 million sublimit for swing line loans and a $ 35 million sublimit for letters of credit. 

The facility amends and restates a previously existing $ 400 million revolving credit agreement, which was scheduled to expire in December 2019.

The facility also includes a $ 10 million sublimit for swing line loans and a $ 35 million sublimit for letters of credit.

Under the terms of the Credit Agreement, we pay a variable rate of interest and a commitment fee on borrowed amounts as well as a commitment fee on unused amounts under the facility. 

6 unchanged sentences

Interest Coverage Ratio - The Company is required to maintain a ratio of Earnings Before Interest and Taxes, as Adjusted (“Adjusted EBIT per the Credit Agreement”), to interest expense for the trailing twelve months of at least 2.75:1.

Adjusted EBIT per the Credit Agreement specifically excludes extraordinary and certain other defined items such as cash restructuring and acquisition-related charges up to the lower of $ 20 million or 10 % of EBITDA, an increase from the prior agreement’s $ 7.5 million cap on restructuring expenses.

The new facility continues to allow unlimited non-cash charges including purchase accounting and goodwill adjustments. 

Adjusted EBIT per the Credit Agreement specifically excludes extraordinary and certain other defined items such as cash restructuring and acquisition-related charges up to the lower of $ 20 million or 10 % of EBITDA. The facility also allows unlimited non-cash charges including purchase accounting and goodwill adjustments. 

At June 30, 2021 , the Company’s Interest Coverage Ratio was 13.10:1.

Leverage Ratio - The Company’s ratio of funded debt to trailing twelve month Adjusted EBITDA per the credit agreement, calculated as Adjusted EBIT per the Credit Agreement plus depreciation and amortization, may not exceed 3.5:1.

Under certain circumstances in connection with a Material Acquisitions (as defined in the Facility), the Facility allows for the leverage ratio to go as high as 4.0:1 for a four -fiscal quarter period.

At June 30, 2020 the Company’s Leverage Ratio was 1.47:1.

As of June 30, 2020, we had borrowings under our facility of $ 200.0 million and the effective rate of interest for outstanding borrowings under the facility was 2.59 %.

During the fourth quarter of fiscal 2020, we collected $ 10.6 million in connection with the sale of our Refrigerated Solutions and substantially all of these proceeds were used to repay borrowings under our facility.

Our primary cash requirements in addition to day-to-day operating needs include interest payments, capital expenditures, and dividends. 

Our primary sources of cash for these requirements are cash flows from continuing operations and borrowings under the facility. 

In order to manage our interest rate exposure, we are party to $ 200.0 million of active floating to fixed rate swaps. 

These swaps convert our interest payments from LIBOR to a weighted average rate of 1.27 %.

Under certain circumstances in connection with a Material Acquisitions (as defined in the Facility), the Credit Agreement allows for the leverage ratio to go as high as 4.0:1 for a four -fiscal quarter period.

At June 30, 

2021 the Company’s Leverage Ratio was 1.31:1.

As of June 30, 2021 , we had borrowings under our facility of $ 200.0 million and the effective rate of interest for outstanding borrowings under the facility was 2.59 %. Our primary sources of cash for these requirements are cash flows from continuing operations and borrowings under the facility. 

In connection with the acquisition of Renco, the company assumed $ 0.7 million of debt under the Paycheck Protection Program, within the United States Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.

These borrowings were forgiven by the Small Business Administration ("SBA") in June 2021.

Other Long-Term Borrowings

At June 30, 2020 and 2019, the Company had standby letter of credit sub-facility outstanding, primarily for insurance and trade financing purposes of $ 7.3 million and $ 7.6 million, respectively.

At June 30, 2021  and 2020 , the Company had standby letter of credit sub-facility outstanding, primarily for insurance and trade financing purposes of $ 6.0  million and $ 7.3 million, respectively.

Accrued LIABILITIES

Accrued expenses from continuing operations recorded in our Consolidated Balance Sheets at June 30, 2020 

and 2019  consist of the following (in thousands):

Accrued expenses from continuing operations recorded in our Consolidated Balance Sheets at June 30, 2021  and 2020  consist of the following (in thousands):

Payroll and employee benefits

$ 32,550  

$ 24,084  

Workers' compensation

Fair value of derivatives

Lease liability

12,712  

14,161  

$ 61,717  

$ 59,929  

Derivative Financial Instruments

7 unchanged sentences

Interest Rate

December 19, 2015

25,000  

2.01 %  

December 19, 2019

25,000  

1.88 %  

April 24, 2022

( 374 )  

25,000  

1.67 %  

August 6, 2018

25,000  

2.83 %  

August 6, 2023

2 unchanged sentences

100,000  

0.91 %  

March 23, 2025

2 unchanged sentences

25,000  

0.88 %  

April 24, 2025

1 unchanged sentence

25,000  

0.91 %  

March 24, 2025

1 unchanged sentence

$ ( 3,096 )  

The Company reported no losses for the years ended June 30, 2020, 2019, and 2018, as a result of hedge ineffectiveness.

The Company reported no losses for the years ended June 30, 2021 , 

2020 , and 2019 , as a result of hedge ineffectiveness.

Future changes in these swap arrangements, including termination of the agreements, may result in a reclassification of any gain or loss reported in accumulated other comprehensive income (loss) into earnings as an adjustment to interest expense. 

1 unchanged sentence

Foreign Exchange Contracts

Forward foreign currency exchange contracts are used to limit the impact of currency fluctuations on certain anticipated foreign cash flows, such as foreign purchases of materials and loan payments between subsidiaries. 

Forward foreign currency exchange contracts are used to limit the impact of currency fluctuations on certain anticipated foreign cash flows, such as sales to foreign customers and loan payments between subsidiaries. 

The Company enters into such contracts for hedging purposes only. 

1 unchanged sentence

Hedge ineffectiveness, if any, associated with these contracts will be reported in net income. 

At June 30, 2020 and 2019, the Company had outstanding forward contracts related to hedges of intercompany loans with net losses of $ 2.5  million and $ 3.1  million, respectively, which approximate the unrealized gains or losses on the related loans. 

The contracts have maturity dates ranging from 2021 to 2024, which correspond to the related intercompany loans. 

At June 30, 2021  and 2020 , the Company had outstanding forward contracts related to hedges of intercompany loans with net losses of $ 1.0 million and $ 2.5 million, respectively, which approximate the unrealized gains or losses on the related loans. 

The contracts have maturity dates ranging from fiscal year 2022 to 2024, which correspond to the related intercompany loans. 

The notional amounts of these instruments, by currency in thousands, are as follows:

7 unchanged sentences

hedging instruments

Interest rate swaps

Foreign exchange contracts

Liability Derivatives

19 unchanged sentences

$ ( 5,247 )  

$ ( 1,576 )  

$ 2,541  

The table below presents the amount reclassified from accumulated other comprehensive income (loss) to net income for the periods ended (in thousands):

5 unchanged sentences

of Operations

Interest rate swaps  

$ 2,287  

$ ( 321 ) Interest expense

Foreign exchange contracts  

( 557 )  

Other non-operating income

Net investment hedge  

( 1,403 )  

Other non-operating income

Net investment hedge

( 285 ) Other non-operating income

$ 1,730  

$ ( 856 )  

On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”

or “TCJA”) was passed which, among other things, reduces the federal corporate tax rate to 21.0% effective for taxable years starting on or after January 1, 2018. 

For the years ended June 30, 2020 and 2019, the Company recorded federal taxes using a federal rate of 21.0 %. 

As allowed under US GAAP, the Company has elected to treat any taxes due on future U.S.

inclusions in taxable income under the GILTI provision as a current-period expense when incurred. 

The Company will continue to monitor guidance regarding these changes for how it will impact the financial statements in later periods.

US tax law allows a one -hundred percent dividend received deduction for foreign dividends and the Company has begun to bring back cash from foreign subsidiaries. 

$ 1,124  

O n M arch 27, 2020, the CARES A ct was enacted to address the economic impact of the COVID - 19 pandemic in the U nited S tates.

A mong other things, the CARES A ct allows a five -year carryback period for tax losses generated in 2019 through 2021.

T he J une 30, 2021 tax provision includes benefits of $ 0.2 million and $ 0.8 million from tax losses in the years ended J une 30, 2019 and J une 30, 2020, respectively, that the CARES A ct allows to be carried back to the years ended J une 30, 2014 and J une 30, 2015, when the U.S .

federal income tax rate was 35%.

tax law allows a one -hundred percent dividend received deduction for foreign dividends and the Company has begun to bring back cash from foreign subsidiaries. 

However, the permanent reinvestment assertion must still be assessed and made regarding potential liabilities for foreign withholding taxes. 

5 unchanged sentences

The components of income from continuing operations before income taxes are as follows (in thousands):

$ 4,997  

$ 11,890  

$ 6,794  

47,703  

42,184  

60,180  

$ 52,700  

$ 54,074  

$ 66,974  

The Company utilizes the asset and liability method of accounting for income taxes. 

1 unchanged sentence

The components of the provision for income taxes on continuing operations (in thousands) were as shown below:

$ ( 2,592 )  

$ ( 870 )  

15,606  

13,963  

21,288  

Total Current

$ 13,321  

$ 13,163  

$ 22,126  

$ 1,469  

$ 2,743  

( 1,007 )  

( 3,731 )  

Total Deferred

( 103 )  

$ 14,157  

$ 13,060  

$ 18,688  

A reconciliation from the U.S.

1 unchanged sentence

Provision at statutory tax rate

21.0 %  

Impact of foreign operations

Federal tax credits

( 1.0 %)  

( 3.5 %)  

Cash repatriation

Uncertain Tax Positions

( 1.3 %)  

Benefit from U.S.

tax loss carryback to prior years

( 1.8 %)  

Tax expense on Enginetics disposal

Return to provision

( 3.2 %)  

Valuation allowance release

( 2.3 %)  

Effective income tax provision

26.9 %  

24.3 %  

Changes in the effective tax rates from period to period may be significant as they depend on many factors including, but not limited to, size of the Company’s income or loss and any one -time activities occurring during the period.

The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2021 was impacted by the following items:

(i) a tax benefit of $ 1.2 million related to the Federal R&D credit, (ii) a tax provision of $ 1.4 million due to the mix of income in various jurisdictions, (iii) a tax benefit of $ 0.7 million related to the release of uncertain tax provision reserves,, and (iv) a tax provision of $ 0.8 million related to GILTI.

federal income tax rate was 35%, (iii) a tax benefit of $ 0.8 million related to Federal R&D credits and Foreign Tax credits, (iv) a tax benefit of $ 1.7 million related to return to provision adjustments, and (v) tax expense of $ 1.2 million attributable to the divestiture of Enginetics Corporation during the year.

The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2020 was impacted by the following items:

(i) a tax benefit of $ 1.2 million related to the Federal R&D credit, (ii) a tax provision of $ 1.4 million due to the mix of income in various jurisdictions, (iii) a tax benefit of $ 0.7 million related to the release of uncertain tax provision reserves, and (iv) a tax provision of $ 0.8 million related to GILTI.

The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2019 was impacted by the following items:

(i) a tax benefit related to the impact of the Sec.

1 unchanged sentence

162 (m) of the Internal Revenue Code, and (iii) a tax provision related to expected foreign withholding taxes on cash repatriation of $ 2.1 million.

The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2018 was impacted by the following items:

(i) a tax provision related to the impact of the Sec.

Significant components of the Company’s deferred income taxes are as follows (in thousands):

1 unchanged sentence

Depreciation and amortization

$ ( 28,997 )  

Withholding taxes

( 4,497 )  

( 302 )  

Operating lease right-of-use-asset

( 4,711 )  

Total deferred tax liability

$ ( 38,507 )  

Deferred tax assets:

Accrued compensation

$ 2,610  

$ 2,410  

Accrued expenses and reserves

Lease Liability

12,653  

19,847  

Lease liabilities

11,446  

Net operating loss and credit carry forwards

16,127  

22,676  

Total deferred tax asset

$ 39,552  

$ 61,211  

Valuation allowance

( 12,191 )  

Net deferred tax asset (liability)

$ ( 11,146 )  

The Company estimates the degree to which deferred tax assets, including net operating loss and credit carry forwards will result in a benefit based on expected profitability by tax jurisdiction and provides a valuation allowance for tax assets and loss carry forwards that it believes will more likely than not go unrealized. 

The valuation allowance at June 30, 2020 applies to state and foreign loss carry forwards, which management has concluded that it is more likely than not that these tax benefits will not be realized. 

The increase (decrease) in the valuation allowance from the prior year was due to the current year activity in those same state and foreign loss jurisdictions.

In addition, the sale of the RSG Group in the fiscal year generated a capital loss for tax purposes. 

The valuation allowance at June 30, 

2021 applies to federal capital loss, state loss, foreign loss, and state R&D credit carryforwards, which management has concluded that it is more likely than not that these tax benefits will not be realized. 

The increase (decrease) in the valuation allowance from the prior year was due to the current year activity in those same federal, state and foreign jurisdictions.

In addition, the sale of the Enginetics Corporation in the fiscal year generated a capital loss for tax purposes. 

As of June 30, 2021 , the Company expects that it is more likely than not that this loss will not be realizable in future years. 

As such, the valuation allowance increased by $ 1.8 million. 

As of June 30, 2020, the Company had gross state net operating loss ("NOL") and credit carry forwards of approximately $ 79.5 million and $ 3.4 million, respectively, which may be available to offset future state income tax liabilities and expire at various dates from 2020 through 2039.

In addition, the Company had foreign NOL carry forwards of approximately $ 4.4 million, $ 3.5 million of which carry forward indefinitely and $ 0.9 million that carry forward for 10 years.

As such, the valuation allowance increased by $ 1.8 million. In addition, the Company decreased the valuation allowance by $ 5.1 million due to a return to provision adjustment on the RSG Group capital loss carryforward.

As of June 30, 2021 , the Company had gross state net operating loss ("NOL") and credit carry forwards of approximately $ 88.8 million and $ 3.2 million, respectively, which may be available to offset future state income tax liabilities and expire at various dates from 2021  through 2040.

 In addition, the Company had foreign NOL carry forwards of approximately $ 4.7 million, $ 3.7 million of which carry forward indefinitely and $ 1.0 million that carry forward for 10 years.

Under ASU 2016 - 09, Improvements to Employee Share-Based Payment Accounting , all excess tax benefits and tax deficiencies are recognized as income tax expense or benefit in the income statement. 

Accordingly, we recorded a discrete income tax provision in the consolidated statements of income of $ 0.2 million during the fiscal year ended June 30, 2020, for the shortfall of tax benefits related to equity compensation.

Accordingly, we recorded an income tax provision in the consolidated statements of income of $ 0.4 million during the fiscal year ended June 30, 2021 , for the shortfall of tax benefits related to equity compensation.

The total provision (benefit) for income taxes included in the consolidated financial statements was as follows (in thousands):

Continuing operations

$ 14,157  

$ 13,060  

$ 18,688  

Discontinued operations

( 550 )  

( 2,613 )  

Total provision

$ 13,607  

$ 10,447  

$ 16,235  

The tax benefit for discontinued operations relates mostly to the write-off of deferred tax liabilities from the sale of the RSG Group, and the sale of the assets of Master-Bilt.

2 unchanged sentences

Beginning Balance

$ 9,286  

$ 11,251  

$ 3,003  

Additions based on tax positions related to the current year

1 unchanged sentence

Reductions for tax positions of prior years

( 1,641 )  

( 328 )  

Ending Balance

The Company decreased its uncertain tax position in the third quarter due to an IRS settlement related to the deduction for charitable contributions.  

$ 9,412  

$ 9,286  

$ 11,251  

At June 30, 2021, we had $ 9.4 million of non-current liabilities for uncertain tax positions.

We are not able to provide a reasonable estimate of the timing of future payments related to these obligations.

The Company increased its uncertain tax position during the year due to Canadian withholding tax exposures.

If the unrecognized tax benefits in the table above were recognized in a future period, $ 8.6 million of the unrecognized tax benefit would impact the Company’s effective tax rate.

2 unchanged sentences

As a result, it is reasonably expected that net unrecognized tax benefits from these various jurisdictions would be recognized within the next twelve months. 

The recognition of these tax benefits is not expected to have a material impact to the Company's financial statements. 

The recognition of these tax benefits is expected to have an impact of $8.6 million to the Company's financial statements. 

The Company does not reasonably expect any other significant changes in the next twelve months. 

2 unchanged sentences

United States

2018 to 2021  

2017 to 2021  

2018 to 2021  

2020 to 2021  

United Kingdom

2017 to 2021  

The Company’s policy is to include interest expense and penalties related to unrecognized tax benefits within the provision for income taxes on the consolidated statements of operations. 

At June 30, 2020 and June 30, 2019, the company had $ 0.1 million and $ 0.1  million for accrued interest expense on unrecognized tax benefits.

Commitments AND CONTINGENCIES

At June 30, 

2021 and 

2020 , the company had $ 0.8 million and $ 0.1  million for accrued interest expense on unrecognized tax benefits.

CONTINGENCIES

From time to time, the Company is subject to various claims and legal proceedings, including claims related to environmental remediation, either asserted or unasserted, that arise in the ordinary course of business.

While the outcome of these proceedings and claims cannot be predicted with certainty, the Company’s management does not believe that the outcome of any of the currently existing legal matters will have a material impact on the Company’s consolidated financial position, results of operations or cash flow.

While the outcome of these proceedings and claims cannot be predicted with certainty, the Company’s management does 

not  believe that the outcome of any of the currently existing legal matters will have a material impact on the Company’s consolidated financial position, results of operations or cash flow.

The Company accrues for losses related to a claim or litigation when the Company’s management considers a potential loss probable and can reasonably estimate such potential loss.

In the second quarter of fiscal year 

2019, a lawsuit was filed against Standex Electronics, Inc., a wholly owned subsidiary of the Company (“Electronics”), by Miniature Precision Components, Inc., a customer (“MPC”), seeking damages in connection with allegedly faulty sensors designed and manufactured by Electronics. 

The subject sensors were incorporated by MPC into a subassembly sold by MPC to its customer, an automotive manufacturer.

MPC alleges that the sensors incorrectly activated a diagnostic code in vehicles for which MPC’s customer issued a service bulletin, resulting in significant warranty costs for MPC.

In the litigation, which is pending in the U.S.

District Court for the Eastern District of Wisconsin, MPC seeks indemnification from Electronics for its costs.

Electronics has numerous defenses to MPC’s claims and, based upon discovery completed to date, the Company believes that liability to Electronics, while possible, is not probable, and the range of any potential liability would be between $ 0 and $ 4.0 million. There have been no accrued liabilities recorded related to this litigation. 

stock-based compensation and purchase plans

3 unchanged sentences

The Company has stock plans for directors, officers and certain key employees. 

Total compensation cost recognized in income for equity based compensation awards was $ 7.0 million, $ 4.4 million, and $ 5.0 million for the years ended June 30, 2020, 2019, and 2018, respectively, primarily within Selling, General, and Administrative Expenses. 

The total income tax benefit recognized in the consolidated statement of operations for equity-based compensation plans was $ 1.9 million, $ 1.1 million, and $ 1.2 million for the years ended June 30, 2020, 2019 and 2018, respectively.

Total compensation cost recognized in the consolidated statement of operations for equity based compensation awards was $ 8.4 million, $ 7.0 million, and $ 4.4 million for the years ended June 30, 2021 , 2020 , and 2019 , respectively, primarily within Selling, General, and Administrative Expenses. 

The total income tax benefit recognized in the consolidated statement of operations for equity-based compensation plans was $ 1.8  million, $ 1.9  million, and $ 1.1  million for the years ended June 30, 2021 , 

2020 and 2019 , respectively.

There were 208,971 shares of common stock reserved for issuance under various compensation plans at June 30, 2021 . 

4 unchanged sentences

Dividends are accumulated and paid out at the end of the restriction period. 

During 2020, 2019, and 2018, the Company granted 75,505 , 70,085 , and 51,792 shares respectively of restricted stock to eligible participants. 

Restrictions on the stock awards generally lapse between fiscal 2021  and fiscal 2023.

For the years ended June 30, 2020, 2019, and 2018, $ 4.2 million, $ 3.7 million, and $ 3.7 million, respectively, was recognized as compensation expense related to restricted stock awards. 

Restrictions on non-vested stock awards generally lapse between fiscal year 2022  and fiscal year 2024.

$ 5.3  million, $ 4.2 million, and $ 3.7 million, respectively, was recognized as compensation expense related to restricted stock awards for fiscal years ended June 30, 2021, 2020, and 2019.

Substantially all awards are expected to vest.

2 unchanged sentences

Restricted Stock Awards

Grant Date  

Outstanding, June 30, 2020

2 unchanged sentences

72,475  

Exercised / vested

( 44,647 )  

$ ( 528,957 )

( 5,832 )  

2 unchanged sentences

$ 74.61  

Restricted stock awards granted during 2020, 2019 and 2018 had a weighted average grant date fair value of $ 71.38 , $ 102.74 , and $ 93.73 , respectively. 

The grant date fair value of restricted stock awards is determined based on the closing price of the Company’s common stock on the date of grant. 

The total intrinsic value of awards exercised during the years ended June 

2020, 2019, and 2018  was ($ 0.5 ) million, $ 0.9 million, and $ 0.8 million, respectively. 

Restricted stock awards granted during fiscal years 

2020  and 2019  had a weighted average grant date fair value of $ 71.38 , and $ 102.74 , respectively. 

The grant date fair value of restricted stock awards is determined based on the closing price of the Company’s common stock on the date of grant. The fair value of awards vested during fiscal years 2021, 2020 and 2019  was $ 2.8 million, $ 2.3 million and $ 4.5  million, respectively. 

As of June 30, 2021 , there was $ 3.7 million of unrecognized compensation costs related to awards expected to be recognized over a weighted-average period of 1.38 years.

7 unchanged sentences

The restrictions on the units expire after three years. 

At June 30, 2020 and 2019, respectively, 32,387 and 34,950 shares of restricted stock units are outstanding and subject to restrictions that lapse between fiscal 2021  and fiscal 2023.

Restrictions on non-vested annual component 

awards generally lapse between fiscal year 2022  and fiscal year 2024.

The compensation expense associated with this incentive program is charged to income over the restriction period. 

The Company recorded compensation expense related to this program of $ 0.4 million, $ 0.3 million, and $ 0.3 million for the years ended June 

30, 2021 , 

2020 and 2019 , respectively.

25 unchanged sentences

Performance Stock Units

Weighted  

Non-vested, June 30, 2020

6 unchanged sentences

69,071  

( 17,108 )  

Exercised / vested

( 10,474 )  

9 unchanged sentences

$ 70.27  

Restricted stock awards granted under the annual component of this program in fiscal 2020, 2019, and 2018 had a grant date fair value of $ 74.37 , $ 110.22 , and $ 96.56 , respectively. 

The PSUs granted in fiscal 2020, 2019 and 2018 had a grant date fair value of $ 70.37 , $ 106.65 , and $ 91.75 , respectively.

The total intrinsic value of awards vested under the executive compensation program during the years ended June 30, 2020, 2019, and 2018 was ($ 1.0 ) million, $ 0.9 million, and $ 1.6 million respectively.

The Company recognized compensation expense related to the PSUs of $ 2.9 million, $ 0.3 million, and $ 0.9 million for the years ended June 30, 2020, 2019 and 2018 respectively based on the probability of the performance targets being met.

The total unrecognized compensation costs related to non-vested performance share units was $ 2.9  million at June 30, 2020, which is expected to be recognized over a weighted average period of 1.3 years.

Restricted stock awards granted under the annual component of this program in fiscal years 

2021 , 2020 , and 

2019 had a weighted average grant date fair value of $ 43.16 , $ 74.37 , and $ 110.22 , respectively. 

The PSUs granted in fiscal years 

2020 and 

2019 had a weighted average grant date fair value of $ 70.37 , and $ 106.65 , respectively.

The grant date fair value of the PSUs is determined based on the closing price of the Company’s common stock on the date of grant. The fair value of PSUs vested under the long-term component of this program during the fiscal years ended June 30, 2021 , 2020 , and 

2019 was $ 0.7 million, $ 0.8 million, and $ 0.7  million respectively.

The Company recognized compensation expense related to the PSUs of $ 2.6 million, $ 2.9  million, and $ 0.3  million for the fiscal years ended June 30, 2021, 

2020 and 2019  respectively based on the probability of the performance targets being met.

The total unrecognized compensation costs related to non-vested performance share units was $ 3.6 million at June 30, 2021, which is expected to be recognized over a weighted average period of 1.3 years.

Employee Stock Purchase Plan

4 unchanged sentences

The 15% discount is recorded as a component of SG&A in the Company’s Consolidated Statements of Operations.

Shares of stock reserved for the plan were 62,484  at June 30, 2020.

Shares of stock reserved for the plan were 54,975 at June 30, 2021 .

Shares purchased under this plan aggregated to 7,509 in fiscal year 2021 , 11,132 in 2020 , and 7,698 in 2019 , at an average price of $ 66.98 , $ 52.57 , and $ 65.63 , respectively.

Accumulated Other Comprehensive Income (LosS)

The components of the Company’s accumulated other comprehensive income (loss) at June 30, 2020  and 2019  are as follows (in thousands):

The components of the Company’s accumulated other comprehensive income (loss) at June 30, 2021  and 

2020 are as follows (in thousands):

Foreign currency translation adjustment

$ ( 21,244 )  

$ ( 31,046 )  

Unrealized pension losses, net of tax

( 92,372 )  

( 109,880 )  

Unrealized losses on derivative instruments, net of tax

( 2,524 )  

( 6,733 )  

$ ( 116,140 )  

$ ( 147,659 )  

$ ( 137,278 )

restructuring

6 unchanged sentences

2021 Restructuring Initiatives

$ 1,313  

$ 1,975  

Prior Year Initiatives

Total expense

$ 2,239  

$ 1,239  

$ 3,478  

2020 Restructuring Initiatives

$ 4,004  

$ 4,610  

Prior Year Initiatives

Total expense

$ 4,004  

$ 4,669  

2019 Restructuring Initiatives

1 unchanged sentence

Total expense

$ 1,163  

$ 1,289  

2021  Restructuring Initiatives

1 unchanged sentence

Restructuring expenses primarily related to headcount reductions and facility rationalization within our Specialty Solutions and Engraving segment.

Thus far, during fiscal year 

During fiscal year 

2021 ,  we have also incurred restructuring expenses related to 

4 unchanged sentences

Additions and adjustments

( 1,274 )  

( 662 )  

Restructuring liabilities at June 30, 2021

1 unchanged sentence

The Company continues to focus our efforts to reduce cost and improve productivity across our businesses, particularly through headcount reductions, facility closures, and consolidations. 

During fiscal year 2019 and 2018, the Company also incurred restructuring expenses related to third party assistance with analysis and implementation of these activities.

The Company expects to incur additional restructuring costs of approximately $ 2.6  million in fiscal year 2021  as the Company continues to focus its efforts to reduce cost and improve productivity across its businesses, particularly through headcount reductions, facility closures, and consolidations.

Activity in the reserves related to 2019 restructuring initiatives is as follows (in thousands):

During fiscal year 2020 and 2019, the Company also incurred restructuring expenses related to headcount reductions, facility rationalization within our Specialty Solutions and Engraving segment, and 

third party assistance with analysis and implementation of these activities.

The Company expects to incur additional restructuring costs of approximately $ 2.0 million in fiscal year 2022  as the Company continues to focus its efforts to reduce cost and improve productivity across its businesses, particularly through headcount reductions, facility closures, and consolidations.

Activity in the reserves related to 2020  restructuring initiatives is as follows (in thousands):

Involuntary Employee

3 unchanged sentences

Additions and adjustments

( 1,446 )  

( 585 )  

Restructuring liabilities at June 30, 2021

Activity in the reserves related to 

2018 restructuring initiatives is as follows (in thousands):

Activity in the reserves related to fiscal year 2020 (in thousands):

Involuntary Employee

3 unchanged sentences

Additions and adjustments

( 3,631 )  

( 652 )  

Restructuring liabilities at June 30, 2020

9 unchanged sentences

Total expense

$ 2,239  

$ 1,239  

$ 3,478  

Fiscal Year 2020

3 unchanged sentences

Total expense

$ 4,004  

$ 4,669  

Fiscal Year 2019

3 unchanged sentences

Total expense

$ 1,163  

$ 1,289  

Employee Benefit Plans

9 unchanged sentences

Interest Cost

10,342  

Expected return on plan assets

( 13,012 )  

( 13,150 )  

( 13,541 )  

( 629 )  

( 868 )  

Recognized net actuarial loss

1 unchanged sentence

Net periodic benefit cost (benefit)

$ 1,037  

$ 1,065  

The following table sets forth the funded status and amounts recognized as of June 30, 

6 unchanged sentences

Benefit obligation at beginning of year

$ 264,619  

$ 253,540  

$ 45,190  

$ 43,983  

Interest cost

Actuarial loss (gain)

( 3,457 )  

18,121  

( 746 )  

Benefits paid

( 16,513 )  

( 16,128 )  

( 1,906 )  

Foreign currency exchange rate & other changes

Projected benefit obligation at end of year

$ 252,092  

$ 264,619  

$ 47,809  

$ 45,190  

Change in plan assets

Fair value of plan assets at beginning of year

$ 194,824  

$ 186,205  

$ 41,973  

$ 39,665  

Actual return on plan assets

26,277  

21,447  

Employer contribution

Benefits paid

( 16,513 )  

( 16,129 )  

( 1,906 )  

Foreign currency exchange rate

Fair value of plan assets at end of year

$ 212,603  

$ 194,824  

$ 45,017  

$ 41,973  

Funded Status

$ ( 39,489 )  

$ ( 69,795 )  

$ ( 2,792 )  

Amounts recognized in the consolidated balance sheets consist of:

Prepaid benefit cost

$ 5,661  

$ 4,663  

Current liabilities

( 208 )  

( 309 )  

Non-current liabilities

( 39,281 )  

( 69,587 )  

( 8,144 )  

Net amount recognized

$ ( 39,489 )  

$ ( 69,795 )  

$ ( 2,792 )  

Unrecognized net actuarial loss

$ 117,847  

$ 140,501  

$ 4,618  

$ 5,075  

Unrecognized prior service cost

( 51 )  

Accumulated other comprehensive income, pre-tax

The accumulated benefit obligation for all defined benefit pension plans was $ 309.7  million and $ 297.4  million at June 30, 2020 

$ 117,847  

$ 140,501  

$ 4,567  

$ 5,018  

The accumulated benefit obligation for all defined benefit pension plans was $ 299.8 million and $ 309.7 million at June 30, 

2021 and 2020 , respectively.

The estimated actuarial net loss for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $ 6.1  million.

Plan Assets and Assumptions

3 unchanged sentences

Cash and cash equivalents

$ 3,209  

$ 3,148  

Common and preferred stocks

86,499  

84,074  

Corporate bonds and other fixed income securities

146,742  

144,892  

21,170  

$ 257,620  

$ 7,423  

$ 250,197  

June 30, 2020

Cash and cash equivalents

$ 3,113  

$ 1,684  

$ 1,429  

Common and preferred stocks

Government securities

85,641  

83,784  

Corporate bonds and other fixed income securities

126,703  

125,083  

21,478  

$ 236,935  

$ 5,161  

$ 231,774  

Asset allocation at June 30, 2021 and 2020 and target asset allocations for 2021 are as follows:

24 unchanged sentences

0.73 - 3.00 % 0.99 - 2.90 % 0.24 - 3.70 %

0.24 - 3.70 %

0.38 - 4.40 %

Rate of compensation increase

3.25 % 2.90 % 3.20 %

Plan assumption - cost

1 unchanged sentence

0.99 - 2.90 % 0.31 - 3.70 % 0.38 - 4.40 %

0.38 - 4.40 %

0.43 - 4.00 %

Expected return on assets

1.40 - 6.90 % 2.30 - 7.00 % 2.45 - 7.00 %

2.45 - 7.00 %

2.55 - 7.00 %

Rate of compensation increase

2.90 % 3.20 % 3.60 %

Included in the above are the following assumptions relating to the obligations for defined benefit pension plans in the United States at June 30, 2021 ;

5 unchanged sentences

Expected benefit payments for all plans during the next five years are as follows: 

2021, $ 17.7  million;

2022, $ 17.6  million;

2023, $ 17.6  million;

2022, $ 18.2 million;

2025, $ 17.5 million and five years thereafter, $ 85.6  million.

The Company expects to make $ 9.9  million of contributions to its pension plans in 2021  including contributions originally scheduled to be made in fiscal year 2020 but deferred under provisions on the U.S.

2023, $ 17.9 million;

2024, $ 17.8 million;

2025, $ 17.8 million;

2026, $ 17.6 million and five years thereafter, $ 86.2 million.

The Company expects to make $ 1.6 million of contributions to its pension plans in 2022.

The Company operates defined benefit plans in Germany and Japan which are unfunded.

10 unchanged sentences

column provides the Employer Identification Number (“EIN”) and the three -digit plan number.

The most recent Pension Protection Act zone status available in 2020 and 2019 relates to the plans’

The most recent Pension Protection Act zone status available in 

2021 and 

2020 relates to the plans’

two most recent fiscal year-ends.

8 unchanged sentences

New England Teamsters and Trucking Industry Pension Fund

04-6372430-001

Yes/ Implemented

IAM National Pension Fund, National Pension Plan

51-6031295-002

Yes/Implemented

May 2021-Oct.

Oct-22 - May-25

$ 1,144  

$ 1,126  

$ 1,105  

Retirement Savings Plans

3 unchanged sentences

The Company, at the discretion of the Board of Directors, may make contributions on behalf of our employees under the plans.

Company contributions were $ 3.7  million, $ 4.0 million, and $ 3.7 million for the years ended June 30, 2020, 2019, and 2018, respectively.

Company contributions were $ 2.9 million, $ 3.7 million, and $ 4.0 million for the years ended June 30, 2021 , 2020 , and 2019 , respectively.

At June 30, 2021 , the salaried plan holds approximately 124,000 shares of Company common stock, representing approximately 3.9 % of the holdings of the plan.

Industry Segment Information

During the third quarter of 2020, the Company announced the divestiture of its Refrigerated Solutions Group (an accumulation of the Master-Bilt and NorLake operating segments) consistent with its strategy to focus financial assets and managerial resources on higher growth and operating margin businesses.

The divestiture of the Refrigerated Solutions Group was completed and consideration was exchanged in April of fiscal year 2020.

Subsequent to the disposition of the Refrigeration Solutions Group, the Company reviewed the quantitative and qualitative characteristics of its remaining businesses and determined that it has seven operating segments that aggregate to five reportable segments. 

The reportable segments are organized around the types of products sold:

The company has five reportable segments organized around the types of products sold:

• 

12 unchanged sentences

an aggregation of three operating segments that manufacture and sell refrigerated, heated and dry merchandizing display cases, custom fluid pump solutions, and single and double acting telescopic and piston rod hydraulic cylinders.

All periods presented have been revised accordingly to reflect the new reportable segments.

Net sales include only transactions with unaffiliated customers and include no significant intersegment or export sales. 

5 unchanged sentences

Such direct expenses that are recharged on an intercompany basis each month include such costs as insurance, workers’

compensation programs, audit fees and pension expense. 

compensation programs, and audit fees. 

The accounting policies applied by the reportable segments are the same as those described in the Summary of Accounting Policies footnote to the consolidated financial statements. 

3 unchanged sentences

Depreciation and Amortization

Electronics  

$ 253,369  

4 unchanged sentences

$ 11,751  

Engraving  

147,016  

2 unchanged sentences

11,140  

Scientific  

10,595  

1 unchanged sentence

57,523  

Engineering Technologies  

57,621  

Engineering Technologies

75,562  

104,047  

Specialty Solutions  

105,270  

Specialty Solutions

100,864  

113,935  

Corporate and Other  

123,274  

Corporate and Other

$ 656,232  

3 unchanged sentences

$ 32,294  

$ 29,288  

Income (Loss) From Operations

Capital Expenditures (1)

$ 46,600  

$ 29,749  

$ 41,227  

$ 11,154  

$ 5,334  

$ 12,646  

22,510  

20,493  

23,996  

10,618  

13,868  

18,240  

13,740  

13,676  

Engineering Technologies

14,027  

11,169  

Specialty Solutions

14,358  

18,546  

19,000  

Restructuring charge

( 3,478 )  

( 4,669 )  

( 1,289 )  

Loss on sale of business

( 14,624 )  

Acquisition-related costs

( 931 )  

( 1,759 )  

( 3,075 )  

Other operating income (expense), net

( 500 )  

( 29,674 )  

( 29,599 )  

( 24,728 )  

$ 59,165  

$ 60,528  

$ 79,476  

$ 21,413  

$ 19,304  

$ 32,613  

Interest expense

( 5,992 )  

( 7,475 )  

( 10,760 )  

( 473 )  

( 1,742 )  

Income from continuing operations before income taxes

Includes capital expenditures in accounts payable of $ 3.2 million, $ 0.9 million, and $ 0.4 million at June 30, 2020, 2019, and 2018 respectively.

$ 52,700  

$ 54,074  

$ 66,974  

( 1 ) Includes capital expenditures in accounts payable of $ 2.4 million, $ 3.2 million, and $ 0.9 million at June 30, 2021 , 2020 , and 

2019 respectively.

Identifiable Assets

$ 144,832  

$ 131,582  

$ 382,045  

$ 324,725  

77,378  

77,195  

263,406  

257,104  

15,454  

110,300  

90,595  

Engineering Technologies

37,085  

43,685  

114,012  

147,797  

Specialty Solutions

46,883  

52,528  

Corporate & Other

45,577  

55,193  

Discontinued Operations

Net sales (2)

United States

Other Americas

Net sales were identified based on geographic location where our products and services were initiated.

EMEA consists primarily of Europe, Middle East and S.

Long-lived assets

$ 278,054  

$ 271,221  

$ 962,223  

$ 930,878  

Tangible Long-lived assets

United States

$ 63,613  

$ 69,548  

33,722  

32,057  

30,677  

26,057  

Other Americas

$ 133,373  

$ 132,533  

EMEA consists primarily of Europe, Middle East and S.

Quarterly Results of Operations (Unaudited)

The unaudited quarterly results of operations for the years ended June 30, 2020 and 2019 are as follows (in thousands, except for per share data):

EARNINGS PER SHARE (1)

Basic and diluted earnings per share are computed independently for each reporting period.

Accordingly, the sum of the quarterly earnings per share amounts may not agree to the year-to-date amounts.

On March 31, 2021, the Company divested Enginetics Corporation (“Enginetics”), its jet engine components business, to Enjet Aero, LLC, a privately-held aerospace engine component manufacturing company.

Enginetics generated approximately $ 9.0 million in revenue in the first nine months of fiscal 2021.

The business activities, which are reported within the Engineering Technologies Group, were divested in order to focus on the higher growth and margin opportunities of the Company's core spin forming solutions business that serves the space, commercial aviation and defense end markets.

The Company received $ 11.7 million cash consideration and recorded a pre-tax loss on sale of the business of $ 14.6 million, including a goodwill impairment charge of $ 7.6 million, assigned to the entirety of the Engineering Technologies segment, and a $ 5.4 million write-down of intangible assets.

The sale transaction and financial results of Enginetics are classified as continuing operations in the Consolidated Financial Statements.

DISCONTINUED OPERATIONS

10 unchanged sentences

The proceeds received were subsequently used to pay down borrowings on our revolving credit facility.

Results of the Refrigerated Solutions Group in current and prior periods and results of the Cooking Solutions Group in prior periods have been classified as discontinued operations in the Condensed Consolidated Financial Statements and excluded from the results of continuing operations. 

Activity related to the Refrigerated Solutions Group, the Cooking Solutions Group and other discontinued operations for the years ended June 30, 2020, 2019, and 2018 is as follows (in thousands):

Activity related to the Refrigerated Solutions Group, the Cooking Solutions Group and other discontinued operations for the years ended June 30, 2021 , 2020 , and 2019  is as follows (in thousands):

Year Ended June 30,

$ 111,841  

$ 223,067  

Gain (loss) on sale of business

$ ( 19,996 )  

$ 20,539  

Transaction fees

Income (loss) from Discontinued Operations

Non-operating Income (Expense)

( 1,933 )  

Profit (loss) before taxes

$ ( 2,620 )  

$ ( 23,439 )  

$ 17,175  

Benefit (provision) for taxes

Net income (loss) from discontinued operations

Assets and liabilities related to our discontinued operations appear in the condensed consolidated balance sheets are as follows (in thousands):

June 30, 2020

June 30, 2019

Accounts receivable

Prepaid Expenses

Due from Buyer

Total current assets

Property, plant, equipment, net

Intangible assets, net

Other non-current assets

Total non-current assets

Accounts Payable

Accrued Liabilities

Income Tax Payable

Total current liabilities

Non-current Liabilities

Total Liabilities

Effective 

July 1, 2019, 

the Company adopted ASU 

$ ( 2,070 )  

Leases (Topic 

842 ),  using the modified retrospective approach and utilizing the effective date as its date of initial application.

As a result, prior periods are presented in accordance with the previous guidance in ASC 

840,  Leases (“ASC 

The Company has elected to apply the ‘package of practical expedients’

which allow it to 

not  reassess i) whether existing or expired arrangements contain a lease, ii) the lease classification of existing or expired leases, or iii) whether previous initial direct costs would qualify for capitalization under the new lease standard.

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement.

Leases with a term greater than 

one  year are recognized on the balance sheet as right-of-use assets and short-term and long-term lease liabilities, as applicable.

The Company does 

not  have material financing leases.

Operating lease liabilities and their corresponding right-of-use assets are initially recorded based on the present value of lease payments over the expected remaining lease term.

The interest rate implicit in lease contracts is typically 

not  readily determinable.

As a result, the Company utilizes its incremental borrowing rate to discount lease payments, which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

To estimate its incremental borrowing rate, a credit rating applicable to the Company is estimated using a synthetic credit rating analysis since the Company does 

not  currently have a rating agency-based credit rating

The Company has elected 

not  to recognize leases with an original term of 

one  year or less on the balance sheet.

The Company typically only includes an initial lease term in its assessment of a lease arrangement.

Options to renew a lease are 

not  included in the Company’s assessment unless there is reasonable certainty that the Company will renew.

$ ( 20,826 )  

$ 19,628  

In the normal course of its business, the Company enters into various leases as the lessee, primarily related to certain transportation vehicles, facilities, office space, and machinery and equipment.

These leases have remaining lease terms between one and fifty-seven years, some of which may include options to extend the leases or options to terminate the leases.

Some lease arrangements require variable payments that are dependent on usage, output, or index-based adjustments. 

Amounts (in thousands) recorded in the Company's Condensed Consolidated Balance Sheet and Statement of Operations related to leases are as follows:

June 30, 2021

ROU Assets (other assets)

Current (accrued expense)

Other non-current liability

June 30, 2020

Operating lease right-of-use-asset

$ 37,276  

$ 44,788  

Current (accrued liabilities)

$ 7,933  

$ 8,016  

Operating lease long-term liabilities

29,041  

36,293  

Total lease liability

$ 36,974  

$ 44,309  

The components of lease costs for the years ended June 

2020  and June 

2019  are as follows:

2021  and 2020  are as follows (in thousands):

June 30, 2021

1 unchanged sentence

Operating lease cost

$ 11,747  

$ 10,791  

Variable lease cost

Net lease cost

$ 12,610  

$ 11,283  

Maturity of lease liability

The maturity of the Company's lease liabilities included in continuing operations at June 

30, 2020  were as follows:

2021 were as follows (in thousands):

Operating Leases

13,724  

Present value of lease liabilities

The Company will make future payments on a lease that have 

not  yet commenced of $ 0.3  million.

This lease will commence in 2021  and has lease term of 

$ 36,974  

The weighted average remaining lease term and discount rates are as follows:

7 unchanged sentences

June 30, 2020

Operating cash flows from operating leases

Total cash paid for amounts included in the measurement of lease liabilities

SUBSEQUENT EVENTS

On July 15, 2020 the Company acquired privately-held, Florida-based Renco Electronics for approximately $ 28.0 million in cash with an additional three -year earnout payment based upon achieving certain financial targets.

The transaction is being financed from Standex’s existing cash balance. 

Operating cash outflows from operating leases

$ 11,025  

$ 10,436  

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Standex International Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Standex International Corporation and subsidiaries (the "Company") as of June 30, 2021, the related consolidated statement of operations, comprehensive income, stockholders' equity, and cash flows, for the year ended June 30, 2021, and the related notes (collectively referred to as the "financial statements").

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

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of June 30, 2021, based on criteria established in Internal Control —

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 13, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

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.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue recognition –

Revenue recognized over time –

Refer to note 3 to the financial statements

Critical Audit Matter Description

For products manufactured over time, the transfer of control is measured pro rata, based upon current estimates of costs to complete such contracts.

Losses on contracts are fully recognized in the period in which the losses become determinable.

Revisions in profit estimates are reflected on a cumulative basis in the period in which the basis for such revision becomes known.

For the year ended June 30, 2021, the revenue recognized over time was $37.2 million.

We identified revenue recognized over time as a critical audit matter because of the judgments and subjectivity involved in the determination of estimated costs to complete contracts.

This required extensive audit effort and a high degree of auditor judgment when performing audit procedures to audit costs incurred to date and management’s estimates of margin at completion used to recognize revenue over time and evaluating the results of those procedures.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s estimates of total costs and profit for the performance obligation used to recognize revenue for certain performance obligations accounted for over time included the following, among others:       

We tested the effectiveness of controls for revenue recognized over time, including management’s controls over the estimates of total costs and profit for performance obligations.

We selected a sample of long-term contracts with customers for which the revenue is recognized over time and we performed the following:

evaluated whether the contracts were properly included in management’s calculation of long-term contract revenue based on the terms and conditions of each contract, including whether continuous transfer of control to the customer occurred as progress was made toward fulfilling the performance obligation

evaluated management’s ability to achieve the estimates of total costs and profit at completion by comparing the estimates to management’s work plans, engineering specifications, and supplier contracts, and performing corroborating inquiries with the Company’s project managers and engineers.

tested the accuracy and completeness of the costs incurred to date for the performance obligation to supporting documentation

tested the mathematical accuracy of management’s calculation of revenue for the contract.

We evaluated management’s ability to estimate total costs and profits accurately by comparing actual costs and profits to management’s historical estimates for performance obligations that have been fulfilled.

/s/ DELOITTE & TOUCHE LLP

Boston, Massachusetts

August 13, 2021

We have served as the Company’s auditor since 2020.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

1 unchanged sentence

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Standex International Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of June 30, 2020 and 2019, the related consolidated statements of comprehensive income, changes in shareholders’

equity, and cash flows for each of the three years in the period ended June 30, 2020, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2020, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of June 30, 2020, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated August 25, 2020 expressed an unqualified opinion.

Change in accounting principle

As discussed in Note 20 to the consolidated financial statements, the Company has changed its method of accounting for leases as of July 1, 2019 due to the adoption of Accounting Standards Codification (ASC) Topic 842, Leases .

We have audited the accompanying consolidated balance sheet of Standex International Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of June 30, 2020, the related consolidated statements of comprehensive income, changes in shareholders’

equity, and cash flows for the years ended June 30, 2020 and 2019, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2020, and the results of its operations and its cash flows for the years ended June 30, 2020 and 2019 in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

1 unchanged sentence

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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 U.S.

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

5 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue recognition –

Revenue Recognized Over Time

As described in Notes 1 and 3 to the consolidated financial statements, the Company’s revenue that is recognized over time was $35.1 million for the year ended June 30, 2020. 

For these transactions, revenue is recognized over time based on cost incurred to date as a percentage of total estimated cost.

We identified revenue recognized over time as a critical audit matter.

The principal considerations for our determination that this matter is a critical audit matter are as follows.

Accounting for these transactions requires the Company to monitor customer contracts to determine the expected costs to be incurred to satisfy the related performance obligation.

Management’s determination of these expected costs involves estimation and subjectivity, which, in turn, involved complexity and auditor subjectivity in evaluating management’s estimates and obtaining sufficient appropriate audit evidence related to such estimates.

Our audit procedures related to revenue recognized over time included the following, among others.

We tested the operating effectiveness of controls relating to management’s development and ongoing evaluation of each contract’s expected cost.

For a sample of transactions, we inspected the customer contract and evaluated assumptions used by management in determining the contract’s estimated expected cost in order to fulfill the performance obligation under the contract.

This included comparing planned costs to actual costs incurred to date based on management’s original assumptions and corroborating management’s assumptions with company engineers assigned to the contract.

For a sample of transactions, we evaluated whether the assumptions surrounding the expected costs to be incurred were reasonable by testing management’s historical ability to estimate.

This included comparing actual costs incurred on completed contracts to management’s original assumptions and assumptions throughout the contract’s life related to expected costs to be incurred.

Goodwill Impairment Assessment

As described in Notes 1 and 6 to the consolidated financial statements, the Company’s consolidated goodwill balance was $271 million at June 30, 2020, which is allocated to the Company’s 7 reporting units.

Goodwill is tested for impairment at least annually at the reporting unit level.

Due to the impact of the COVID-19 pandemic on the Company’s projected operating results, cash flow and market capitalization, the Company completed an interim goodwill impairment assessment of its reporting units during the third quarter along with the Company’s annual impairment assessment during the fourth quarter.

We identified the Company’s goodwill impairment assessments of certain reporting units as a critical audit matter.

The principal considerations for our determination that this matter is a critical audit matter are as follows.

The determination of the fair value of reporting units requires management to make significant estimates and assumptions related to forecasts of future cash flows and discount rates.

This requires management to evaluate historical results and expectations of future operating performance based on relevant information available to them regarding expectations of industry performance, as well as expectations for entity-specific performance.

In addition, determining the discount rate requires management to evaluate the appropriate risk premium based on their judgment of industry and entity-specific risks.

As disclosed by management, changes in these assumptions could have a significant impact on either the fair value of the reporting units, the amount of any goodwill impairment charge, or both.

In turn, auditing management’s judgments regarding forecasts of future cash flows and the discount rate to be applied involved a high degree of auditor subjectivity.

Our audit procedures related to the Company’s goodwill impairment assessment of certain reporting units included the following, among others.

We tested the design and operating effectiveness of controls relating to management’s goodwill impairment tests, including controls over the determination of key inputs such as the forecasting of future cash flows and determination of the discount rate.

We compared management’s forecasts of future revenue and operating margin to third -party industry projections, historical operating results, and past projections.

We evaluated management’s historical ability to achieve forecasted revenue and operating margins.

We performed sensitivity analysis on the Company’s future revenue and operating margins to evaluate the reasonableness of management’s forecasts.

We utilized a valuation specialist to assist in recalculating the Company’s discounted cash flow model and in evaluating the reasonableness of significant assumptions to the model, including the discount rate.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2015.

We served as the Company’s auditor from 2015 to 2020.

Boston, Massachusetts

3 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-K

Item 8. Financial Statements and Supplementary Data