Nortech Systems(NSYS) - 2023 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents Nortech Systems' unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1 - Financial Statements This section presents the unaudited condensed consolidated financial statements, including statements of operations, balance sheets, cash flows, and shareholders' equity, along with detailed notes on significant accounting policies, credit risk, revenue recognition, financing, leases, income taxes, employee retention credit, and related party transactions for Nortech Systems Incorporated and its subsidiaries Condensed Consolidated Statements of Operations and Comprehensive Income This statement details the company's financial performance, including net sales, gross profit, income from operations, net income, and comprehensive income for the three and six months ended June 30, 2023 and 2022 Condensed Consolidated Statements of Operations and Comprehensive Income (in thousands, except share data): | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Sales | $35,021 | $32,518 | $69,909 | $63,229 | | Gross Profit | $5,474 | $5,004 | $10,958 | $9,048 | | Income From Operations | $1,099 | $1,025 | $2,152 | $1,194 | | Net Income | $634 | $719 | $1,315 | $857 | | Basic Net Income Per Common Share | $0.23 | $0.27 | $0.49 | $0.32 | | Diluted Net Income Per Common Share| $0.22 | $0.25 | $0.46 | $0.30 | | Comprehensive income, net of tax | $353 | $475 | $1,074 | $618 | Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and shareholders' equity as of June 30, 2023, and December 31, 2022 Condensed Consolidated Balance Sheets (in thousands): | Metric | June 30, 2023 | December 31, 2022 | | :----------------------------------- | :------------ | :---------------- | | ASSETS | | | | Cash | $781 | $1,027 | | Restricted Cash | $1,134 | $1,454 | | Accounts Receivable, Net | $17,404 | $15,975 | | Inventories, Net | $21,078 | $22,438 | | Total Current Assets | $54,354 | $54,860 | | Total Assets | $68,434 | $69,540 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Total Current Liabilities | $24,399 | $26,398 | | Total Long-Term Liabilities | $14,546 | $15,062 | | Total Liabilities | $38,945 | $41,460 | | Total Shareholders' Equity | $29,489 | $28,080 | | Total Liabilities and Shareholders' Equity | $68,434 | $69,540 | Condensed Consolidated Statements of Cash Flows This statement outlines the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2023 and 2022 Condensed Consolidated Statements of Cash Flows (in thousands): | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----------------------------------------- | :----------------------------- | :----------------------------- | | Net Cash Provided By (Used In) Operating Activities | $281 | $(1,940) | | Net Cash Used In Investing Activities | $(956) | $(1,208) | | Net Cash Provided By Financing Activities | $144 | $2,098 | | Net Change in Cash and Restricted Cash | $(566) | $(1,050) | | Cash and Restricted Cash - End of Period | $1,915 | $1,175 | - Cash paid for interest increased from $198 thousand in 2022 to $248 thousand in 2023 for the six months ended June 30[14] - Cash paid for income taxes significantly increased from $20 thousand in 2022 to $1,036 thousand in 2023 for the six months ended June 30[14] Condensed Consolidated Statements of Shareholders' Equity This statement details changes in shareholders' equity, including net income, foreign currency translation adjustments, and stock-based compensation, from December 31, 2022, to June 30, 2023 Changes in Shareholders' Equity (in thousands): | Metric | Balance December 31, 2022 | Net Income | Foreign Currency Translation Adjustment | Stock Option Exercises | Compensation on Stock-Based Awards | Cumulative Adjustment Related to the Adoption of ASC 326 | Balance June 30, 2023 | | :----------------------------------------- | :------------------------ | :--------- | :-------------------------------------- | :--------------------- | :--------------------------------- | :------------------------------------------------------- | :-------------------- | | Preferred Stock | $250 | - | - | - | - | - | $250 | | Common Stock | $27 | - | - | - | - | - | $27 | | Additional Paid-In Capital | $16,347 | - | - | $173 | $192 | - | $16,712 | | Accumulated Other Comprehensive Loss | $(370) | - | $(241) | - | - | - | $(611) | | Retained Earnings | $11,826 | $1,315 | - | - | - | $(30) | $13,111 | | Total Shareholders' Equity | $28,080 | $1,315 | $(241) | $173 | $192 | $(30) | $29,489 | Condensed Notes to Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering significant accounting policies and specific financial items NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the basis of presentation for the unaudited interim financial statements, principles of consolidation, and key accounting policies including revenue recognition, stock-based awards, net income per common share, restricted cash, accounts receivable, allowance for credit losses, inventories, and other intangible assets. It also details the adoption of the CECL accounting standard and the revision of previously issued financial statements regarding cash flow classification - The company adopted ASU 2016-13 (CECL) on January 1, 2023, recognizing a $30 thousand decrease in retained earnings due to increased estimated credit losses[46][47] - Comparative information for 2022 is not restated[47] - An immaterial error in the June 30, 2022 condensed consolidated cash flow statement was corrected to show line of credit borrowings and payments on a gross basis instead of net, with no impact on total operating, investing, or financing cash flows, income statement, or balance sheet[48][49] Stock Options Status as of June 30, 2023 (in thousands, except share data): | Metric | Shares | Weighted Average Exercise Price Per Share | | :----------------------------------------- | :-------- | :---------------------------------------- | | Outstanding - January 1, 2023 | 452,700 | $5.97 | | Granted | 29,000 | $9.37 | | Exercised | (36,044) | $4.12 | | Cancelled | (43,956) | $7.50 | | Outstanding - June 30, 2023 | 401,700 | $6.21 | | Exercisable - June 30, 2023 | 244,400 | $4.43 | - Unrecognized compensation related to stock options: $632 thousand, vesting over 3.7 years[24][25] - Total compensation expense for stock options: $55 thousand (3 months ended June 30, 2023), $123 thousand (6 months ended June 30, 2023)[25] Restricted Stock Units (RSUs) Status as of June 30, 2023 (in thousands, except share data): | Metric | Shares | Weighted Average Grant Date Fair Value | | :----------------------------------------- | :-------- | :------------------------------------- | | Outstanding - January 1, 2023 | 21,000 | $12.00 | | Granted | 18,000 | $9.37 | | Vested | (10,500) | $12.00 | | Forfeited | (6,000) | $10.93 | | Outstanding - June 30, 2023 | 22,500 | $10.18 | - Unrecognized compensation related to RSUs: $195 thousand, vesting over 1.4 years[26][29] - Total compensation expense for RSUs: $38 thousand (3 months ended June 30, 2023), $69 thousand (6 months ended June 30, 2023)[29] Inventories (in thousands): | Category | June 30, 2023 | December 31, 2022 | | :-------------- | :------------ | :---------------- | | Raw Materials | $20,461 | $21,673 | | Work in Process | $960 | $1,238 | | Finished Goods | $744 | $671 | | Reserves | $(1,087) | $(1,144) | | Total | $21,078 | $22,438 | Other Intangible Assets (in thousands): | Category | June 30, 2023 | December 31, 2022 | | :------------------ | :------------ | :---------------- | | Customer Relationships | $144 | $216 | | Patents | $198 | $206 | | Total | $342 | $422 | - Weighted-average remaining amortization period: 1.4 years[41][42] - Amortization expense for finite life intangible assets: $40 thousand (3 months ended June 30, 2023), $80 thousand (6 months ended June 30, 2023)[42] NOTE 2. CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS This note details the company's concentration of credit risk, particularly regarding cash balances held in China and Mexico, and identifies major customers that account for significant portions of net sales and accounts receivable. It also provides figures for export sales - Two customers accounted for 39% of net sales for both the three and six months ended June 30, 2023[52] - One customer accounted for 28% and 26% of net sales for the three and six months ended June 30, 2022, respectively[52] - At June 30, 2023, two customers represented approximately 38% of gross accounts receivable, compared to one customer representing 21% at December 31, 2022[53] - Export sales represented approximately 3% of total net sales for both the three and six months ended June 30, 2023, a decrease from 4% in the prior year periods[54] NOTE 3. REVENUE This note describes the company's revenue recognition policies for products, engineering, and repair services, emphasizing that most revenue from contract manufacturing is recognized over time. It also provides a breakdown of contract assets and net sales by market segment and timing of transfer - The majority of revenue (approximately 73-74%) is derived from contract manufacturing agreements, recognized over time based on costs incurred[58] Net Sales by Market and Timing of Transfer (Three Months Ended June 30, 2023, in thousands): | Market | Product/Service Transferred Over Time | Product Transferred at Point in Time | Noncash Consideration | Total Net Sales by Market | | :-------------------- | :------------------------------------ | :----------------------------------- | :-------------------- | :------------------------ | | Medical | $14,570 | $5,318 | $719 | $20,607 | | Industrial | $6,593 | $2,125 | $341 | $9,059 | | Aerospace and Defense | $4,499 | $674 | $182 | $5,355 | | Total Net Sales | $25,662 | $8,117 | $1,242 | $35,021 | Net Sales by Market and Timing of Transfer (Six Months Ended June 30, 2023, in thousands): | Market | Product/Service Transferred Over Time | Product Transferred at Point in Time | Noncash Consideration | Total Net Sales by Market | | :-------------------- | :------------------------------------ | :----------------------------------- | :-------------------- | :------------------------ | | Medical | $30,295 | $10,379 | $1,305 | $41,979 | | Industrial | $13,183 | $4,533 | $815 | $18,531 | | Aerospace and Defense | $7,914 | $1,224 | $261 | $9,399 | | Total Net Sales | $51,392 | $16,136 | $2,381 | $69,909 | - Contract assets increased from $9,982 thousand at December 31, 2022, to $11,587 thousand at June 30, 2023, with substantially all remaining performance obligations expected to be transferred to receivables within 90 days[62] NOTE 4. FINANCING ARRANGEMENTS This note details the company's credit agreement with Bank of America, including the line of credit amount, expiration date, interest rates, outstanding borrowings, and compliance with financial covenants. It also specifies the unused availability under the line of credit - The company has a $16 million line of credit with Bank of America, expiring June 15, 2026[65] - Weighted-average interest rate on the line of credit increased from 5.2% at December 31, 2022, to 7.9% at June 30, 2023[66] Line of Credit Borrowings (in thousands): | Metric | June 30, 2023 | December 31, 2022 | | :----------------- | :------------ | :---------------- | | Outstanding Borrowings | $7,056 | $6,897 | | Unused Availability| $5,292 | N/A | - The company met all covenants for the period ended June 30, 2023[68] NOTE 5. LEASES This note provides information on the company's operating and finance leases for manufacturing sites, office space, and equipment. It details lease costs, balance sheet and cash flow impacts, and the maturity schedule of lease liabilities Total Lease Cost (in thousands): | Lease Cost Category | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $592 | $578 | $1,159 | $1,159 | | Finance lease interest cost | $11 | $17 | $23 | $36 | | Finance lease amortization expense | $182 | $183 | $364 | $365 | | Total lease cost | $785 | $778 | $1,546 | $1,560 | Lease Assets (in thousands): | Asset Type | June 30, 2023 | December 31, 2022 | | :------------------ | :------------ | :---------------- | | Operating lease assets | $7,253 | $7,850 | | Finance lease assets | $998 | $1,363 | | Total leased assets | $8,251 | $9,213 | - Cash paid for amounts included in the measurement of operating lease liabilities increased from $862 thousand for the six months ended June 30, 2022, to $934 thousand for the same period in 2023[73] Maturities of Lease Liabilities (in thousands): | Year | Operating Leases | Finance Leases | Total Lease Payments | | :---------------- | :--------------- | :------------- | :------------------- | | Remainder of 2023 | $882 | $216 | $1,098 | | 2024 | $1,514 | $379 | $1,893 | | 2025 | $1,265 | $103 | $1,368 | | 2026 | $1,227 | $107 | $1,334 | | 2027 | $1,256 | - | $1,256 | | Thereafter | $5,818 | - | $5,818 | | Total Lease Payments | $11,962 | $805 | $12,767 | | Less: Interest | $(3,837) | $(45) | $(3,882) | | Present value of lease liabilities | $8,125 | $760 | $8,885 | NOTE 6. INCOME TAXES This note outlines the company's quarterly estimation process for its effective tax rate and provides the effective tax rates for the current and prior periods, highlighting the primary drivers of change Effective Tax Rate: | Period | 2023 | 2022 | | :--------------------------------- | :--- | :--- | | Three Months Ended June 30 | 35% | 21% | | Six Months Ended June 30 | 31% | 12% | - Primary drivers of change: increase in projected pre-tax book income and an increase in the valuation allowance due to Section 174[76] NOTE 7. EMPLOYEE RETENTION CREDIT This note provides an update on the Employee Retention Credit (ERC) benefits, confirming that all payments have been received as of June 30, 2023 - All Employee Retention Credit (ERC) payments have been received as of June 30, 2023[78] - At December 31, 2022, the company had $2,650 thousand in ERC benefits recorded as Employee Retention Credits Receivable[78] NOTE 8. RELATED PARTY TRANSACTIONS This note discloses transactions with related parties, specifically Abilitech Medical, Inc. and Marpe Technologies, LTD, both of which have connections to the company's Chairman. It details the nature of services provided, payments received, and future agreements - No payments were received from Abilitech Medical, Inc. for the three and six months ended June 30, 2023, compared to $163 thousand and $217 thousand, respectively, in 2022[80] - The company has recorded a full reserve against outstanding accounts receivable and inventory related to Abilitech[80] - The company recognized revenue of $163 thousand and $113 thousand from Marpe Technologies, LTD for the six months ended June 30, 2023 and 2022, respectively[81] - The company is involved in a $1 million conditional grant with Marpe Technologies, providing services at cost or no cost for its $500 thousand contribution, and will receive a 10-year exclusive manufacturing right[81] Item 2 - Management's Discussion and Analysis of Financial Condition And Results of Operations This section provides an overview of Nortech Systems' business as a global EMS contract manufacturer and a detailed analysis of its financial performance for the three and six months ended June 30, 2023, compared to the prior year. It covers net sales, gross profit, operating expenses, net income, liquidity, capital resources, and forward-looking statements Overview This section introduces Nortech Systems as a global EMS contract manufacturer specializing in complex electromedical and electromechanical products across various markets - Nortech Systems Incorporated is a Minnesota-based global EMS contract manufacturer serving Medical, Aerospace & Defense, and Industrial markets[83] - It offers engineering, technical, and manufacturing services for complex electromedical and electromechanical products[83] - The company operates facilities in Minnesota, Mexico, and China, all certified to relevant ISO/AS standards[83] Results of Operations This section analyzes the company's financial performance, including net sales, gross profit, and operating expenses, for the three and six months ended June 30, 2023 Net Sales Net sales increased for both the three and six months ended June 30, 2023, driven by higher production volume and price increases. The Medical market showed significant growth, while Industrial remained stable and Aerospace and Defense experienced a decline for the six-month period Net Sales Performance (in millions): | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | % Change | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | % Change | | :------------ | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Total Net Sales | $35.0 | $32.5 | 7.7% | $69.9 | $63.2 | 10.6% | | Medical | $20.6 | $18.6 | 10.8% | $42.0 | $33.8 | 24.3% | | Industrial | $9.0 | $9.4 | (4.3)% | $18.5 | $18.1 | 2.2% | | Aerospace and Defense | $5.4 | $4.5 | 20.0% | $9.4 | $11.3 | (16.8)% | - The increase in net sales was primarily driven by higher production volume and price increases implemented to offset rising material and labor costs[85] Backlog The 90-day shipment backlog showed a slight increase from the prior quarter but a decrease year-over-year. Total order backlog increased quarter-over-quarter but decreased year-over-year, with medical customers returning to pre-pandemic ordering practices 90-Day Shipment Backlog (in millions): | Market | June 30, 2023 | March 31, 2023 | June 30, 2022 | | :-------------------- | :------------ | :------------- | :------------ | | Medical | $18.3 | $20.6 | $20.9 | | Industrial | $9.7 | $7.8 | $9.8 | | Aerospace and Defense | $6.3 | $5.4 | $5.2 | | Total 90-Day Backlog | $34.3 | $33.8 | $35.9 | - 1% increase from prior quarter, 4% decrease from June 30, 2022[89][91] Total Order Backlog (in millions): | Market | June 30, 2023 | March 31, 2023 | June 30, 2022 | | :-------------------- | :------------ | :------------- | :------------ | | Medical | $51.9 | $49.8 | $63.7 | | Industrial | $21.0 | $20.5 | $22.6 | | Aerospace and Defense | $28.1 | $28.5 | $19.9 | | Total Order Backlog | $101.0 | $98.8 | $106.2 | - 2% increase from prior quarter, 5% decrease from June 30, 2022[91][93] - The decrease in total backlog year-over-year is attributed to medical customers returning to pre-pandemic ordering practices as global supply chain conditions improve[91] Gross Profit Gross profit as a percentage of net sales improved for both the three and six months ended June 30, 2023, primarily due to price increases and higher plant utilization Gross Profit as a Percentage of Net Sales: | Period | 2023 | 2022 | | :--------------------------------- | :---- | :---- | | Three Months Ended June 30 | 15.6% | 15.4% | | Six Months Ended June 30 | 15.7% | 14.3% | - Improvement driven by price increases in response to material and labor cost inflation, and higher production volume leading to increased plant utilization[94] Selling Expense Selling expenses remained relatively stable in absolute terms but decreased slightly as a percentage of sales for both the three and six months ended June 30, 2023 Selling Expenses (in millions and as % of sales): | Period | 2023 ($) | 2023 (%) | 2022 ($) | 2022 (%) | | :--------------------------------- | :------- | :------- | :------- | :------- | | Three Months Ended June 30 | $1.0 | 2.7% | $1.0 | 2.9% | | Six Months Ended June 30 | $1.8 | 2.6% | $1.8 | 2.8% | General and Administrative Expense General and administrative expenses increased in both absolute terms and as a percentage of sales for the three and six months ended June 30, 2023, primarily due to higher professional fees and labor costs General and Administrative Expenses (in millions and as % of sales): | Period | 2023 ($) | 2023 (%) | 2022 ($) | 2022 (%) | | :--------------------------------- | :------- | :------- | :------- | :------- | | Three Months Ended June 30 | $3.1 | 8.9% | $2.7 | 8.2% | | Six Months Ended June 30 | $6.4 | 9.1% | $5.4 | 8.5% | - Increase mainly due to higher professional fees and increased labor costs[96] Research and Development Expense Research and development expenses decreased in absolute terms and as a percentage of net sales for both the three and six months ended June 30, 2023 Research and Development Expenses (in millions and as % of sales): | Period | 2023 ($) | 2023 (%) | 2022 ($) | 2022 (%) | | :--------------------------------- | :------- | :------- | :------- | :------- | | Three Months Ended June 30 | $0.3 | 0.9% | $0.4 | 1.1% | | Six Months Ended June 30 | $0.6 | 0.8% | $0.7 | 1.1% | Income From Operations Income from operations increased for both the three and six months ended June 30, 2023, driven by higher sales and improved gross margin percentage Income From Operations (in millions): | Period | 2023 ($) | 2022 ($) | | :--------------------------------- | :------- | :------- | | Three Months Ended June 30 | $1.1 | $1.0 | | Six Months Ended June 30 | $2.2 | $1.2 | - Increase driven by higher sales and improved gross margin percentage, primarily due to price increases and higher plant utilization[98] Interest Expense Interest expense remained consistent for both the three and six months ended June 30, 2023, compared to the prior year Interest Expense (in millions): | Period | 2023 ($) | 2022 ($) | | :--------------------------------- | :------- | :------- | | Three Months Ended June 30 | $0.1 | $0.1 | | Six Months Ended June 30 | $0.2 | $0.2 | Income Taxes The effective tax rate significantly increased for both the three and six months ended June 30, 2023, primarily due to higher projected pre-tax income and an increased valuation allowance related to Section 174 Effective Tax Rate: | Period | 2023 | 2022 | | :--------------------------------- | :--- | :--- | | Three Months Ended June 30 | 35% | 21% | | Six Months Ended June 30 | 31% | 12% | - Primary drivers of change: increase in projected pre-tax book income and an increase in the valuation allowance due to Section 174[102] Net Income Net income for the three months ended June 30, 2023, decreased slightly, while net income for the six months ended June 30, 2023, increased significantly, driven by higher sales and improved gross margins Net Income and EPS (in millions, except per share data): | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income | $0.6 | $0.7 | $1.3 | $0.9 | | Basic EPS | $0.23 | $0.27 | $0.49 | $0.32 | | Diluted EPS | $0.22 | $0.25 | $0.46 | $0.30 | - Increase in net income for the six-month period was driven by higher sales and improved gross margin percentage, primarily due to price increases and higher plant utilization[103] Liquidity and Capital Resources The company believes its current financing arrangements, anticipated cash flows, and cash on hand are sufficient to meet working capital, capital expenditure, and debt repayment needs for the next twelve months. It details its credit facility, compliance with covenants, and unused availability - Management believes existing financing, anticipated cash flows from operations, expected Employee Retention Credit (ERC) funds, and cash on hand will be sufficient to cover working capital, capital expenditures, and debt repayments for the next twelve months[104] Credit Facility The company's $16 million credit facility with Bank of America, expiring in 2026, had outstanding borrowings of $7.0 million at June 30, 2023, with an increased weighted-average interest rate of 7.9%. The company remains compliant with all covenants and has $5.3 million in unused availability - The company's $16 million line of credit with Bank of America expires on June 15, 2026[105] - The weighted-average interest rate on the line of credit increased to 7.9% as of June 30, 2023, from 5.2% at December 31, 2022[106] Credit Facility Status (in millions): | Metric | June 30, 2023 | December 31, 2022 | | :----------------- | :------------ | :---------------- | | Outstanding Borrowings | $7.0 | $6.9 | | Unused Availability| $5.3 | N/A | - The company met all financial covenants for the period ended June 30, 2023[108] Off-Balance Sheet Arrangements The company has not engaged in any off-balance sheet arrangements as defined by SEC regulations - The company has not engaged in any off-balance sheet activities as defined in Item 303(a)(4) of Regulation S-K[110] Critical Accounting Policies and Estimates The company's critical accounting policies and estimates are consistent with those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2022, involving significant judgment and potential for actual results to differ from estimates - Significant accounting policies and estimates are summarized in the Annual Report on Form 10-K for the year ended December 31, 2022, and involve significant judgment and inherent uncertainty[111] Forward-Looking Statements This section reiterates that statements not based on historical facts are forward-looking and subject to various risks, as detailed in the company's Annual Report on Form 10-K. The company does not undertake to update these statements publicly - Forward-looking statements are subject to various factors that could cause actual results to differ materially, as detailed in the 'Risk Factors' section of the Annual Report on Form 10-K[113][114][115] - The company does not undertake any obligation to publicly update forward-looking statements[114] Item 3 - Quantitative and Qualitative Disclosures About Market Risk This section states that there are no applicable quantitative and qualitative disclosures about market risk for the reporting period - This item is not applicable[117] Item 4 - Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2023, and concluded they were effective. There were no material changes in internal control over financial reporting during the quarter - Management, with the participation of the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2023[118] - There were no material changes in internal control over financial reporting during the most recently completed fiscal quarter[119] PART II - OTHER INFORMATION This section covers various other information, including legal proceedings, risk factors, equity sales, defaults, mine safety, and exhibits Item 1 - Legal Proceedings The company is subject to various legal proceedings and claims that arise in the ordinary course of business - The company is subject to various legal proceedings and claims that arise in the ordinary course of business[121] Item 1A. - Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022 - No material changes in risk factors from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[122] Item 2 - Unregistered Sales of Equity Securities, Use of Proceeds The company's share repurchase program has expired, and no additional amounts are available for repurchase - The share repurchase program has expired, and no additional amounts are available for repurchase[123] Item 3 - Defaults on Senior Securities The company reported no defaults on senior securities for the period - None[124] Item 4 - Mine Safety Disclosures This section is not applicable to the company's operations - Not applicable[125] Item 5 - Other Information The company reported no other information for the period - None[126] Item 6 - Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications from the CEO and CFO, and financial statements formatted in iXBRL - Key exhibits include certifications from the Chief Executive Officer and Chief Financial Officer (31.1, 31.2, 32) and financial statements formatted in iXBRL (101, 104)[128] SIGNATURES The report was duly signed on August 9, 2023, by Jay D. Miller, Chief Executive Officer and President, and Alan K. Nordstrom, Acting Chief Financial Officer and Corporate Controller - The report was signed on August 9, 2023, by Jay D. Miller (CEO and President) and Alan K. Nordstrom (Acting CFO and Corporate Controller)[130]