What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-08-05 compared with 2021-08-13 · 127 added, 190 removed, 370 unchanged (46% of the section changed)

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Business, above, for additional information regarding our segment structure and management strategy.

It is our objective to grow larger and more profitable business units through both organic initiatives and acquisitions. 

We seek to identify and implement organic growth initiatives such as new product development, geographic expansion, and the introduction of products and technologies into new markets, key accounts and strategic sales channel partners. 

Also, we have a long-term objective to create sizable business platforms by adding strategically aligned or “bolt on”

acquisitions to strengthen the individual businesses, create both sales and cost synergies with our core business platforms, and accelerate their growth and margin improvement. 

We look to create both sales and cost synergies within our core business platforms, accelerate growth and improve margins. 

We have a particular focus on identifying and investing in opportunities that complement our products and will increase the global presence and capabilities of our businesses. 

From time to time, we have divested, and likely will continue to divest, businesses that we feel are not strategic or do not meet our growth and return expectations.

As part of our ongoing strategy:

In the third quarter of fiscal year 2022, we acquired Sensor Solutions, a designer and manufacturer of customized standard magnetic sensor products including hall effect switch and latching sensors, linear and rotary sensors, and specialty sensors.

Sensor Solutions' customer base in automotive, industrial, medical, aerospace, military and consumer electronics end markets are a strategic fit and expand our presence in these markets.

Sensor Solution's operates one light manufacturing facility in Colorado.

Its results are reported within our Electronics segment. 

In the third quarter of fiscal year 2021, we divested Enginetics Corporation (“Enginetics”) our jet engine components business reported within our Engineering Technologies segment, to Enjet Aero, LLC, a privately held aerospace engine component manufacturing company. This divestiture allows us to focus on the higher growth and margin opportunities of our core spin forming solutions business that serves the space, commercial aviation and defense end markets.  We received $11.7 million cash consideration and recorded a pre-tax loss on the sale of $14.6 million in the Consolidated Financial Statements 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.  

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The divestiture was finalized and consideration was exchanged in the fourth quarter of 2020. 

Results of RSG in current and prior periods have been classified as discontinued operations in the Consolidated Financial Statements. 

The divestiture impacts the consolidated company results as follows:

Year Ended June 30, 2020

Year Ended June 30, 2019

$000’s

Operating Income/(Loss)

Asset Impairment Charge

Operating Income/(Loss) without impairment charge

During the first quarter of 2019, we decided to divest our Cooking Solutions Group, which consisted of three operating segments, Associated American Industries, BKI, and Ultrafryer, along with a minority interest investment. 

We completed this divestiture during the third quarter of 2019 and received proceeds for the sale on the first day of the fourth quarter of 2019. 

In connection with the divestiture efforts, we also sold our minority interest in a European oven manufacturer back to the majority owners. 

Results of the Cooking Solutions Group in current and prior periods have been classified as discontinued operations in the Consolidated Financial Statements. 

In the fourth quarter of 2019, we acquired Ohio-based Genius Solutions Engineering Company (d/b/a GS Engineering), a provider of specialized “soft surface”

skin texturized tooling, primarily serving the automotive end market.

GS Engineering brought us critical proprietary technologies that offer significant advantages in creating tools for “soft surface”

components which are used increasingly in vehicle interiors.

The tooling for soft surface products offered by GS is highly complementary to our industry-leading capabilities in texturing molds and tools used to create “hard surface”

This technology also complements and enabled us to improve our existing nickel shell technology that produces soft surface tooling.

GS operates one facility in Ohio and its results are reported within our Engraving segment. 

In September 2018, fiscal year 2019, we acquired New Hampshire-based Regional Mfg.

Specialists, Inc.

(now a part of Standex Electronics Magnetics, Inc and operated under the name Agile Magnetics), a provider of high-reliability magnetics. 

The addition of Agile Magnetics is an important step forward in building out the high reliability magnetics business of Standex Electronics.

As a result of this combination, we have broadened our exposure to several attractive end-markets and added a valuable manufacturing and sales base in the northeast.

Additionally, we can now offer complementary products from Standex’s broader portfolio to Agile’s customer base. 

Agile Magnetics products include transformers, inductors and coils for mission critical applications for blue chip OEMs in the semiconductor, military, aerospace, healthcare, and industrial markets.

Agile operates one manufacturing facility in New Hampshire and its results are reported within our Electronics segment. 

In August 2018, fiscal year 2019, we acquired Michigan-based Tenibac-Graphion, Inc., a provider of chemical and laser texturing services. 

The combination of Tenibac and Standex Engraving expanded services available to customers, increased responsiveness to customer demands, and drove innovative approaches to solving customer needs. 

The combined customer base now has access to the full line of mold and tool services, such as the Architecture design consultancy, chemical and laser engraving, tool finishing, and tool enhancements. 

Tenibac serves automotive, packaging, medical and consumer products customers, and operates three facilities, two in Michigan and one in China.

The Tenibac results are reported within our Engraving segment. 

Results of RSG in current and prior periods have been classified as discontinued operations in the Consolidated Financial Statements.  

As a result of these portfolio moves, we have transformed Standex to a company with a more focused group of businesses selling customized solutions to high value end markets via a compelling customer value proposition. 

The narrowing of the portfolio allows for greater management focus on driving operational disciplines and positions us well to benefit from an economic rebound associated with the end of the COVID-19 crisis and to use our cash flow from operations to invest selectively in our ongoing pipeline of organic and inorganic opportunities.

We develop “Customer Intimacy”

by utilizing the Standex Growth Disciplines to partner with our customers in order to develop and deliver custom solutions. 

By partnering with our customers during long-term product development cycles, we become an extension of their development teams. 

Through this Partner, Solve, Deliver®

approach, we are able to secure our position as a preferred long-term solution provider for our products and components. 

This strategy results in increased sales and operating margins that enhance shareholder returns. 

Standex Operational Excellence drives continuous improvement in the efficiency of our businesses, both on the shop floor and in the office environment. 

We recognize that our businesses are competing in a global economy that requires us to improve our competitive position. 

We have deployed a number of management competencies to drive improvements in the cost structure of our business units including operational excellence through lean enterprise, the use of low cost manufacturing facilities, the consolidation of manufacturing facilities to achieve economies of scale and leveraging of fixed infrastructure costs, alternate sourcing to achieve procurement cost reductions, and capital improvements to increase productivity.

The narrowing of the portfolio allows for greater management focus on driving operational disciplines and positions us well to use our cash flow from operations to invest selectively in our ongoing pipeline of organic and inorganic opportunities.

The Company’s strong historical cash flow has been a cornerstone for funding our capital allocation strategy. 

We use cash flow generated from operations to fund investments in capital assets to upgrade our facilities, improve productivity and lower costs, invest in the strategic growth programs described above, including organic growth and acquisitions, and to return cash to our shareholders through payment of dividends and stock buybacks. 

Restructuring expenses reflect costs associated with the Company’s efforts of continuously improving operational efficiency and expanding globally in order to remain competitive in our end-user markets. 

Restructuring expenses reflect costs associated with our efforts of continuously improving operational efficiency and expanding globally in order to remain competitive in our end-user markets. 

We incur costs for actions to size our businesses to a level appropriate for current economic conditions, improve our cost structure, enhance our competitive position and increase operating margins. 

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We are rigorously following health protocols in our plants, including changing work cell configurations and revising shift schedules when appropriate, in order to do our best to maintain operations. 

During the end of fiscal year 2020 and the beginning of fiscal year 2021, we experienced revenue losses in many of our businesses due to the impact that the pandemic has had on our customers.

Conversely, public and private sector responses to COVID-19 vaccine distribution, especially in the United States, have also resulted in increased sales of scientific refrigeration equipment to customers within our Scientific reporting segment.

Given the impact that the pandemic created on our backlog and incoming order rate, we took immediate actions in the end of fiscal year 2020 to identify and implement cost savings and restructuring actions within each of our operating units as well as our corporate headquarters. 

Actions identified included reducing outside discretionary spend, the natural elimination of travel and trade show expenses that were a result of COVID-19 related curtailments, implementation of rolling furloughs in several businesses where appropriate, and the elimination of certain salaried and hourly positions.

The costs, including restructuring charges, for many of these items occurred in our fourth quarter of fiscal year 2020.  

We exited the fourth quarter of 2021 with $136.4 million in cash and $200.0 million of borrowings under our revolving credit facility. 

Our leverage ratio covenant, as defined in our revolving credit agreement, was 1.31 to 1 and allowed us the capacity to borrow an additional $245.2 million at June 30, 2021. 

Initially, we experienced revenue reductions in many of our businesses due to the impact that the pandemic had on our customers.

Conversely, public and private sector responses to COVID-19 vaccine distribution, especially in the United States, have resulted in increased sales of scientific refrigeration equipment to customers within our Scientific reporting segment.

While overall customer demand has rebounded from the impact of the pandemic, more recently we have been impacted by (i) supply chain shortages, (ii) increased material costs, (iii) labor shortages, especially in North America, and (iv) lockdowns implemented by the Chinese government in select cities in which we operate.

Like other industrial manufacturers, we are impacted by rising inflation which we attempt to manage through appropriate pricing actions and enhanced production efficiency measures.

We exited the fourth quarter of 2022 with $104.8 million in cash and $175.0 million of borrowings under our revolving credit facility. 

Our leverage ratio covenant, as defined in our revolving credit agreement, was 0.98 to 1 and allowed us the capacity to borrow an additional $312.6 million at June 30, 2022. 

We believe that we have sufficient liquidity around the world and access to financing to execute on our short and long-term strategic plans.

Finally, we continue to monitor our ability to participate in any governmental assistance programs available to us in each of our global locations and participate in these programs as available and appropriate.

For instance, the Company's required contributions to the United States funded pension plan for the second half of fiscal year 2021 of approximately $1.7 million was reduced to zero upon passage of the American Rescue Plan Act (the "Act").

The required contributions to the United States funded pension plan for fiscal year 2022 is approximately $1.0 million. 

Consolidated Results from Continuing Operations (in thousands):

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Acquisition related expenses

Other operating expense

Loss on sale of business

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Organic sales change

Net sales increased for fiscal year 2022 by $79.1 million or 12.1% when compared to the prior year. Organic sales increased $96.3 million or 14.7% primarily due to pricing actions and strong demand in our Electronics segment, acquisitions had a $1.9 million impact on sales, and foreign currency had a $9.9 million or 1.5% negative impact on sales.

Net sales in the prior year included revenue of $9.2 million related to our divested Enginetics business.

We discuss our results and outlook for each segment below. 

Net sales increased for fiscal year 2021 by $51.7 million or 8.6% when compared to the prior year end.

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Organic sales increased $15.3 million or 2.5% primarily as a result of impacts from the COVID-19 pandemic economic recovery, and foreign currency had a $14.5 million or 2.4% positive impact on sales.

These increases were offset by a $3.6 million impact on sales due to the divestiture of Enginetics in the third quarter of fiscal year 2021.We discuss our results and outlook for each segment below. 

Net sales for the fiscal year 2020 decreased by $35.4 million, or 5.5%, when compared to the prior year. 

Incremental sales from our acquisitions accounted for $11.6 million or 1.8% of the increase, while organic sales accounted for a decrease of $40.9 million or 6.4%. 

Changes in foreign exchange rates contributed to sales declines of $6.1 million or 1.0%.

The organic sales decrease occurred in all of our segments and was primarily a result of both direct and indirect impacts of the pandemic driven economic slowdown.

These increases were offset by a $3.6 million impact on sales due to the divestiture of Enginetics in the third quarter of fiscal year 2021.

Gross Profit 

Gross profit in fiscal year 2022 increased to $269.9 million, or a gross margin of 36.7% as compared to $241.3 million, or a gross margin of 36.8% in fiscal year 2021.

This increase is a result of organic sales increases, productivity initiatives and targeted prices increases, partially offset by raw material and ocean freight cost headwinds, a one-time project related charge at Engineering Technologies, along with production decreases due to a temporary work stoppage in our Specialty Solutions segment which was resolved during the first quarter.

Gross profit in fiscal year 2021 increased to $241.3 million, or a gross margin of 36.8% as compared to $215.5 million, or a gross margin of 35.6% in fiscal year 2020.

This increase is a result of organic sales increases, productivity initiatives and targeted prices increases, offset by raw material and ocean freight cost headwinds, along with business mix. 

Gross profit in fiscal year 2020 declined to $215.5 million, or a gross margin of 35.6% as compared to $234.7 million, or a gross margin of 36.7% in fiscal year 2019 primarily due to the pandemic related organic sales decline during the second half of the year.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses, (“SG&A”) for the fiscal year 2022 were $169.9 million, or 23.1% of sales compared to $163.1 million, or 24.8% of sales during the prior year.

SG&A expenses during this period were primarily impacted by increased distribution expenses associated with the customer mix and higher organic sales volume and increased research and development spending to drive future product initiatives.

Selling, general, and administrative expenses, (“SG&A”) for the fiscal year 2021 were $163.1 million, or 24.8% of sales compared to $148.5 million, or 24.6% of sales during the prior year.

SG&A expenses during this period were impacted by approximately $4.8 million of SG&A expenses related to the Renco acquisition, increased distribution expenses of $2.0 million as a result of increased organic sales, an increase in research and development spending to drive future product initiatives, and general wage inflation, offset by productivity and cost out actions. 

Restructuring Charges

During fiscal year 2022, we incurred restructuring expenses of $4.4 million, primarily related to productivity improvements, facility rationalization activities, and global headcount reductions within our Engraving and Electronics segments.

During fiscal year 2021, we incurred restructuring expenses of $3.5 million, primarily related to productivity improvements, facility rationalization activities, and global headcount reductions within our Engraving and Specialty Solutions segments.

During fiscal year 2020, we incurred restructuring expenses of $4.7 million primarily related to restructuring efforts that were intended to improve profitability, streamline production and reduce our cost base to a level commensurate with a post-pandemic operating environment.

These efforts included approximately $1.1 million related to the announced closure of a Specialty Solutions pump rotor production facility in Ireland.

Acquisition Related Expenses

We incurred acquisition-related expenses of $0.9 million in fiscal year 2021.

Acquisition-related expenses typically consist of due diligence, integration, and valuation expenses incurred in connection with recent or pending acquisitions.

Acquisition related expenses in fiscal year 2020 were $1.8 million.

These expenses were comprised primarily of $1.2 million for deferred compensation payments earned by the Horizon Scientific seller during the year.

Because these payments were contingent on the seller remaining an employee of the Company, they are treated as compensation expense.

We made the third and final scheduled payment to the seller during the first quarter of fiscal year 2020 and this arrangement was settled. 

Loss on Sale of Business

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The loss included a $7.6 million impairment of goodwill assigned to the entirety of the Engineering Technologies segment and a $5.4 million write-down of intangible assets. 

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses, (“SG&A”) for the fiscal year 2021 were $163.1 million, or 24.8% of sales compared to $148.5 million, or 24.6% of sales during the prior year.

SG&A for the fiscal year 2020 were $148.5 million, or 24.6% of sales compared to $150.3 million, or 23.5% of sales during the prior year.

SG&A expenses were impacted by on-going expenses related to our recent acquisitions of $1.7 million offset by a decrease in variable distribution and selling expenses primarily as a result of organic sales declines.

Acquisition Related Expenses

We incurred acquisition related expenses of $1.6 million and $0.9 million in fiscal year 2022 and 2021, respectively.

Acquisition related expenses typically consist of due diligence, integration, and valuation expenses incurred in connection with recent or pending acquisitions.

Other Operating Expense 

We incurred expense of $5.7 million in fiscal year 2022 related to a litigation accrual.

Refer to Part II, Item 8, Note 12, "CONTINGENCIES," in the Notes to the Consolidated Financial Statements for details.

Income from Operations

Income from operations for the fiscal year 2022 was $88.3 million, compared to $59.2 million during the prior year.

The $1.4 million decrease, or 2.3% is primarily due to the loss on sale of the Enginetics business of $14.6 million along with material inflation, partially offset by income from organic sales increases and pricing actions, along with cost reduction activities and productivity improvement initiatives implemented in all of our businesses.

The $29.1 million increase, or 49.2% is primarily due to the loss on sale of the Enginetics business of $14.6 million in the prior year, income from organic sales increases and pricing actions, along with cost reduction activities and productivity improvement initiatives implemented in all of our businesses, partially offset by material inflation, logistics and labor costs as well as the impact of the COVID-19 lockdown in China in the fourth fiscal quarter of 2022 and a litigation charge of $5.7 million.

Income from operations for the fiscal year 2021 was $59.2 million, compared to $60.5 million during the prior year.

The $19.0 million decrease, or 23.8%, was primarily due to the impact of volume related losses triggered by the COVID-19 pandemic along with material inflation, partially offset by cost reduction activities and productivity improvement initiatives implemented in all of our businesses. 

Discussion of the performance of each of our reportable segments is fully explained in the segment analysis that follows.  

Interest Expense

Interest expense for the fiscal year 2021 was $6.0 million, a decrease of $1.5 million as compared to the prior year, due to lower borrowings outstanding.

Interest expense for the fiscal year 2020 was $7.5 million, a decrease of $3.3 million as compared to the prior year. 

Decreased interest expense was a result of lower borrowings and a lower effective interest rate. 

Interest expense for the fiscal year 2022 was $5.9 million a decrease of $0.1 million as compared to the prior year.

Interest expense for the fiscal year 2021 was $6.0 million, a decrease of $1.5 million as compared to the prior year.

On March 27, 2020, the CARES Act was enacted to address the economic impact of the COVID-19 pandemic in the United States.

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federal income tax rate was 35%.

The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2021 was $14.2 million, or an effective rate of 26.9% compared to $13.1 million, or an effective rate of 24.2% for the year ended June 30, 2020, and $18.7 million, or an effective rate of 27.9% for the year ended June 30, 2019.

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:

The income tax provision from continuing operations for the fiscal year ended June 30, 2022 was $19.8 million, or an effective rate of 24.4% compared to $14.2 million, or an effective rate of 26.9% for the year ended June 30, 2021, and $13.1 million, or an effective rate of 24.2% for the year ended June 30, 2020.

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 our 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 income tax provision from continuing operations for the fiscal year ended June 30, 2022 was impacted by the following items:

(i) a tax provision of $4.3 million due to the mix of income in various jurisdictions, (ii) a tax benefit of $2.2 million related to Federal R&D credit and Foreign Tax credit (iii) a tax benefit of $1.3 million related to return-to-accrual adjustments to true up prior-period provision amounts, and (iv) a tax expense of $1.0 million related to uncertain tax position. 

The 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-accrual adjustments to true-up up prior-period provision amounts, 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:

The 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.

965 toll tax of $0.8 million, (ii) a tax provision of $0.3 million related to the elimination of the performance based compensation exception for executive compensation under Sec.

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.

Capital Expenditures

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In general, we anticipate our capital expenditures over the long-term will be approximately 3% to 5% of net sales. 

During fiscal year 2021, capital expenditures increased to $21.4 million or 3.3% of net sales, as compared to $19.3 million, or 3.2%, of net sales in the prior year.

At the onset of the COVID-19 pandemic in fiscal year 2020, we reduced our capital expenditures to only necessary maintenance, safety and the highest priority growth initiatives. 

As the global economic recovery began to take shape in fiscal year 2021, we increased our investments in machinery and equipment for those opportunities that will provide future growth and increased productivity, primarily in our Electronics and Engraving segments.

Additionally, in fiscal year 2021, $2.2 million of capital expenditures was spent for construction underway to build a new Electronics facility in Germany to replace a legacy facility sold in fiscal year 2019.

We expect 2022 capital spending to be between $25 million and $30 million.

During fiscal year 2022, capital expenditures were $23.9 million or 3.2% of net sales, as compared to $21.4 million, or 3.3%, of net sales in the prior year. We expect 2023 capital spending to be between $35 million and $40 million.

Backlog includes all active or open orders for goods and services. 

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Customers may delay delivery of products or cancel orders prior to shipment, subject to possible cancellation penalties.

Due to the nature of long-term agreements in the Engineering Technologies segment, the timing of orders and delivery dates can vary considerably resulting in significant backlog changes from one period to another.

In general, the majority of net realizable backlog beyond one year comes from the Engineering Technologies segment.

Backlog orders in place at June 30, 2021 and 2020 are as follows (in thousands): 

Backlog orders are as follows (in thousands): 

As of June 30, 2022

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Specialty Solutions

Total backlog realizable within one year increased $58.2 million, or 38.2% to $210.5 million at June 30, 2021 from $152.3 million at June 30, 2020. 

We experienced 76% increase in backlog at Scientific due to increased demand for cold storage products in connection with the COVID-19 vaccine rollout.

Electronics backlog increased 111% due to demand in all geographic markets in response to the beginning of the global recovery from the pandemic, new business opportunities and the acquisition of Renco.

Backlog declines in the Engineering Technologies segment are primarily due to the divestiture of Enginetics.

Total backlog realizable within one year increased $45.8 million, or 21.7% to $256.3 million at June 30, 2022 from $210.5 million at June 30, 2021. 

Electronics total backlog increased 46% due to demand in all geographic markets in response to the beginning of the global recovery from the pandemic, new business opportunities, plus an additional $2.3 million due to the acquisition of Sensor Solutions.

Backlog declines in the Engineering Technologies segment are primarily due to project related timing, particularly in the space end market.

Changes in backlog under 1 year are as follows (in thousands):

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Effect of acquisitions

Effect of divestitures

Backlog under 1 year, current period

Segment Analysis (in thousands)

Looking forward to fiscal year 2022, we expect to be well-positioned to build on fiscal year 2021 momentum, with anticipated continued improvement in key financial metrics, supported by orders growth and productivity initiatives.

Overall Outlook

Looking forward to fiscal year 2023, we expect to be well-positioned, with anticipated continued improvement in key financial metrics, supported by productivity initiatives.

In general, for fiscal year 2023, we expect:

continued end market strength in reed switch and relay products as well as growth in magnetics in our Electronics segment;

an increase in soft trim demand in our Engraving segment;

a decline in demand for COVID-19 related vaccine storage in our Scientific segment;

continued strength in the commercial aviation market and growth in the space market in our Engineering Technologies segment;

recovery in the food service market in our Specialty Solutions segment.

continued growth in transportation markets from electric vehicle programs, both the ramp up of existing business and new business opportunities, including sensors for chargers plugs and soft trim growth;

vaccine storage demand to decline after record COVID-19 related surge in fiscal year 2021 and early fiscal year 2022, countered by a return of demand from universities and research institutions;

commercial aviation and defense end markets to remain strong with double digit sales increase from the prior year based on current program expectations;

space markets to remain attractive, with an anticipated moderate volume decline due to timing of production versus launch;

refuse and dump end markets to remain stable while being supported by investments in the U.S.

infrastructure bill;

strong Merchandising and Pumps business to benefit from return to pre-COVID-19 demand levels in food service equipment markets. 

2022 compared to 2021

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Operating income margin

Net sales in fiscal year 2021 increased $68.1 million, or 36.7%, when compared to the prior year as organic sales increased $35.9 million, or 3.6%.

Net sales in fiscal year 2022 increased $50.9 million, or 20.1%, when compared to the prior year.

Organic sales increased $56.1 million, or 22.2%, reflecting a broad-based geographical recovery with continued strong demand for all product groups as well as new business opportunities, including the impact of a COVID-19 lockdown in China in the fourth fiscal quarter. Acquisitions in fiscal year 2022 added $1.9 million, or 0.8% in sales. The foreign currency impact decreased sales by $7.1 million, or 2.8%. 

Income from operations in the fiscal year 2022 increased $23.8 million, or 51.1%, when compared to the prior year.

The operating income increase was the result of organic sales growth, various pricing actions and cost saving initiatives, partially offset by material and freight cost increases.

In the first quarter of fiscal year 2023, on a sequential basis, we expect a moderate increase in revenue due to continued positive end market demand trends and some recovery of sales deferred due to the COVID-19 lockdown in China.

We also expect a slight sequential increase in operating margin reflecting the sales increase partially offset by product mix. 

Net sales in fiscal year 2021 increased 68.1 million, or 36.7%, when compared to the prior year as organic sales increased $35.9 million, or 3.6%.

The Renco Electronics acquisition added $25.6 million or 13.8%.

The foreign currency impacted increased sales by $6.6 million, or $6.5%.

Organic sales growth was positive in all geographic areas as well as the product groups of magnetics, sensors and switching technologies supported by the rebound from the COVID-19 pandemic impact.

Income from operations in the fiscal year 2021 increased $16.9 million, or 56.6%, when compared to the prior year.

The operating income increase was the result of organic sales growth, product line mix, various cost savings initiatives, and the impact of the Renco acquisition, offset by inflationary material cost increases and $0.6 million of purchase accounting expenses.

Looking forward to the first quarter of fiscal year 2022, we expect slight revenue growth and moderate operating margin improvement compared to the fourth quarter of fiscal year 2021, reflecting continued end market strength.

Net sales in fiscal year 2020 decreased 18.8 million, or 9.2%, when compared to the prior year.

Sales were slightly down in North America while down significantly in Europe and Asia.

New sensor, switch and relay applications continued to offset some of the core business loss due to economic conditions and COVID-19 impact.

The incremental sales impact of the Agile Magnetics acquisition, which was acquired in September of fiscal year 2019, was $3.1 million during the year and foreign exchange rates unfavorably affected sales by $1.6 million or 0.8%. 

Income from operations in the fiscal year 2020 decreased $11.5 million, or 27.8% when compared to the prior year.

The operating income decline was due to the margin loss on the lower organic sales, inflationary cost increases, particularly rhodium costs, and incremental costs related to the COVID-19 environment, which more than offset cost saving initiatives implemented throughout the year. 

Organic sales growth was positive in all geographic areas as well as the product groups of magnetics, sensors and switching technologies supported by the rebound from the COVID-19 pandemic impact. 

Income from operations in the fiscal year 2021 increased $16.9 million, or 56.6% when compared to the prior year.

2022 compared to 2021

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Operating income margin

Net sales in fiscal year 2021 increased by $3.3 million or 2.3% compared to the prior year.

Net sales in fiscal year 2022 decreased by $0.8 million, or 0.5%, compared to the prior year.

Organic sales increased by $0.9 million, or 0.6%, as a result of timing of projects.

The sales increase was offset by foreign exchange impacts of $1.6 million, or 1.1%.

Income from operations in fiscal year 2022 decreased by $0.7 million, or 3.0%, when compared to the prior year, reflecting geographic mix, partially offset by productivity initiatives.

In the first quarter of fiscal year 2023, we expect a slight sequential decrease in revenue and operating margin due to project mix partially offset by operational improvements.

Net sales in fiscal year 2021 increased by $3.3 million or 2.3% compared to the prior year.

Favorable foreign exchange impacts of $6.6 million, or 4.6%, for the period were offset by organic sales declines of $3.3 million, or 2.3%, as a result of the regional timing of automotive projects.

Income from operations in fiscal year 2021 increased by $2.0 million, or 9.8%, when compared to the prior year.

Income from operations in fiscal year 2021 increased by $2.0 million, or 9.8%, when compared to the prior year.

The increase was primarily a result of cost savings initiatives partially offset by organic sales declines for the year. 

Looking forward to the first quarter of fiscal year 2022, we expect slight to moderate revenue and operating margin declines from the fourth quarter of fiscal year 2021 reflecting the timing of projects and regional mix.

Net sales in fiscal year 2020 decreased by $6.0 million or 4.0% compared to the prior year.

The effect of acquisitions generated $8.5 million or 5.7% of additional sales for fiscal year 2020 which were partially offset by foreign exchange declines of $3.6 million for the year.

Organic sales declines of $10.9 million, or 7.3%, were a result of the timing of automotive projects, slower incoming workloads as a result of pandemic related delays, and the closure of unprofitable sites as part of our announced restructuring.

Income from operations in fiscal year 2020 decreased by $3.5 million, or 14.6%, when compared to the prior year.

The decrease was primarily a result of organic sales declines for the year.

2022 compared to 2021

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Net sales in fiscal year 2022 increased by $4.4 million, or 5.6% when compared to the prior year. 

The net sales increase reflects overall growth in end markets including pharmaceutical channels, clinical laboratories, and academic institutions, primarily in response to customer needs for cold storage surrounding COVID-19 vaccine distribution.

Income from operations in fiscal year 2021 increased by $4.5 million, or 32.8%, reflecting revenue growth, partially offset by reinvestments in the business for future growth opportunities and increased freight costs. 

Looking forward to the first quarter of fiscal year 2022, we expect a moderate sequential decrease in revenue and a slight operating margin decline from the fourth quarter of fiscal year 2021, reflecting lower demand for COVID-19 vaccine related storage and increased freight costs partially offset by pricing actions.

The net sales increase reflects overall growth in end markets, such as pharmaceutical channels, clinical settings, and academic laboratories, including continued strong demand for cold storage surrounding COVID-19 vaccine distribution and the general market recovery as well as pricing actions.

Income from operations in fiscal year 2022 decreased by $0.4 million, or 2.1%, reflecting higher freight costs and investments in new product development, offset by revenue growth and pricing actions.

In the first quarter of fiscal year 2023, on a sequential basis, we expect slight revenue and operating margin decrease due to lower COVID vaccine storage demand. 

Net sales in fiscal year 2021 remained relatively flat compared to the prior year.

We experienced decreased sales volume in our clinical laboratories, physicians' offices, hospitals and academic laboratories markets, primarily due to impacts of the COVID-19 pandemic and the economic downturn.

This was largely offset by sales in the pharmaceutical market. 

Income from operations in fiscal year 2020 increased $0.1 million or 0.5% when compared to the prior year as modest sales declines were overcome with cost controls of labor and discretionary spending as well as stronger sales in our pharmaceutical market.  

Income from operations in fiscal year 2021 increased $4.5 million or 32.8%, reflecting revenue growth, partially offset by reinvestments in the business for future growth opportunities and increased freight costs. 

Engineering Technologies

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Operating income margin

Net sales in fiscal year 2021 decreased $28.5 million or 27.4% when compared to the prior year.

Net sales in fiscal year 2022 increased $2.6 million or 3.4% when compared to the prior year.

Sales distribution by market in 2022 was as follows:

40% space, 23% aviation, 19% defense, 7% energy, and 11% other markets.

Sales in the prior year period included revenue of $9.2 million related to our divested Enginetics business.

Excluding the impact of the divestiture, sales increased $11.8 million primarily due to customer demand in the commercial aviation market, along with an increase in sales into the space end market, particularly related to commercialization of space and a medical market customer demand surge. 

Income from operations in fiscal year 2022 increased $2.6 million or 42.4% when compared to the prior year.

The increase was primarily due to cost saving measures implemented during the pandemic and maintained as economic activity resumed along with the absences of losses associated with the Enginetics business, offset by a $1.1 million one-time project-related charge.

In the first quarter of fiscal year 2023, on a sequential basis, we expect a moderate to significant decrease in revenue reflecting timing of projects and a slight decrease in operating margin, with productivity initiatives mostly offsetting the impact of the volume decline.

Net sales in fiscal year 2021 decreased $28.5 million or 27.4% when compared to the prior year.

Sales distribution by market in 2021 was as follows:

40% space, 26% aviation, 19% defense, 7% energy, and 8% other markets.

The decline was primarily due to the impact of COVID-19 on the commercial aviation segment, especially engine parts manufacturing, along with the divestiture of our Enginetics business.

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These declines were partially offset by higher defense segment sales, improvements in manufacturing efficiencies, and cost reductions in response to the reduced volume levels. 

Looking forward to the first quarter of fiscal year 2022, we expect slight to moderate sequential decrease in revenue and operating margin from the fourth quarter of fiscal year 2021, due to project timing.

Net sales in fiscal year 2020 decreased $1.2 million or 1.2% when compared to the prior year.

A decline in aviation sales of 8% from the prior year was primarily in the aircraft engine segment, as a result of both the grounding of the Boeing MAX 737 aircraft and the impacts of the COVID-19 pandemic on the aviation industry in general.

Space market sales increased 13.4% from the prior year driven by higher sales in the unmanned and manned space segment on production and new development programs, while defense sales increased by 12.5% from the prior year driven by higher volume in the missile segment.

Income from operations in fiscal year 2020 increased $2.8 million or 25.6% when compared to the prior year.

The increase in operating income was driven by improved manufacturing efficiencies, cost reduction programs implemented during the year, and a favorable product mix.

Specialty Solutions

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Operating income margin

Net sales for fiscal year 2021 decreased $13.1 million, or 11.5% when compared to the prior year.

Net sales for fiscal year 2022 increased $22.0 million, or 21.8% when compared to the prior year.

Organic sales increased $22.9 million, or 22.7%.

Increased sales volume is primarily due to a continued recovery in the Pumps and Merchandising businesses and pricing actions, partially offset by the impact of a temporary work stoppage which was resolved during the first quarter.

Income from operations for fiscal year 2022 increased $1.2 million, or 8.5%, when compared to the prior year primarily as a result of increased sales volume in the Pumps and Merchandising businesses, partially offset by higher costs of labor, including the temporary work stoppage in the first quarter and higher raw material and ocean freight costs.

In the first quarter of fiscal year 2023, on a sequential basis, we expect revenue to be similar and operating margin to slightly increase reflecting end market demand trends and the impact of pricing and productivity initiatives. 

Net sales for fiscal year 2021 decreased $13.1 million, or 11.5% when compared to the prior year.

Organic sales declined $13.6 million, or 11.9%, partially offset by positive foreign exchange impacts of $0.5 million, or 0.5%.

Decreased sales volume is primarily due to the impact of the COVID-19 pandemic earlier in the year, which created market downturns in the beverage, food service, and OEM equipment markets.

Income from operations for fiscal year 2021 decreased $4.2 million, or 22.6%, when compared to the prior year.

Income from operations for fiscal year 2021 decreased $4.2 million, or 22.6%, when compared to the prior year.

The decrease during the period is primarily due to reduced sales volume in each of our businesses and increased raw material costs in the OEM equipment market, particularly for steel, partially offset by productivity and cost out actions.

Looking forward to the first quarter of fiscal year 2022, we expect a slight sequential increase in revenue and operating margin from the fourth quarter of fiscal year 2021, due to a continued recovery in Merchandising and Pumps businesses, partially offset by the impact of a prior work stoppage at one of the plants.

Net sales for fiscal year 2020 decreased $9.3 million, or 7.6% when compared to the prior year as organic sales declined by $8.8 million or 7.1% and foreign exchange rates unfavorably affected sales by $0.6 million or 0.5%.

Decreased sales volume is primarily due to impacts of the COVID-19 pandemic which created market downturns in the beverage, convenience store and dump markets. 

Income from operations for fiscal year 2020 decreased $0.5 million, or 2.4%, when compared to the prior year, primarily due to decreased sales volume in each of our businesses.

The sales volume decrease was offset in our Hydraulics and Display Merchandising businesses by favorable mix, cost control of labor, and the implementation of identified manufacturing efficiencies. 

Corporate, Restructuring and Other

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Restructuring

Other Operating Expenses

Corporate expenses remained flat in in fiscal year 2021 primarily due to general wage inflation and benefit increases offset by cost saving reductions compared to the prior year.

Corporate expenses increased by 19.7% in fiscal year 2020 primarily due to increased stock-based compensation, management transition, and benefit expenses in the first two quarters of fiscal year 2020.

The loss on sale of business, restructuring, and acquisition-related costs have been discussed above in the Company Overview.

Acquisition related expenses

Other operating expense

Corporate expenses in fiscal year 2022 increased $4.7 million, or 16% when compared to the prior year, primarily due to employee related compensation accruals and research and development costs.

Corporate expenses remained flat in fiscal year 2021 primarily due to general wage inflation and benefit increases offset by cost saving reductions compared to the prior year.

The loss on sale of business, restructuring, and acquisition related expenses have been discussed above in the Company Overview.

The increase in other operating expense in fiscal year 2022 reflects a $5.7 million litigation accrual. 

Discontinued Operations

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At June 30, 2022, our total cash balance was $104.8 million, of which $94.2 million was held outside of the United States. 

In the fourth quarter of fiscal year 2022, we paid $25.0 million of our outstanding borrowings under the credit facility.

During fiscal years 2022, 2021 and 2020, we repatriated $30.8 million, $37.6 million, and $39.2 million of our cash previously held outside of the United States, respectively. 

During fiscal year 2022, we anticipate returning $30.0 million to $35.0 million of foreign cash, however, the amount and timing of cash repatriation during 2022 will be dependent upon each business unit’s operational needs including requirements to fund working capital, capital expenditure, and jurisdictional tax payments. 

During fiscal year 2023, we anticipate returning $30.0 million to $35.0 million of foreign cash, however, the amount and timing of cash repatriation during 2023 will be dependent upon foreign exchange rates and each business unit’s operational needs including requirements to fund working capital, capital expenditure, and jurisdictional tax payments. 

The repatriation of cash balances from certain of our subsidiaries could have adverse tax consequences or be subject to capital controls;

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Net cash provided by continuing operating activities for the year ended June 30, 2022 was $78.1 million compared to net cash provided by continuing operating activities of $81.9 million in the prior year.

We generated $94.7 million from income statement activities and used $4.4 million of cash to fund working capital decreases.

We generated $101.7 million from income statement activities and used $23.1 million of cash to fund working capital increases.

Cash flow used in investing activities for the year ended June 30, 2022 totaled $31.0 million.

Uses of investing cash consisted primarily of $27.4 million for the acquisition of Renco and capital expenditures of $21.8 million offset by $11.7 million of proceeds from sale of the Enginetics business. Cash used by financing activities for the year ended June 30, 2021 were $31.7 million and included stock repurchases of $21.2 million and cash paid for dividends of $11.4 million.

Uses of investing cash consisted primarily of capital expenditures of $23.9 million, $13.0 million for the acquisitions, $1.0 million used in other investing activities, offset by $5.0 million generated by proceeds from a life insurance policy related to the death of a retired Company executive and $1.8 million generated by sales of property, plant, and equipment.

Cash used by financing activities for the year ended June 30, 2022 were $69.4 million and included stock repurchases of $31.4 million, repayments of debt of $25.0 million, cash paid for dividends of $12.2 million, and contingent consideration payments due to the seller of the Renco business of $2.2 million.

Net cash provided by continuing operating activities for the year ended June 30, 2021 was $81.9 million compared to net cash provided by continuing operating activities of $54.7 million in the prior year.

We generated $88.6 million from income statement activities and used $32.1 million of cash to fund working capital increases.

We generated $94.7 million from income statement activities and generated $4.4 million of cash to fund working capital decreases.

Cash flow used in investing activities for the year ended June 30, 2021 totaled $39.1 million. 

Uses of investing cash consisted primarily of capital expenditures of $21.52 million.

Cash used by financing activities for the year ended June 30, 2020 were $19.0 million and included cash paid for dividends of $10.6 million and stock repurchases of $10.4 million offset by net borrowings of $1.2 million. 

Uses of investing cash consisted primarily of $27.4 million for the acquisition of Renco and capital expenditures of $21.75 million offset by $11.7 million of proceeds from the sale of the Enginetics business.

Cash used by financing activities for the year ended June 30, 2021 were $31.7 million and included stock repurchases of $21.2 million and cash paid for dividends of $11.4 million.

We sponsor a number of defined benefit and defined contribution retirement plans. 

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The fair value of the Company's U.S.

defined benefit pension plan assets was $212.6 million at June 30, 2021, as compared to $194.8 million as of June 30, 2020. We participate in two multi-employer pension plans and sponsor six defined benefit plans including two in the U.S.

defined benefit pension plan assets was $157.9 million at June 30, 2022, as compared to $212.6 million as of June 30, 2021. We participate in two multi-employer pension plans and sponsor six defined benefit plans including two in the U.S.

and one in the U.K., Germany, Ireland, and Japan. 

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Our primary U.S.

defined benefit plan is not expected to be 100% funded under ERISA rules at June 30, 2021. 

defined benefit plan contributions of $7.8 million were made during fiscal year 2021 compared to $3.1 million during fiscal year 2020.The required contributions to the United States funded pension plan for fiscal year 2022 is approximately $1.0 million.

The Company expects to make contributions during fiscal year 2022 of $0.2 million and $0.3 million to its unfunded defined benefit plans in the U.S.

defined benefit plan is not 100% funded under ERISA rules at June 30, 2022. 

defined benefit plan contributions of $0.2 million were made during fiscal year 2022 compared to $7.8 million during fiscal year 2021.There are no required contributions to the United States funded pension plan for fiscal year 2023.

The Company expects to make contributions during fiscal year 2023 of $0.2 million and $0.2 million to its unfunded defined benefit plans in the U.S.

and Germany, respectively.

Any subsequent plan contributions will depend on the results of future actuarial valuations.

We have evaluated the current and long-term cash requirements of our defined benefit and defined contribution plans as of June 30, 2021 and determined our operating cash flows from continuing operations and available liquidity are expected to be sufficient to cover the required contributions under ERISA and other governing regulations. 

We have an insurance program in place to fund supplemental retirement income benefits for five retired executives. 

We have evaluated the current and long-term cash requirements of our defined benefit and defined contribution plans as of June 30, 2022 and determined our operating cash flows from continuing operations and available liquidity are expected to be sufficient to cover the required contributions under ERISA and other governing regulations. 

We have an insurance program in place to fund supplemental retirement income benefits for three retired executives. 

Current executives and new hires are not eligible for this program. At June 30, 2022, the underlying policies had a cash surrender value of $11.1 million and are reported net of loans of $5.1 million for which we have the legal right of offset.

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Funds borrowed under the facility may be used for the repayment of debt, working capital, capital expenditures, acquisitions (so long as certain conditions, including a specified funded debt to EBITDA leverage ratio is maintained), and other general corporate purposes.

As of June 30, 2021, the Company has used $6.0 million against the letter of credit sub-facility and had the ability to borrow $245.2 million under the facility based on our current trailing twelve-month EBITDA.

As of June 30, 2022, the Company has used $5.1 million against the letter of credit sub-facility and had the ability to borrow $312.6 million under the facility based on our current trailing twelve-month EBITDA.

The facility contains customary representations, warranties and restrictive covenants, as well as specific financial covenants.

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

We expect that fiscal year 2022 depreciation and amortization expense will be between $21.0 and $22.0 million and $12.0 and $13.0 million, respectively.

We expect that fiscal year 2023 depreciation and amortization expense will be between $20.0 and $21.0 million and $7.0 and $9.0 million, respectively.

The following table sets forth our capitalization at June 30:

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Stockholders’

equity increased year over year by $44.8 million, primarily as a result of current year net income of $36.5 million. The Company's net debt to capital percentage changed to 11.1% as of June 30, 2021 from 14.8% in the prior year. 

equity decreased year over year by $7.1 million, primarily as a result of $43.6 million of cash returned to shareholders in the form of dividends and stock repurchases, offset by current year net income of $61.4 million. The Company's net debt to capital percentage changed to 12.3% as of June 30, 2022 from 11.1% in the prior year. 

At June 30, 2022, we expect to pay estimated interest payments of $10.8 million within the next five years.

This estimate is based upon effective interest rates as of June 30, 2021 and excludes any interest rate swaps which are assets to us.

This estimate is based upon effective interest rates as of June 30, 2022 and excludes any interest rate swaps which are assets to us.

See Item 7A for further discussions surrounding interest rate exposure on our variable rate borrowings.

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At June 30, 2022, we had $39.2 million of operating lease obligations.

Financial Statements and Supplementary Data,  Note 20.

Financial Statements and Supplementary Data, Note 20.

Leases" for additional information regarding these obligations. 

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Employee Relations –

The Company has labor agreements with five union locals in the United States and several European employees belong to European trade unions. 

The Company has labor agreements with four union locals in the United States and various European employees belong to European trade unions. 

Critical Accounting Policies

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Revenue Recognition –

Effective July 1, 2018, the Company adopted 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 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.

The Company’s accounting policy has been updated to align with ASC 606. 

The adoption of ASC 606 represents a change in accounting principle that provides enhanced revenue recognition disclosures.

Revenue is recognized when the control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services.

The Company recognizes all revenues on a gross basis based on consideration of the criteria set forth in ASC Topic 606-10-55, Principal versus Agent Considerations.

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

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Therefore, no impairment charges were recorded in connection with our annual assessment during the fourth quarter of fiscal year 2022. 

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 partially 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.

During the third quarter fiscal year 2021 review, the Company determined that there were no indications of impairment, therefore, no additional impairment charges were recorded

Cost of Employee Benefit Plans –

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million per year. 

A twenty-five-basis point change in our discount rate, holding all other assumptions constant, would have no impact on 2021 pension expense as changes to amortization of net losses would be offset by changes to interest cost. 

A twenty-five-basis point change in our discount rate, holding all other assumptions constant, would have no impact on 2022 pension expense as changes to amortization of net losses would be offset by changes to interest cost. 

In future years, the impact of discount rate changes could yield different sensitivities.

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However, any such losses or gains would generally be offset by corresponding gains and losses, respectively, on the related hedged asset or liability. 

At June 30, 2021 and 2020, the fair value, in the aggregate, of the Company’s open foreign exchange contracts was a liability of $2.8 million and $2.5 million respectively. 

At June 30, 2022 and 2021, the fair value, in the aggregate, of the Company’s open foreign exchange contracts was a liability of $0.6 million and $2.8 million respectively. 

Our primary translation risk is with the Euro, British Pound Sterling, Peso, Japanese Yen and Chinese Yuan. 

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The Company’s effective interest rate on borrowings was 2.53% and 2.59% at June 30, 2022 and 2021, respectively. 

Our interest rate exposure is limited primarily to interest rate changes on our variable rate borrowings, and is mitigated by our use of interest rate swap agreements to modify our exposure to interest rate movements. 

Our interest rate exposure is limited primarily to interest rate changes on our variable rate borrowings and is mitigated by our use of interest rate swap agreements to modify our exposure to interest rate movements. 

At June 30, 2022, we have $175.0 million of active floating to fixed rate swaps with terms ranging from one to four years. 

These swaps convert our interest payments from LIBOR to a weighted average rate of 1.18%. 

At June 30, 2021 and 2020, the fair value, in the aggregate, of the Company’s interest rate swaps were liabilities of $3.1 million and $6.7 million respectively.

A 25-basis point increase in interest rates would not change our annual interest expense as all of our outstanding debt is currently converted to fixed rate debts by means of interest rate swaps.

At June 30, 2022, the fair value, in the aggregate, of the Company’s interest rate swaps were assets of $8.4 million.

At June 30, 2021, the fair value, in the aggregate, of the Company’s interest rate swaps were liabilities of $3.1 million. A 25-basis point increase in interest rates would not change our annual interest expense as all of our outstanding debt is currently converted to fixed rate debts by means of interest rate swaps.

Concentration of Credit Risk

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

What changed 10-K

Item 5. Market for Registrant’s Common Equity