NOTE 1 - INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

The interim condensed consolidated financial statements are unaudited and are prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, and rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the interim financial statements include all normal adjustments and disclosures necessary to present fairly the Company’s financial position as of September 30, 2019, the results of its operations for the three month periods ended September 30, 2019 and 2018, and its cash flows for the three month periods ended September 30, 2019 and 2018. These statements should be read in conjunction with the financial statements and footnotes included in the fiscal 2018 Annual Report on Form 10-K.  Financial information as of June 30, 2019 has been derived from the Company’s audited consolidated financial statements.

 

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

A summary of the Company’s significant accounting policies is included in Note 1 to the audited consolidated financial statements of the Company’s fiscal 2019 Annual Report on Form 10-K. Significant changes to our accounting policies as a result of adopting ASU-2014-09 “Revenue from Contracts with Customers” (Topic 606) in the first quarter of fiscal 2019 and adopting ASU 2016-02, “Leases” in the first quarter of fiscal 2019, which are discussed below.

 

Revenue Recognition: 

 

The Company recognizes revenue when it satisfies the performance obligations in its customer contracts or purchase orders. Most of the Company’s products have a single performance obligation which is satisfied at a point in time when control is transferred to the customer. Control is generally transferred at time of shipment when title and risk of ownership passes to the customer. For customer contracts with multiple performance obligations, the Company allocates the transaction price and any discounts to each performance obligation based on relative standalone selling prices. Payment terms are typically within 30 to 90 days from the shipping date, depending on our terms with the customer. The Company offers standard warranties that do not represent separate performance obligations.

 

Installation is a separate performance obligation, except for our digital signage products. For digital signage products, installation is not a separate performance obligation as the product and installation is the combined item promised in digital signage contracts. The Company is not always responsible for installation of products it sells and has no post-installation responsibilities other than standard warranties.

 

A number of the Company's products are highly customized. As a result, these customized products do not have an alternative use. For these products, the Company generally has a legal right to payment for performance to date and generally does not accept returns on these items. The measurement of performance is based upon cost plus a reasonable profit margin for work completed. Because there is no alternative use and there is a legal right to payment, the Company transfers control of the item as the item is being produced and therefore, recognizes revenue over time. The customized product types are as follows:

 

●

Customer specific branded print graphics

●

Electrical components based on customer specifications

●

Digital signage and related media content

 

The Company also offers installation services. Installation revenue is recognized over time as our customer simultaneously receives and consumes the benefits provided through the installation process.

 

For these customized products and installation services, revenue is recognized using a cost-based input method: recognizing revenue and gross profit as work is performed based on the relationship between the actual cost incurred and the total estimated cost for the contract.

 

 

Disaggregation of Revenue

 

The Company disaggregates the revenue from contracts with customers by the timing of revenue recognition because the Company believes it best depicts the nature, amount, and timing of our revenue and cash flows. The table presents a reconciliation of the disaggregation by reportable segments.

 

 

		Three Months Ended September 30
		Lighting Segment				Graphics Segment
Timing of revenue recognition
Products and services transferred at a point in time		$	56,525			$	17,725
Products and services transferred over time			6,666				7,785
		$	63,191			$	25,510

 

		Three Months Ended September 30
		Lighting Segment				Graphics Segment
Type of Product and Services
LED lighting, digital signage, electronic circuit boards		$	54,483			$	3,874
Legacy Products			8,038				16,700
Turnkey Services and Other			670				4,936
		$	63,191			$	25,510

 

Legacy products include lighting fixtures utilizing light sources other than LED technology and printed two- and three-dimensional graphic products. Turnkey services and other includes installation services along with shipping and handling charges.

 

Practical Expedients and Exemptions

 

●

The Company’s contracts with customers have an expected duration of one year or less, as such the Company applies the practical expedient to expense sales commissions as incurred and have omitted disclosures on the amount of remaining performance obligations.

●

Shipping costs that are not material in context of the delivery of products are expensed as incurred.

●

The Company’s accounts receivable balance represents the Company’s unconditional right to receive payment from its customers with contracts. Payments are generally due within 30 to 90 days of completion of the performance obligation and invoicing; therefore, payments do not contain significant financing components.

●

The Company collects sales tax and other taxes concurrent with revenue-producing activities which are excluded from revenue. Shipping and handling costs are treated as fulfillment activities and included in cost of products and services sold on the Consolidated Statements of Operations.

 

 New Accounting Pronouncements:

 

On July 1, 2018, the Company adopted ASU 2014-09. “Revenue from Contracts with Customers,” (Topic 606) using the modified retrospective adoption method which requires a cumulative effect adjustment to the opening balance of retained earnings. This approach was applied to contracts that were not completed as of June 30, 2018. Results for reporting periods beginning July 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. The Company recorded a net increase to beginning retained earnings of $591,000 on July 1, 2018 due to the cumulative impact of adopting Topic 606, as described below.

 

 

(In thousands)		Balance as of June 30, 2018				Adjustments				Opening Balance as of July 1, 2018
Assets:
Accounts receivable, net		$	50,609			$	4,935			$	55,544
Inventories, net		$	50,994			$	(4,167	)		$	46,827
Other long-term assets, net		$	9,786			$	(177	)		$	9,609
Shareholders’ Equity:
Retained earnings		$	15,124			$	591			$	15,715

 

 

In February 2016, the Financial Accounting Standards Board issued ASU 2016-02, “Leases.” The amended guidance requires an entity to recognize assets and liabilities that arise from leases. The amended guidance is effective for financial statements issued for fiscal and interim periods within those years, beginning after December 15, 2018, or the Company’s fiscal 2020, with early adoption permitted. The Company adopted this guidance effective July 1, 2019 using a modified-retrospective transition method, under which it elected not to adjust comparative periods. The Company elected the package of practical expedients permitted under the new guidance to not reassess prior conclusions related to contracts containing leases, lease classification, and initial direct costs. In addition, the Company elected the practical expedient to not separate lease and non-lease component and the accounting policy election to not present leases with an initial term of twelve months or less on the balance sheet.

 

The Company’s most significant leases are those relating to its two manufacturing facilities along with a small office space. Besides these three real estate leases, most other leases are insignificant and consist of leases related to a vehicle, forklifts, small tooling, and various office equipment. All of the Company’s leases are operating leases and are included in other long-term assets with the corresponding liability in other long-term liabilities. Lease expense is recognized on a straight-line basis over the lease term. The Company used its incremental borrowing rate when determining the present value of lease payments. The adoption of the new lease standard resulted in the recognition of right-of-use assets (ROU assets) of $10.4 million and lease liabilities of 10.8 million which includes the impact of existing deferred rents and tenant improvement allowances on the consolidated balance sheets as of July 1, 2019 for the Company’s real estate leases. The adoption of the standard resulted in no material impact to consolidated statements of operations or consolidated statements of cash flow. (Refer to Note 15)

 

Subsequent Events:

 

The Company has evaluated subsequent events for potential recognition and disclosure through the date the consolidated financial statements were filed.  No items were identified during this evaluation that required adjustment to or disclosure in the accompanying consolidated financial statements.

 

 

NOTE 3 - SEGMENT REPORTING INFORMATION

 

The accounting guidance on Segment Reporting establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information of those segments to be presented in financial statements. Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker (the Company’s Chief Executive Officer or “CODM”) in making decisions on how to allocate resources and assess performance. The Company’s two operating segments are Lighting and Graphics, with one executive team under the organizational structure reporting directly to the CODM with responsibilities for managing each segment. Corporate and Eliminations, which captures the Company’s corporate administrative activities, is also reported in the segment information.

 

The Lighting Segment includes outdoor and indoor lighting utilizing both traditional and LED light sources that have been fabricated and assembled for the Company’s markets, primarily petroleum / convenience stores, automotive dealerships, quick-service restaurants, grocery and pharmacy stores, and retail/national accounts. The Company also services lighting product customers through the commercial industrial, stock and flow, and renovation channels. The Lighting Segment also includes the design, engineering, and manufacturing of electronic circuit boards, assemblies and sub-assemblies used to manufacture certain LED light fixtures and sold directly to customers.

 

 

The Graphics Segment designs, manufactures and installs exterior and interior visual image elements such as traditional graphics, interior branding, electrical and architectural signage, active digital signage along with the management of media content related to digital signage, LED video screens, and menu board systems that are either digital or traditional by design. These products are used in visual image programs in several markets including, but not limited to the petroleum / convenience store market, multi-site retail operations, banking, and restaurants. The Graphics Segment implements, installs and provides program management services related to products sold by the Graphics Segment and by the Lighting Segment.

 

The Company’s corporate administration activities are reported in the Corporate and Eliminations line item. These activities primarily include intercompany profit in inventory eliminations, expense related to certain corporate officers and support staff, the Company’s internal audit staff, expense related to the Company’s Board of Directors, equity compensation expense for various equity awards granted to corporate administration employees, certain consulting expenses, investor relations activities, and a portion of the Company’s legal, auditing and professional fee expenses. Corporate identifiable assets primarily consist of cash, invested cash (if any), refundable income taxes (if any), and deferred income taxes.

 

There was no concentration of consolidated net sales in the three months ended September 30, 2019 or 2018.  There was no concentration of accounts receivable at September 30, 2018 or June 30, 2019.

 

Summarized financial information for the Company’s operating segments is provided for the indicated periods and as of September 30, 2019 and September 30, 2018:

 

		Three Months Ended
(In thousands)		September 30
		2019				2018
Net Sales:
Lighting Segment		$	63,191			$	61,432
Graphics Segment			25,510				23,525
		$	88,701			$	84,957
Operating Income (Loss):
Lighting Segment		$	9,159			$	3,850
Graphics Segment			1,017				2,387
Corporate and Eliminations			(3,337	)			(3,303	)
		$	6,839			$	2,934
Capital Expenditures:
Lighting Segment		$	330			$	276
Graphics Segment			--				266
Corporate and Eliminations			25				106
		$	355			$	648
Depreciation and Amortization:
Lighting Segment		$	1,778			$	1,990
Graphics Segment			386				395
Corporate and Eliminations			235				258
		$	2,399			$	2,643

 

		September 30, 2019				June 30, 2019
Identifiable Assets:
Lighting Segment		$	141,647			$	142,105
Graphics Segment			44,467				40,914
Corporate and Eliminations			17,407				18,081
		$	203,521			$	201,100

 

 

The segment net sales reported above represent sales to external customers.  Segment operating income, which is used in management’s evaluation of segment performance, represents net sales less all operating expenses. Identifiable assets are those assets used by each segment in its operations.

 

The Company records a 10% mark-up on intersegment revenues. Any intersegment profit in inventory is eliminated in consolidation. Intersegment revenues were eliminated in consolidation as follows:

 

		Three Months Ended
		September 30
(In thousands)		2019				2018
Lighting Segment inter-segment net sales		$	811			$	409
Graphics Segment inter-segment net sales		$	24			$	31

 

The Company’s operations are located solely within the United States. As a result, the geographic distribution of the Company’s net sales and long-lived assets originate within the United States.

 

 

NOTE 4 - EARNINGS PER COMMON SHARE

 

The following table presents the amounts used to compute basic and diluted earnings per common share, as well as the effect of dilutive potential common shares on weighted average shares outstanding (in thousands, except per share data):

 

		Three Months Ended
		September 30
		2019				2018
BASIC EARNINGS (LOSS) PER SHARE
Net income		$	4,475			$	1,749
Weighted average shares outstanding, net of treasury shares (a)			26,024				25,752
Weighted average vested restricted stock units outstanding			24				53
Weighted average shares outstanding in the Deferred Compensation Plan			188				227
Weighted average shares outstanding			26,236				26,032
Basic earnings per share		$	0.17			$	0.07
DILUTED EARNINGS (LOSS) PER SHARE
Net income (loss)		$	4,475			$	1,749
Weighted average shares outstanding
Basic			26,236				26,032
Effect of dilutive securities (b):
Impact of common shares to be issued under stock option plans, and contingently issuable shares, if any			57				333
Weighted average shares outstanding (c)			26,293				26,365
Diluted earnings per share		$	0.17			$	0.07

 

 

(a)

Includes shares accounted for like treasury stock.

 

(b)

Calculated using the “Treasury Stock” method as if dilutive securities were exercised and the funds were used to purchase common shares at the average market price during the period.

 

(c)

Options to purchase 2,861,423 common shares and 3,146,466 common shares at September 30, 2019 and 2018, respectively, were not included in the computation of the three month period for diluted earnings per share, respectively, because the exercise price was greater than the average fair market value of the common shares.

 

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NOTE 7 - GOODWILL AND OTHER INTANGIBLE ASSETS

 

The carrying values of goodwill and other intangible assets with indefinite lives are reviewed at least annually for possible impairment. The Company may first assess qualitative factors in order to determine if goodwill and indefinite-lived intangible assets are impaired. If through the qualitative assessment it is determined that it is more likely than not that goodwill and indefinite-lived assets are not impaired, no further testing is required. If it is determined more likely than not that goodwill and indefinite-lived assets are impaired, or if the Company elects not to first assess qualitative factors, the Company’s impairment testing continues with the estimation of the fair value of the reporting unit using a combination of a market approach and an income (discounted cash flow) approach, at the reporting unit level. The estimation of the fair value of reporting unit requires significant management judgment with respect to revenue and expense growth rates, changes in working capital and the selection and use of an appropriate discount rate. The estimates of the fair value of reporting units are based on the best information available as of the date of the assessment. The fair value measurements of the reporting units are based on significant inputs not observable in the market and thus represent Level 3 measurements as defined by ASC 820 “Fair Value Measurements.” The use of different assumptions would increase or decrease estimated discounted future operating cash flows and could increase or decrease an impairment charge. Company management uses its judgment in assessing whether assets may have become impaired between annual impairment tests. Indicators such as adverse business conditions, economic factors and technological change or competitive activities may signal that an asset has become impaired.

 

The Company identified its reporting units in conjunction with its annual goodwill impairment testing. The Company has a total of two reporting units that contain goodwill. There is one reporting unit within the Lighting Segment and one reporting unit within the Graphics Segment. The Company relies upon a number of factors, judgments and estimates when conducting its impairment testing including, but not limited to, the Company’s stock price, operating results, forecasts, anticipated future cash flows and marketplace data. There are inherent uncertainties related to these factors and judgments in applying them to the analysis of goodwill impairment.

 

 

The following table presents information about the Company's goodwill on the dates or for the periods indicated:

 

Goodwill
(In thousands)		Lighting				Graphics
		Segment				Segment				Total
Balance as of June 30, 2019
Goodwill		$	94,564				28,690				123,254
Accumulated impairment losses			(85,356	)			(27,525	)			(112,881	)
Goodwill, net as of June 30, 2019		$	9,208				1,165				10,373
Balance as of September 30, 2019
Goodwill		$	94,564				28,690				123,254
Accumulated impairment losses			(85,356	)			(27,525	)			(112,881	)
Goodwill, net as of September 30, 2019		$	9,208				1,165				10,373

 

The gross carrying amount and accumulated amortization by major other intangible asset class is as follows:

 

		September 30, 2019
Other Intangible Assets		Gross
(In thousands)		Carrying				Accumulated				Net
		Amount				Amortization				Amount
Amortized Intangible Assets
Customer relationships		$	35,563			$	12,585			$	22,978
Patents			338				254				84
LED technology firmware, software			16,066				12,489				3,577
Trade name			2,658				747				1,911
Total Amortized Intangible Assets			54,625				26,075				28,550
Indefinite-lived Intangible Assets
Trademarks and trade names			3,422				--				3,422
Total Indefinite-lived Intangible Assets			3,422				--				3,422
Total Other Intangible Assets		$	58,047			$	26,075			$	31,972

 

 

		June 30, 2019
Other Intangible Assets		Gross
(In thousands)		Carrying				Accumulated				Net
		Amount				Amortization				Amount
Amortized Intangible Assets
Customer relationships		$	35,563			$	12,070			$	23,493
Patents			338				247				91
LED technology			16,066				12,364				3,702
firmware, software			2,658				719				1,939
Trade name											-
Total Amortized Intangible Assets			54,625				25,400				29,225
Indefinite-lived Intangible Assets
Trademarks and trade names			3,422				--				3,422
Total Indefinite-lived Intangible Assets			3,422				--				3,422
Total Other Intangible Assets		$	58,047			$	25,400			$	32,647

 

 

 

The Company expects to record annual amortization expense as follows:

 

 

 

NOTE 8 - REVOLVING LINE OF CREDIT

 

In February 2019, the Company amended its secured line of credit to a $75 million facility from a $100 million facility in order to better match its financing needs with an appropriate borrowing capacity. The line of credit expires in the third quarter of fiscal 2022. Interest on the revolving line of credit is charged based upon an increment over the LIBOR rate as periodically determined, or at the bank’s base lending rate, at the Company’s option. The increment over the LIBOR borrowing rate, as periodically determined, fluctuates between 125 and 250 basis points depending upon the ratio of indebtedness to earnings before interest, taxes, depreciation and amortization (“EBITDA”), as defined in the line of credit agreement. The increment over LIBOR borrowing rate will be 200 basis points for the first quarter of fiscal 2020. The fee on the unused balance of the $75 million committed line of credit is 20 basis points. Under the terms of this line of credit, the Company has agreed to a negative pledge of real estate assets and is required to comply with financial covenants that limit the ratio of indebtedness to EBITDA and require a minimum fixed charge coverage ratio. As of September 30, 2019, there was $23.2 million borrowed against the line of credit, and $51.8 million was available as of that date. Based on the terms of the line of credit and the maturity date, the debt has been classified as long term.

 

The Company is in compliance with all of its loan covenants as of September 30, 2019.

 

 

NOTE 9 - CASH DIVIDENDS

 

The Company paid cash dividends of $1,319,000 and $1,296,000 in the three months ended September 30, 2019 and 2018, respectively. Dividends on restricted stock units in the amount of $34,842 and $31,553 were accrued as of September 30, 2019 and 2018, respectively. These dividends will be paid upon the vesting of the restricted stock units when shares are issued to the award recipients. In November 2019, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable November 26, 2019 to shareholders of record as of November 18, 2019. The indicated annual cash dividend rate is $0.20 per share.

 

 

NOTE 10 - EQUITY COMPENSATION

 

In November 2019, the Company’s shareholders approved the 2019 Omnibus Award Plan. The purpose of the plan is to provide a means through which the Company may attract and retain key personnel and to provide a means by which directors, officers, and employees can acquire and maintain an equity interest in the Company. This plan replaced the 2012 Stock Incentive Plan. The number of shares of common stock authorized for issuance under the plan is 2,650,000 which will be combined with the remaining shares available under the previous plan of 1,147,429 shares as of September 30, 2019 for total number of shares available for issuance of approximately 3.8 million. The plan implements the use of a fungible share ratio that consumes 2.5 available shares for every full value share awarded by the Company as stock compensation. The 2019 Omnibus Award Plan allows for the grant of non-qualified stock options, stock appreciation rights, restricted stock awards, performance stock units, and other stock-based awards.

 

In the first quarter of fiscal 2020, the Company granted 455,429 non-qualified serviced-based stock options with an exercise price of $3.83 and 199,310 Performance Stock Units and 81,917 Restricted Stock Units at a fair value of $3.83. Stock compensation expense was $398,000 and $551,000 in the first quarter of fiscal 2019 and 2018, respectively.

 

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NOTE 12 - COMMITMENTS AND CONTINGENCIES

 

The Company is party to various negotiations, customer bankruptcies, and legal proceedings arising in the normal course of business. The Company provides reserves for these matters when a loss is probable and reasonably estimable. The Company does not disclose a range of potential loss because the likelihood of such a loss is remote. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position, results of operations, cash flows or liquidity.

 

The Company may occasionally issue a standby letter of credit in favor of third parties. As of September 30, 2019, there were no such standby letters of credit issued.

 

 

NOTE 13 – SEVERANCE COSTS

 

The activity in the Company’s Accrued Severance Liability is as follows for the periods indicated:

 

		Three				Three				Fiscal
		Months Ended				Months Ended				Year Ended
(In thousands)		September 30,				September 30,				June 30,
		2019				2018				2019
Balance at beginning of the period		$	1,134			$	1,772			$	1,772
Accrual of expense			18				--				560
Payments			(162	)			(197	)			(1,198	)
Adjustments			--				--				--
Balance at end of the period		$	990			$	1,575			$	1,134

 

Of the total $990,000 reported as of September 30, 2019, $591,000 has been classified as a current liability and will be paid out over the next twelve months. The remaining $399,000 has been classified as a long-term liability.

 

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NOTE 14 – RESTRUCTURING COSTS

 

In the first quarter of fiscal 2020, the Company sold its New Windsor, New York facility. The net proceeds from the sale was $12.3 million resulting in a gain of $4.8 million. The Company also incurred additional restructuring costs totaling $233,000 related to closure of the New York facility which impacted both the Lighting and Graphics segment.

 

The following table presents information about restructuring costs for the periods indicated:

 

		Three				Three
		Months Ended				Months Ended
(In thousands)		September 30,				September 30,
		2019				2018
Severance benefits		$	--			$	19
Moving costs			--				53
Impairment of fixed assets and accelerated depreciation			49				43
Facility repairs			--				40
Gain on sale of facility			(4,821	)			--
Exit Costs			184				--
Total		$	(4,588	)		$	155

 

 

The following table presents a roll forward of the beginning and ending liability balances related to the restructuring costs:

 

(In thousands)
		Balance as of June 30, 2019				Restructuring Expense				Payments				Adjustments				Balance as of September 30, 2019
Severance and termination benefits		$	236			$	--			$	(131	)		$	--			$	105
Other restructuring costs			--				184				(184	)			--				--
Total		$	236			$	184			$	(315	)		$	--			$	105

 

 

 

NOTE 15 - LEASES

 

The Company leases two of its manufacturing facilities along with a small office space, a company vehicle, several forklifts, several small tooling items, and various items of office equipment. All of the Company’s leases are operating leases and are included in other long-term assets with the corresponding liability in other long-term liabilities. Leases have a remaining term of 1 to 5 years some of which have an option to renew. The Company does not assume renewals in determining the lease term unless the renewals are deemed reasonably certain. The lease agreements do not contain any material residual guarantees or material variable lease payments.

 

The Company has periodically entered into short-term operating leases with an initial term of twelve months or less. These leases are not recorded on the balance sheet. For the three months ended September 30, 2019, the rent expense for these leases is immaterial.

 

The Company has certain leases that contain lease and non-lease components and has elected to utilize the practical expedient to account for these components together as a single lease component.

 

Lease expense is recognized on a straight-line basis over the lease term. The Company used its incremental borrowing rate when determining the present value of lease payments. The adoption of the new lease standard resulted in the recognition of right-of-use assets (ROU assets) of $10.4 million and lease liabilities of 10.8 million which includes the impact of existing deferred rents and tenant improvement allowances on the consolidated balance sheets as of July 1, 2019 for the Company’s real estate leases. The adoption of the new standard resulted in no material impact to the consolidated statements of operations or consolidated statements of cash flow.

 

 

		Three Months Ended September 30, 2019
		(in thousands)
Operating lease cost			587

 

 

Supplemental Cash Flow Information:		Three Months Ended September 30, 2019
		(in thousands)
Operating cash flows from operating leases
Fixed payments			573
Liability reduction			443

 

 

		At September 30, 2019
Operating Leases:
Total operating right-of-use asset (Other long-term assets)			9,953
Accrued Liabiltities (Current liabilities)			324
Long-term operating lease liability (Other long-term liabilties)			10,368
			10,692
Weighted Average Remaining Lease Term (in years)			5.3
Weighted Average Discount Rate			4.85	%

 

 

 

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NOTE 16 – INCOME TAXES

 

The Company's effective income tax rate is based on expected income, statutory rates and tax planning opportunities available in the various jurisdictions in which it operates. For interim financial reporting, the Company estimates the annual income tax rate based on projected taxable income for the full year and records a quarterly income tax provision or benefit in accordance with the anticipated annual rate. The Company refines the estimates of the year's taxable income as new information becomes available, including actual year-to-date financial results. This continual estimation process often results in a change to the expected effective income tax rate for the year. When this occurs, the Company adjusts the income tax provision during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the expected income tax rate. Significant judgment is required in determining the effective tax rate and in evaluating tax positions. In the first quarter of fiscal 2020, the Company sold its New Windsor, New York facility resulting in a book gain of $4.8 million. The Company was able to utilize a deferred tax asset of $864,000 related to the sale of the facility

 

		Three Months Ended
		September 30
		2019				2018
Reconciliation to effective tax rate:
Provision for income taxes at the anticipated annual tax rate			24.1	%			23.0	%
Uncertain tax positions			0.5				1.3
Shared based compensation			4.3				3.3
Other			0.4				--
Effective tax rate			29.3	%			27.6	%