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Excrept from filing document 2024-06-30

Statements contained in this Annual Report on Form 10 K that are not based on historical facts are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 Forward looking statements may be identified by the use of forward looking terminology such as should could may will expect believe estimate anticipate intend continue or similar terms or variations of those terms or the negative of those terms There are many factors that affect the Company s business and the results of its operations and that may cause the actual results of operations in future periods to differ materially from those currently expected or anticipated These factors include but are not limited to the impact of pandemics and other global crises or catastrophic events on employees our supply chain and the demand for our products and services around the world materially adverse or unanticipated legal judgments fines penalties or settlements conditions in the financial and banking markets including fluctuations in exchange rates and the inability to repatriate foreign cash domestic and international economic conditions including the impact length and degree of economic downturns on the customers and markets we serve and more specifically conditions in the automotive construction aerospace defense transportation food service equipment consumer appliance energy oil and gas and general industrial markets lower cost competition the relative mix of products which impact margins and operating efficiencies in certain of our businesses the impact of higher raw material and component costs particularly steel certain materials used in electronics parts petroleum based products and refrigeration components the impact of higher transportation and logistics costs especially with respect to transportation of goods from Asia an inability to realize the expected cost savings from restructuring activities including effective completion of plant consolidations cost reduction efforts including procurement savings and productivity enhancements capital management improvements strategic capital expenditures and the implementation of lean enterprise manufacturing techniques the potential for losses associated with the exit from or divestiture of businesses that are no longer strategic or no longer meet our growth and return expectations the inability to achieve the savings expected from global sourcing of raw materials and diversification efforts in emerging markets the impact on cost structure and on economic conditions as a result of actual and threatened increases in trade tariffs the inability to attain expected benefits from acquisitions and the inability to effectively consummate and integrate such acquisitions and achieve synergies envisioned by the Company market acceptance of our products our ability to design introduce and sell new products and related product components the ability to redesign certain of our products to continue meeting evolving regulatory requirements the impact of delays initiated by our customers and our ability to increase manufacturing production to meet demand the impact on our operations of any successful cybersecurity attacks and potential changes to future pension funding requirements In addition any forward looking statements represent management s estimates only as of the day made and should not be relied upon as representing management s estimates as of any subsequent date While the Company may elect to update forward looking statements at some point in the future the Company and management specifically disclaim any obligation to do so even if management s estimates change
Standex International Corporation and subsidiaries we us our the Company and Standex is a diversified industrial manufacturer with leading positions in a variety of products and services that are used in diverse commercial and industrial markets Headquartered in Salem New Hampshire we have six operating segments aggregated into five reportable segments Electronics Engraving Scientific Engineering Technologies and Specialty Solutions Two operating segments are aggregated into Specialty Solutions Our businesses work in close partnership with our customers to deliver custom solutions or engineered components that solve their unique and specific needs an approach we call Customer Intimacy
Standex was incorporated in 1975 and is the successor of a corporation organized in 1955 We have paid dividends each quarter since Standex became a public corporation in November 1964 Overall management strategic development and financial control are led by the executive staff at our corporate headquarters Our growth strategy is focused on four key areas 1 Increasing our presence in rapidly growing markets and applications 2 executing new product development in both core and adjacent market applications 3 expanding geographically where meaningful business opportunities exist and 4 undertaking strategically aligned acquisitions that strengthen and or expand these core businesses We direct our investments towards markets with long term secular growth prospects such as renewable energy electric vehicles smart power grid military and defense and life sciences
Our long term business strategy is to create improve and enhance shareholder value by building more profitable focused industrial platforms through our Standex Value Creation System This methodology employs four components Balanced Performance Plan Growth Disciplines Operational Excellence and Talent Management and provides both a company wide framework and tools used to achieve our goals We intend to continue investing organically and inorganically in high margin and growth businesses using this balanced and proven approach
It is our objective to grow larger and more profitable business units through both organic and inorganic initiatives We have a particular focus on identifying and investing in opportunities that complement our products and will increase the overall scale global presence and capabilities of our businesses We continue to execute on acquisitions where strategically aligned with our businesses and where the opportunity meets our investment metrics 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
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 and inorganic growth and to return cash to our shareholders through payment of dividends and stock buybacks
Our Electronics group is a global component and value added solutions provider of both sensing and switching technologies as well as magnetic power conversion components and assemblies Electronics competes on the basis of Customer Intimacy by designing engineering and manufacturing innovative solutions components and assemblies to solve our customers application needs through our Partner Solve Deliver approach Our approach allows us to expand the business through organic growth with current customers as well as developing new products driving geographic expansion and pursuing inorganic growth through strategic acquisitions
Our highly engineered products and vertically integrated manufacturing capabilities provide solutions to an array of markets and provide safe and efficient power transformation current monitoring and isolation as well as switch sensor and relay solutions to monitor systems for function and safety The end user of our engineered solution is typically an original equipment manufacturer OEM or industrial equipment manufacturer End user markets include but are not limited to appliances electrification electric vehicles solar smart grid alternative energy security military medical aerospace test and measurement power distribution transportation and general industrial applications
Our sensing products employ reed switch Hall effect inductive conductive and other technologies Sensing based solutions include reed relays fluid level proximity motion flow HVAC condensate as well as custom electronic sensors containing our core technologies The magnetics or power conversion products include custom wound transformers and inductors for low and high frequency applications current sense technology advanced planar transformer technology value added assemblies and mechanical packaging
Our Engraving group is a global creator and provider of custom textures and surface finishes on tooling that enhance the beauty and function of a wide range of consumer good and automotive products We focus on continuing to meet the needs of a changing marketplace by offering experienced craftsmanship while investing in new technologies such as laser engraving and soft surface skin texturized tooling Our growth strategy is to continue to develop and or acquire technologies to enhance surface textures that also allow our customers to introduce more sustainable manufacturing processes and reduce their own energy consumption We are one company operating in 18 countries using a consistent approach to guarantee harmony on global programs in service of our customers
Standex Engraving Mold Tech has become the global leader in its industry by offering a full range of services to OEM s Tier 1 suppliers mold makers and product designers From start to finish these services include the design of bespoke textures the verification of the texture on a prototype engraving a mold enhancing and polishing it and then offering on site try out support with ongoing tool maintenance and texture repair capabilities In addition to these services we also produce soft trim tooling such as in mold graining IMG and nickel shells
Architexture Design Studio uses proprietary technology called Model Tech which utilizes proven expertise to create and test custom textures During the Model Tech process an original texture is first designed to offer beauty and function which ultimately is used to create a large format skin that can be wrapped on a model for testing
We offer a range of products in our portfolio that control the temperatures of critical healthcare products medications vaccines and laboratory samples Our focus is on solving customer problems for these critical applications delivering innovative products and solutions that meet stringent regulatory requirements and the unique needs of our customers
The scientific and healthcare equipment that we design assemble and manufacture is used in hospitals pharmacies clinical laboratories reference laboratories physicians offices life science laboratories government and academic facilities and industrial testing laboratories Our product offerings include
We manufacture and provide specialty controlled temperature equipment purpose built for the medical scientific pharmaceutical biotech and industrial markets Our comprehensive portfolio includes a range of innovative storage solutions for medications vaccines blood products patient samples biologics and laboratory samples
Our solutions seek to address unique customer design challenges such as reduction of input weight material cost part count and complexity involving all formable materials with particular focus on large dimensions large thickness or thin wall construction complex shapes and contours and or single piece construction requirements Engineering Technologies devises and manufactures these cost effective components and assemblies by combining a portfolio of best in class forming technologies and technical experience vertically integrated manufacturing processes and group wide technical and design expertise
Federal Industries provides merchandising solutions to retail and food service customers whose revenue stream is enhanced through food presentation Federal Industries focuses on the challenges of enabling retail and food service establishments to provide food and beverages that are fresh and appealing while at the same time providing for food safety and energy efficiency Our key differentiator is the ability to customize products to meet customers needs within industry standard lead times This differentiator is used to target the convenience store school cafeterias and quick service restaurant segments
Custom Hoists is a supplier of engineered hydraulic cylinders that meet customer specific requirements for demanding applications Our engineering expertise coupled with broad manufacturing capabilities and responsiveness to customer needs drives our top line growth opportunities We leverage our full line of products for the construction markets in dump truck and trailer applications and deep expertise in the refuse market to expand into new adjacent markets targeting the most challenging custom applications Flexible design capability a global supply chain and speed to market enable us to be successful in growing our business Our team is dedicated to superior customer service through our technical engineering support and on time delivery
Federal Industries custom designs and manufactures refrigerated heated and dry merchandising display cases for bakery deli confectionary and packaged food products utilized in restaurants convenience stores quick service restaurants supermarkets drug stores and institutions such as hotels hospitals and school cafeterias
Custom Hoist products are utilized by OEMs on vehicles such as dump trucks dump trailers bottom dumps garbage trucks both recycling and rear loader container roll off vehicles hook lift trucks liquid waste handlers vacuum trucks compactors balers airport catering vehicles container handling equipment for airlines lift trucks yard tractors and underground mining vehicles
Standex manufactures and markets products many of which have achieved a unique or leadership position in their market however we encounter competition in varying degrees in all product groups and for each product line Competitors include domestic and foreign producers of the same and similar products The principal methods of competition are industry and design expertise product performance and technology price delivery schedule quality of services and other terms and conditions Standex competes on the basis of Customer Intimacy in which our teams work as extensions of our customers organizations to apply our expertise and technology to address needs with customer solutions
International operations are conducted at 42 locations including Europe Canada China Japan India Southeast Asia Korea and Mexico See the Notes to Consolidated Financial Statements for international operations financial data Our net sales from continuing international operations decreased slightly from 39 in fiscal year 2023 to 38 in fiscal year 2024 International operations are subject to certain inherent risks in connection with the conduct of business in foreign countries including exchange controls price controls limitations on participation in local enterprises nationalizations expropriation and other governmental action restrictions of repatriation of earnings and changes in currency exchange rates
We develop and design new products to meet customer needs in order to offer enhanced products or to provide customized solutions for customers Developing new and improved products broadening the application of established products and continuing efforts to improve our methods processes and equipment continues to drive our success Research and development costs are quantified in the Notes to Consolidated Financial Statements
Based on our knowledge and current known facts we believe that we are presently in substantial compliance with all existing applicable environmental laws and regulations and do not anticipate i any instances of non compliance that will have a material effect on our future capital expenditures earnings or competitive position or ii any material capital expenditures for environmental control facilities
Standex International understands that its rich history of success and future opportunities are directly linked to its dedicated engaged and diverse workforce As of June 30 2024 we employ approximately 3 700 employees of which approximately 1 100 are in the United States About 200 of our U S employees are represented by unions Our competitive wages and benefits align with those of other manufacturers in our geographic locations We prioritize open two way communication and foster strong relationships with both our non union employees and the various unions and works councils within our business segments Regular training programs tailored to employees roles and optional development opportunities are available for those seeking personal and professional growth Our global Standex Safety Council which includes representatives from all Standex sites meets regularly to enhance our safety culture and monitor our Total Recordable Incident Rate
The Chief Human Resources Officer frequently collaborates with the Chief Executive Officer to align Human Capital strategies and initiatives with our business goals We aim to provide a rewarding employee experience across the company by continuously reviewing our Human Capital Resources metrics such as safety metrics turnover rates and culture survey responses These reviews help us promote a safe inclusive and engaging work environment Our LEAP performance management and development process emphasizes both manager engagement and employee ownership We conduct regular employee engagement and satisfaction surveys including our annual Culture Survey Insights from these surveys drive senior management s efforts to continually improve our company culture and operations
In fiscal year 2025 we will implement a Human Capital Management System to further support our commitment to our workforce This system will enhance our ability to manage and develop our talent streamline operations enhance employee development and satisfaction ensuring that we continue to provide a rewarding and supportive environment for all employees
Standex hosts an annual meeting event in the first quarter of the fiscal year with the extended global leadership team representative of all our business segments and corporate functions in which participants join together to align on business and culture goals participate in leadership development training share best practices and build unity across the company
The Inclusion Advisory Council IAC serves as a collaborative platform for employee voices informing and aligning the company s commitment to inclusivity The IAC provides operational input to the Executive Leadership Team in three key areas setting global inclusivity and diversity goals collaborating with Corporate Communications to highlight the IAC s work and championing the implementation of IAC initiatives Additionally we launched the Women and Leadership Employee Resource Group in fiscal year 2023 aiming to increase the representation of women at all levels enhancing the company s success through relationships and partnerships Work continues to add additional ERGs in partnership with the IAC
The U S Securities and Exchange Commission the SEC maintains an internet website at www sec gov that contains our annual reports on Form 10 K quarterly reports on Form 10 Q current reports on Form 8 K and proxy statements and all amendments thereto Standex s internet website address is www standex com Our annual reports on Form 10 K quarterly reports on Form 10 Q current reports on Form 8 K and proxy statements and all amendments thereto are available free of charge on our website as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC In addition our code of business conduct our code of ethics for senior financial management our corporate governance guidelines and the charters of each of the committees of our Board of Directors which are not deemed filed by this reference are available on our website and are available in print to any Standex shareholder without charge upon request in writing to Chief Legal Officer Standex International Corporation 23 Keewaydin Drive Salem New Hampshire 03079
An investment in the Company involves various risks including those mentioned below and those that are discussed from time to time in our other periodic filings with the Securities and Exchange Commission Investors should carefully consider these risks along with the other information filed in this report before making an investment decision regarding the Company Any of these risks could have a material adverse effect on our financial condition results of operations and or value of an investment in the Company
Our business and operations and the operations of our suppliers business partners and customers were adversely affected by the Coronavirus or COVID 19 pandemic which is impacted worldwide economic activity including in many countries or localities in which we operate sell or purchase goods and services Any future pandemics or other global health crises could similarly have an adverse effect on our revenues operating results cash flow and financial condition The ultimate extent to which any such circumstance impacts our business will depend on the severity location and duration of the issue the actions undertaken in response by local and world governments and health officials and the success of medical efforts to address and mitigate the threat
Recent inflationary conditions in the United States Europe and other parts of the world have increased virtually all of our costs including our cost of materials labor and transportation We attempt to maintain our profit margins by anticipating such inflationary pressures and increasing our prices where possible in accordance with contractual requirements and competitive conditions While we thus far have been largely successful in mitigating the impact of such inflationary conditions we may be unable to continue to increase our own prices sufficiently to offset cost increases and to the extent that we are able to do so we may not be able to maintain existing operating margins and profitability Additionally competitors operating in regions with less inflationary pressure may be able to compete more effectively which could further impact our ability to increases prices and or result in lost sales
Recessionary economic conditions with or without a tightening of credit could adversely impact major markets served by our businesses including cyclical markets such as automotive aviation energy and power heavy construction vehicle general industrial consumer appliances and food service An economic recession could adversely affect our business by
We rely on our revolving credit facility in part along with operating cash flow to provide us with sufficient capital to operate our businesses and to fund acquisitions The availability of borrowings under our revolving credit facility is dependent upon our compliance with the covenants set forth in the facility including the maintenance of certain financial ratios Our ability to comply with these covenants is dependent upon our future performance which is subject to economic conditions in our markets along with factors that are beyond our control Violation of those covenants could result in our lenders restricting or terminating our borrowing ability under our credit facility cause us to be liable for covenant waiver fees or other obligations or trigger an event of default under the terms of our credit facility which could result in acceleration of the debt under the facility and require prepayment of the debt before its due date Even if new financing is available in the event of a default under our current credit facility the interest rate charged on any new borrowing could be substantially higher than under the current credit facility thus adversely affecting our overall financial condition If our lenders reduce or terminate our access to amounts under our credit facility we may not have sufficient capital to fund our working capital needs and or acquisitions or we may need to secure additional capital or financing to fund our working capital requirements or to repay outstanding debt under our credit facility or to fund acquisitions
We operate in 42 locations outside of the United States in Europe Canada China Japan India Singapore Korea Mexico Turkey and Malaysia If we are unable to successfully manage the risks inherent to the operation and expansion of our global businesses those risks could have a material adverse effect on our results of operations cash flow or financial condition These international business risks include
We focus on improving profitability through LEAN enterprise low cost sourcing and manufacturing initiatives improving working capital management developing new and enhanced products consolidating factories where appropriate automating manufacturing processes diversification efforts and completing acquisitions which deliver synergies to stimulate sales and growth If we are unable to successfully execute these programs such failure could adversely affect our operating profits and cash flows In addition actions we may take to consolidate manufacturing operations to achieve cost savings or adjust to market developments may result in restructuring charges that adversely affect our profits
We cannot assure that our internal controls code of conduct and training of our employees will provide complete protection from reckless or criminal acts of our employees business partners or agents that might violate United States or international laws relating to anti bribery or similar topics A violation of these laws could subject us to civil or criminal investigations that could result in substantial civil or criminal fines and penalties and which could damage our reputation
Our businesses operate in highly competitive markets To compete effectively we must retain long standing relationships with significant customers offer attractive pricing maintain product quality meet customer delivery requirements develop enhancements to products that offer performance features that are superior to our competitors and which maintain our brand recognition continue to automate our manufacturing capabilities continue to grow our business by establishing relationships with new customers diversify into emerging markets and penetrate new markets In addition many of our businesses experience sales churn as customers seek lower cost suppliers We attempt to offset this churn through our continual pursuit of new business opportunities However if we are unable to compete effectively or succeed in our pursuit of new business opportunities our net sales profitability and cash flows could decline Pricing pressures resulting from competition may adversely affect our net sales and profitability
Our ability to develop new products and innovations to satisfy customer needs or demands in the markets we serve can affect our competitive position and often requires significant investment of resources Difficulties or delays in research development or production of new products and services or failure to gain market acceptance of new products and technologies may significantly reduce future net sales and adversely affect our competitive position
We purchase large quantities of steel aluminum refrigeration components freight services and other metal commodities for the manufacture of our products We also purchase significant quantities of relatively rare elements used in the manufacture of certain of our electronics products Historically prices for commodities and rare elements have fluctuated and we are unable to enter into long term contracts or other arrangements to hedge the risk of price increases in many of these commodities Significant price increases for these commodities and rare elements could adversely affect our operating profits if we cannot timely mitigate the price increases by successfully sourcing lower cost commodities or rare elements or by passing the increased costs on to customers Shortages or other disruptions in the supply of these commodities or rare elements could delay sales or increase costs
As part of our low cost country sourcing strategy we i maintain manufacturing facilities in China and ii import certain components and finished goods from our own facilities and third party suppliers in China Many of the components and finished goods we import from China are subject to tariffs enacted by the United States government While we attempt to pass on these additional costs to our customers competitive factors including competitors who import from other countries not subject to such tariffs may limit our ability to sustain price increases and as a result may adversely impact our net sales profits and cash flows The maintenance of such tariffs over the long term also could impair the value of our investments in our Chinese operations In addition the imposition of tariffs may influence the sourcing habits of certain end users of our products and services which in turn could have a direct impact on the requirements of our direct customers for our products and services Such an impact could adversely affect our net sales profits and cash flows
As part of our growth strategy we intend to pursue acquisitions that provide opportunities for profitable growth for our businesses and enable us to leverage our competitive strengths While we continue to evaluate potential acquisitions we may not be able to identify and successfully negotiate suitable acquisitions obtain financing for future acquisitions on satisfactory terms obtain regulatory approval for certain acquisitions or otherwise complete acquisitions in the future An inability to identify or complete future acquisitions could limit our future growth
Additionally our level of indebtedness may increase in the future if we finance acquisitions with debt which would cause us to incur additional interest expense and could increase our vulnerability to general adverse economic and industry conditions and limit our ability to service our debt or obtain additional financing We cannot assure that future acquisitions will not have a material adverse effect on our financial condition results of operations and cash flows
We test goodwill and our other intangible assets with indefinite useful lives for impairment on an annual basis or on an interim basis if a potential impairment factor arises that indicates the fair value of the reporting unit may fall below its carrying value Various uncertainties including adverse conditions in the capital markets or changes in general economic conditions could impact the future operating performance at one or more of our businesses which could significantly affect our valuations and could result in additional future impairments The recognition of an impairment of a significant portion of goodwill would negatively affect our results of operations
We are and may from time to time become a party to legal proceedings incidental to our businesses including but not limited to alleged claims relating to product liability environmental compliance patent infringement commercial disputes and employment and regulatory matters In accordance with United States generally accepted accounting principles we establish reserves based on our assessment of contingent liabilities Subsequent developments in legal proceedings may affect our assessment and estimates of loss contingencies recorded as reserves which could require us to record additional reserves or make material payments which could adversely affect our profits and cash flows Even the successful defense of legal proceedings may cause us to incur substantial legal costs and may divert management s time and resources away from our businesses
We are subject to a variety of environmental laws relating to the storage discharge handling emission generation use and disposal of chemicals hazardous waste and other toxic and hazardous materials used to manufacture or resulting from the process of manufacturing our products and providing our services We cannot predict the nature scope or effect of regulatory requirements to which our operations might be subject or the manner in which existing or future laws will be administered or interpreted We are also exposed to potential legacy environmental risks relating to businesses we no longer own or operate Future regulations could be applied to materials products or activities that have not been subject to regulation previously The costs of complying with new or more stringent regulations or with more vigorous enforcement of these or existing regulations could be significant
In addition properly permitted waste disposal facilities used by us as a legal and legitimate repository for hazardous waste may in the future become mismanaged or abandoned without our knowledge or involvement In such event legacy landfill liability could attach to or be imposed upon us in proportion to the waste deposited at any disposal facility
Environmental laws require us to maintain and comply with a number of permits authorizations and approvals and to maintain and update training programs and safety data regarding materials used in our processes Violations of these requirements could result in financial penalties and other enforcement actions We could be required to halt one or more portions of our operations until a violation is cured Although we attempt to operate in compliance with these environmental laws we may not succeed in this effort at all times The costs of curing violations or resolving enforcement actions that might be initiated by government authorities could be substantial
Certain of our products are subject to regulations promulgated by administrative agencies such as the Department of Energy Occupational Health and Safety Administration and the Food and Drug Administration Such regulations among other matters specify requirements regarding energy efficiency and product safety Regulatory violations could result in financial penalties and other enforcement actions We could be required to halt production of one or more products until a violation is cured Although we attempt to produce our products in compliance with these requirements the costs of curing violations or resolving enforcement actions that might be initiated by administrative agencies could be substantial
Natural disasters such as hurricanes tornadoes floods earthquakes and other adverse weather and climate conditions political crises such as terrorist attacks war labor unrest and other political instability or other catastrophic events such as disasters occurring at our suppliers manufacturing facilities whether occurring in the United States or internationally could disrupt our operations or the operations of one or more of our suppliers Certain of our key manufacturing facilities are located in geographic areas with a higher than nominal risk of earthquake and flood such as Japan and hurricane such as South Carolina The effects of global warming have elevated the possibility of natural catastrophes which could impact these and other locations as well as the locations of certain of our customers and suppliers Certain of our key facilities are in areas of higher than nominal political risk such as China The labor workforces in four of our U S facilities belong to unions and a strike slowdown or other concerted effort could adversely impact production at the affected facility To the extent any of these events occur our operations and financial results could be adversely affected
To date we have experienced minimal impacts on our businesses related to the ongoing war in Ukraine beyond the general impact on global energy prices and other economic conditions However customer demand for our products and services as well as raw material and components from our suppliers may be impacted in the future if the war was to extend beyond Ukrainian borders especially into Europe Any of these impacts could have an adverse effect on our results of operations and financial condition
We believe that our success depends on our ability to hire new talent develop existing talent and the continued employment of our senior management team and other key personnel While we engage in ongoing succession planning if one or more members of our senior management team or other key personnel were unable or unwilling to continue in their present positions our business could be seriously harmed In addition if any of our key personnel joins a competitor or forms a competing company some of our customers might choose to use the services of that competitor or those of a new company instead of our own Other companies seeking to develop capabilities and products or services similar to ours may hire away some of our key personnel If we are unable to maintain and develop our key personnel and attract new employees the execution of our business strategy may be hindered and our growth limited
From time to time we have sold and may continue to sell business that we consider to be either underperforming or no longer part of our strategic vision The sale of any such business could result in a financial loss and or write down of goodwill which could have a material adverse effect on our results for the financial reporting period during which such sale occurs In addition in connection with such divestitures we have retained and may in the future retain responsibility for some of the known and unknown contingent liabilities related to certain divestitures such as lawsuits tax liabilities product liability claims and environmental matters
The discount rate and the expected rate of return on plan assets represent key assumptions inherent in our actuarially calculated pension plan obligations and pension plan expense If discount rates and actual rates of return on invested plan assets were to decrease significantly our pension plan obligations could increase materially Although our pension plans have been frozen the size of future required pension contributions could require us to dedicate a greater portion of our cash flow from operations to making contributions which could negatively impact our financial flexibility
Our information technology networks and related systems are critical to the operation of our business and essential to our ability to successfully perform day to day operations Cybersecurity threats are persistent evolve quickly and include but are not limited to computer viruses ransomware attempts to access information denial of service and other electronic security breaches These events could disrupt our operations or customers and other third party IT systems in which we are involved and could negatively impact our reputation among our customers and the public which could have a negative impact on our financial conditions results of operations or liquidity
Regulatory scrutiny of privacy data protection collection use and sharing of data is increasing on a global basis Like all global companies we are subject to a number of laws rules and directives privacy laws relating to the collection use retention security processing and transfer processing of personally identifiable information about our employees customers and suppliers personal data in the countries where we operate The most notable of these privacy laws is the EU s General Data Protection Regulation GDPR which came into effect in 2018 GDPR extends the scope of the EU data protection law to all foreign companies processing data of EU residents and imposes a strict data protection compliance regime with severe penalties for non compliance of up to the greater of 4 of worldwide turnover and 20 million While we continue to strengthen our data privacy and protection policies and to train our personnel accordingly a determination that there have been violations of GDPR or other privacy or data protection laws could expose us to significant damage awards fines and other penalties that could individually or in the aggregate materially harm our results of operations and reputation
a provision in our certificate of incorporation that requires the approval of the holders of 80 of the outstanding shares of our common stock to adopt any agreement of merger the sale of substantially all of the assets of the Company to a third party or the issuance or transfer by the Company of voting securities having a fair market value of 1 million or more to a third party if in any such case such third party is the beneficial owner of 10 or more of the outstanding shares of our common stock unless the transaction has been approved prior to its consummation by all of our directors
Section 203 of the Delaware General Corporation Law prohibits a merger consolidation asset sale or other similar business combination between the Company and any stockholder of 15 or more of our voting stock for a period of three years after the stockholder acquires 15 or more of our voting stock unless 1 the transaction is approved by our board of directors before the stockholder acquires 15 or more of our voting stock 2 upon completing the transaction the stockholder owns at least 85 of our voting stock outstanding at the commencement of the transaction or 3 the transaction is approved by our board of directors and the holders of 66 2 3 of our voting stock excluding shares of our voting stock owned by the stockholder
Like other global companies we face various cybersecurity threats that could have a material adverse effect on our business strategy results of operations or financial condition Cybersecurity therefore is an important element of our business and our overall enterprise risk management program and while we have experienced a small number of cyber incidents over the last few years none to date have been material or had a material adverse effect on our business or financial condition To mitigate the risk we have established a multilayered approach to assessing identifying and managing material risks from cybersecurity threats which includes the following
As part of our cybersecurity program we have and will continue to engage third parties such as consultants network security firms auditors and forensics providers to assist us in assessing managing or investigating cyber risks or incidents For example we have engaged industry recognized third parties to monitor and conduct penetration and vulnerability testing on our networks and to assist us in the conduct of tabletop exercises
In order to oversee and identify risks from cybersecurity threats associated with our use of third party service providers we perform third party risk assessments designed to help protect against the misuse of IT by third parties and business partners and generally request that third party service providers provide us information about their security policies and procedures
Our board of directors through its Audit Committee maintains oversight of risks including cybersecurity risks and receives an update from the Director of IT Security and the Chief Information Officer CIO at each quarterly committee meeting The Audit Committee also reports to the full board on cybersecurity matters as part of its regular report out after each meeting The Audit Committee Chair is immediately informed of any breach that could be more than de minimis and is kept apprised of any resulting investigation and is briefed on the substance of any Form 8 K filing related to a material cybersecurity incident
At the management level oversight of our cybersecurity program rests with an internal committee comprised of the CIO the Chief Legal Officer CLO and the Director of IT Security who have in aggregate over 40 years of experience in assessing and managing cyber risks The committee is responsible for overseeing the implementation and execution of our cybersecurity program and policies and for engaging external experts as needed The committee also reviews the log of security incidents as needed to validate that there are no materiality issues in the aggregate The committee reports to the Audit Committee on a quarterly basis or more frequently as needed We have an Incident Response Team comprised of IT legal and internal audit personnel that is activated with the help of other disciplines in the event of a perceived breach or security risk The team is responsible for assessing the impact and materiality of the incident in accordance with a written Incidence Response Plan determining the appropriate response and remediation actions and communicating with internal and external stakeholders as needed
In an effort to deter and detect cyber threats we have a required cybersecurity training program that is provided to all new employees during on boarding and semi annually to employees with access to our IT resources which aims to raise awareness and foster a culture of cybersecurity among our workforce We also have an ongoing process of sending simulated phishing emails to employees The results of these simulated attempts are monitored and reported to each employee s manager Training includes such cybersecurity topics as social engineering phishing password protection confidential data protection asset use and mobile security The training also emphasizes the importance of reporting all incidents immediately
We operate a total of 62 facilities including manufacturing plants service centers and warehouses located throughout the United States Europe Canada Southeast Asia Korea Japan China India Brazil and Mexico The Company owns 20 of the facilities and the others are leased For the year ended June 30 2024 the approximate building space utilized by each segment is as follows
1 The Company has a Stock Buyback Program the Program which was originally announced on January 30 1985 and most recently amended on April 28 2022 Under the Program the Company is authorized to repurchase up to an aggregate of 200 million of its shares Under the program purchases may be made from time to time on the open market including through 10b5 1 trading plans or through privately negotiated transactions block transactions or other techniques in accordance with prevailing market conditions and the requirements of the Securities and Exchange Commission The Board s authorization is open ended and does not establish a timeframe for the purchases The Company is not obligated to acquire a particular number of shares and the program may be discontinued at any time at the Company s discretion
The graph below matches Standex International Corporation s cumulative 5 Year total shareholder return on common stock with the cumulative total returns of the Russell 2000 index and the S P 600 Industrials index The graph tracks the performance of a 100 investment in our common stock and in each index with the reinvestment of all dividends from 6 30 2019 to 6 30 2024
We are a diversified industrial manufacturer with leading positions in a variety of products and services that are used in diverse commercial and industrial markets We have six operating segments that aggregate to five reportable segments Please refer to Item 1 Business above for additional information regarding our segment structure and management strategy
On February 19 2024 we acquired through our subsidiary Standex Electronics Japan Corporation privately held Japanese based Sanyu Switch Co Ltd Sanyu Sanyu designs and manufactures reed relays test sockets testing systems for semiconductor and other electronics manufacturing and other switching applications Its results are reported in the Electronics segment
On July 31 2023 we acquired Minntronix a privately held company Minntronix designs and manufactures customized as well as standard magnetics components and products including transformers inductors current sensors coils chokes and filters The products are used in applications across cable fiber smart meters industrial control and lighting electric vehicles and home security markets Its results will be reported in the Electronics segment
In the third quarter of fiscal year 2023 we divested our Procon business for 75 0 million This transaction reflects the continued simplification of our portfolio and enables greater focus on managing our larger platforms and pursuing growth opportunities Proceeds will be deployed towards organic and inorganic initiatives and returning capital to shareholders Its results are reported within our Specialty Solutions segment In fiscal year 2023 we received 67 0 million cash consideration and recorded a pre tax gain on the sale of 62 1 million in the Consolidated Financial Statements Cash consideration received at closing excludes amounts held in escrow and was net of closing cash
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
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 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 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 Such expenses include costs for moving facilities to locations that allow for lower fixed and variable costs external consultants who provide additional expertise starting up plants after relocation downsizing operations because of changing economic conditions and other costs resulting from asset redeployment decisions Shutdown costs include severance benefits stay bonuses lease and contract terminations asset write downs costs of moving fixed assets and moving and relocation costs Vacant facility costs include maintenance utilities property taxes and other costs
Because of the diversity of the Company s businesses end user markets and geographic locations management does not use specific external indices to predict the future performance of the Company other than general information about broad macroeconomic trends Each of our individual business units serves niche markets and attempts to identify trends other than general business and economic conditions which are specific to its business and which could impact their performance Those units report pertinent information to senior management which uses it to the extent relevant to assess the future performance of the Company A description of any such material trends is described below in the applicable segment analysis
We monitor a number of key performance indicators KPIs including net sales income from operations backlog effective income tax rate gross profit margin and operating cash flow A discussion of these KPIs is included below We may also supplement the discussion of these KPIs by identifying the impact of foreign exchange rates acquisitions and other significant items when they have a material impact on a specific KPI
We believe the discussion of these items provides enhanced information to investors by disclosing their impact on the overall trend which provides a clearer comparative view of the KPI as applicable For discussion of the impact of foreign exchange rates on KPIs the Company calculates the impact as the difference between the current period KPI calculated at the current period exchange rate as compared to the KPI calculated at the historical exchange rate for the prior period For discussion of the impact of acquisitions we isolate the effect on the KPI amount that would have existed regardless of our acquisition Sales resulting from synergies between the acquisition and existing operations of the Company are considered organic growth for the purposes of our discussion
Net sales decreased for fiscal year 2024 by 20 4 million or 2 8 when compared to the prior year period Organic sales decreased by 37 7 million or 5 1 due to transitory headwinds in several of our end markets primarily due to lower demand in our Electronics Specialty and Scientific segments partially offset by project timing in our Engineering Technologies group Organic sales included 94 0 million in the period attributed to fast growth markets Acquisitions had a 40 4 million or 5 5 positive impact on sales offset by negative impacts on sales for divestitures of 21 3 million or 2 9 and foreign currency of 1 8 million or 0 3
Net sales increased for fiscal year 2023 by 5 7 million or 0 8 when compared to the prior year period Organic sales increased by 39 6 million or 5 7 excluding the impact of the Procon divestiture primarily due to pricing actions and strong demand in our Engraving Specialty and ETG segments Acquisitions had a 1 9 million or 0 3 positive impact on sales offset by negative impacts on sales for divestitures of 11 9 million or 1 9 and foreign currency of 23 9 million or 3 3
Gross profit in fiscal year 2024 decreased to 282 0 million or a gross margin of 39 1 as compared to 285 1 million or a gross margin of 38 5 for the prior year period This decrease was a result of organic sales decreases of 37 6 million approximately 2 8 million of net inflationary impacts in the areas of labor and raw material and by the divestiture of the Procon business The decreases were partially offset by contributions from the Minntronix acquisition pricing actions and productivity initiatives
Gross profit in fiscal year 2023 increased to 285 1 million or a gross margin of 38 5 as compared to 269 9 million or a gross margin of 36 7 for the prior year period This increase was a result of organic sales increases of 39 6 million and productivity initiatives which offset approximately 11 4 million of inflationary impacts in the areas of raw material and labor Organic sales increases were attributed to 82 5 million to fast growth markets targeted pricing initiatives in most of our businesses and volume in each business with the exception of Scientific Gross profit was also negatively impacted by the divestiture of the Procon business
Selling general and administrative expenses SG A for the fiscal year 2024 were 169 6 million or 23 5 of sales compared to 172 3 million or 23 3 of sales during the prior year period SG A expenses during the period were impacted by a reduction in general and administrative expenses partially offset by increased research and development spending
Selling general and administrative expenses SG A for the fiscal year 2023 were 172 3 million or 23 3 of sales compared to 169 9 million or 23 1 of sales during the prior year period SG A expenses during the period were primarily impacted by increased research and development spending to drive future product initiatives
We recorded a pre tax gain on sale of the Procon business of 62 1 million for fiscal year 2023 The goodwill balance of 0 2 million was written off as a part of the transaction The sale transaction and financial results of Procon are classified as continuing operations in the Consolidated Financial Statements
We incurred expense of 5 7 million in fiscal year 2022 related to a litigation accrual In the third quarter of fiscal year 2023 we received 1 0 million from our insurance provider as recoupment related to this litigation matter Refer to Part II Item 8 Note 12 CONTINGENCIES in the Notes to the Consolidated Financial Statements for details
Income from operations for the fiscal year 2024 was 101 7 million compared to 171 1 million during the prior year The decrease of 69 4 million or 40 5 is primarily due to the gain on the divestiture of Procon in the third quarter of the fiscal year 2023 organic sales decreases and increased investment in research and development spending restructuring and acquisition related costs The decreases are partially offset by cost reduction activities and productivity improvement initiatives
Income from operations for the fiscal year 2023 was 171 1 million compared to 88 3 million during the prior year The increase of 82 8 million or 93 8 is primarily due to the divestiture of the Procon business for a gain of 62 1 million as well as income from organic sales increases and pricing actions along with cost reduction activities and productivity improvement initiatives partially offset by foreign currency material inflation and increased logistics and labor costs
The income tax provision from continuing operations for the fiscal year ended June 30 2024 was 21 5 million or an effective rate of 22 6 compared to 24 8 million or an effective rate of 15 1 for the year ended June 30 2023 and 19 8 million or an effective rate of 24 4 for the year ended June 30 2022 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 U S versus outside the U S 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 2024 was impacted by the following items i a tax provision of 3 1 million due to the mix of income in various jurisdictions ii tax benefits of 2 8 million related to foreign tax credits of 0 7 million as well as Federal R D tax credits of 2 1 million iii a tax provision of 3 8 million related to officers compensation and iv a tax benefit of 3 9 million relating to share based compensation
The income tax provision from continuing operations for the fiscal year ended June 30 2023 was impacted by the following items i a tax benefit of 4 3 million due to the mix of income in various jurisdictions ii tax benefits of 14 3 million primarily related to foreign tax credits of 11 6 million as well as Federal R D tax credits of 2 7 million iii a tax provision of 11 3 million related to the U S tax effects of international operations and iv a tax benefit of 5 0 million relating to the partial release of the valuation allowance on capital loss carryforwards which were utilized against the capital gain recognized on the divestiture of the Procon business
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
In December 2021 the Organization for Economic Cooperation and Development OECD published a proposal for the establishment of a global minimum tax rate of 15 the Pillar Two rule The OECD has recommended that the Pillar Two rule become effective for fiscal years beginning after January 1 2024 To date member states are in various stages of implementation and the OECD continues to refine technical guidance We are closely monitoring developments of the Pillar Two rule and are currently evaluating the potential impacts in each of the countries in which we operate however we currently do not expect the Pillar Two rule to have a material impact on our effective tax rate
Backlog includes all active or open orders for goods and services Backlog also includes any future deliveries based on executed customer contracts so long as such deliveries are based on agreed upon delivery schedules Backlog orders are not necessarily an indicator of future sales levels because of variations in lead times and customer production demand pull systems with the exception of Engineering Technologies 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
Net sales in fiscal year 2024 increased 16 1 million or 5 3 when compared to the prior year Organic sales decreased by 22 7 million or 7 4 due to continued softness in China and Europe primarily in appliances and general industrial end markets The foreign currency impact decreased sales by 1 6 million or 0 5 partially offset by the Minntronix Sanyu and SEPL acquisitions in fiscal year 2024 which contributed 40 4 million or 13 2 in sales for the period
Income from operations in the fiscal year 2024 decreased 4 9 million or 7 2 when compared to the prior year The operating income decrease was the result of lower sales a change in product mix and foreign currency impacts partially offset by contributions from the recent acquisitions and realization of pricing and productivity initiatives
Net sales in fiscal year 2023 increased 1 6 million or 0 5 when compared to the prior year Organic sales increased by 13 7 million or 4 5 reflecting positive trends in end markets like industrial applications power management renewable energy technologies and electric vehicle related applications Sensor Solutions was acquired in the third quarter of fiscal year 2022 adding 1 9 million or 0 6 in sales for the period The foreign currency impact decreased sales by 14 0 million or 4 6
Net sales in fiscal year 2023 increased 3 0 million or 3 8 when compared to the prior year Organic sales increased by 4 1 million or 5 3 offset by foreign currency impacts of 1 1 million or 1 5 as compared to the prior year period Organic sales change was primarily due to increases in new product development of new solutions provided to customers in the aerospace and defense markets
Net sales for fiscal year 2024 decreased 31 5 million or 24 8 when compared to the prior year Organic sales for the group decreased 10 3 million or 8 1 as compared to the prior year period reflecting organic growth decreases in the Display Merchandising business and the Hydraulics business due to an ongoing industry wide chassis shortage The divestiture of Procon in the third quarter of fiscal year 2023 negatively impacted the group by 21 3 million or 16 7
Income from operations for fiscal year 2024 decreased 5 7 million or 22 6 when compared to the prior year The decrease is due to the Procon divestiture and lower volume in the Display Merchandising and Hydraulics business partially offset by improved operating performance in the Display Merchandising business
Net sales for fiscal year 2023 increased 4 3 million or 3 5 when compared to the prior year Organic sales increased 16 7 million or 13 6 excluding Procon as compared to the prior year period The increased sales volume is primarily due to pricing realization strong market demand and the absence of the labor work stoppage in two plants during the prior year The impact of the Procon divestiture partially offset the organics sales increase
At June 30 2024 our total cash balance was 154 2 million of which 128 1 million was held outside of the United States The amount and timing of cash repatriation is 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 however those balances are generally available without legal restrictions to fund ordinary business operations
Net cash provided by continuing operating activities for the year ended June 30 2024 was 93 3 million compared to net cash provided by continuing operating activities of 90 8 million in the prior year We generated 111 4 million from income statement activities and used 5 1 million of cash to fund working capital and other balance sheet account increases Cash flow used in investing activities for the year ended June 30 2024 totaled 61 6 million We used 48 8 million for the purchase of acquisitions in the fiscal year and 20 3 million was used for capital expenditures We generated 7 8 million in the fiscal year of proceeds from the divestiture of the Procon business Cash used by financing activities for the year ended June 30 2024 was 69 2 million and included stock repurchases of 31 8 million repayments of debt of 25 0 million and cash paid for dividends of 13 9 million
Net cash provided by continuing operating activities for the year ended June 30 2023 was 90 8 million compared to net cash provided by continuing operating activities of 78 1 million in the prior year We generated 116 6 million from income statement activities and used 18 2 million of cash to fund working capital and other balance sheet account increases Cash flow provided by investing activities for the year ended June 30 2023 totaled 41 6 million We generated 67 0 million in proceeds from the divestiture of the Procon business and 24 3 million was used for capital expenditures Cash used by financing activities for the year ended June 30 2023 was 40 0 million and included stock repurchases of 25 5 million cash paid for dividends of 13 0 million contingent consideration payments to the sellers of the Renco business of 1 2 million and debt modification costs of 1 7 million
We sponsor a number of defined benefit and defined contribution retirement plans The U S pension plan is frozen for all participants We have evaluated the current and long term cash requirements of these plans and our existing sources of liquidity are expected to be sufficient to cover required contributions under ERISA and other governing regulations
The fair value of the Company s U S defined benefit pension plan assets was 142 3 million at June 30 2024 as compared to 142 1 million as of June 30 2023 We participate in two multi employer pension plans and sponsor six defined benefit plans including two in the U S and Japan and one each in the U K and Germany The Company s pension plan is frozen for U S employees and participants in the plan ceased accruing future benefits Our primary U S defined benefit plan is not 100 funded under ERISA rules at June 30 2024
U S defined benefit plan contributions of 10 0 million were made during fiscal year 2024 compared to 0 2 million during fiscal year 2023 There are required contributions of 5 8 million to the United States funded pension plan for fiscal year 2025 The Company expects to make contributions during fiscal year 2025 of 0 2 million and 0 3 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 2024 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 2024 the underlying policies had a cash surrender value of 11 7 million and are reported net of loans of 4 9 million for which we have the legal right of offset These amounts are reported net on our balance sheet
During the third quarter of fiscal year 2023 the Company entered into a Third Amended Restated Credit Agreement which renewed the existing Credit Agreement for an additional five year period credit agreement or facility with a borrowing limit of 500 million The facility can be increased by an amount of up to 250 million in accordance with specified conditions contained in the agreement The facility also includes a 10 million sublimit for swing line loans and a 35 million sublimit for letters of credit
Under the terms of the Credit Facility we will pay a variable rate of interest and a fee on borrowed amounts as well as a commitment fee on unused amounts under the facility The amount of the commitment fee will depend upon both the undrawn amount remaining available under the facility and the Company s funded debt to EBITDA as defined in the agreement ratio at the last day of each quarter
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 2024 the Company has used 2 7 million against the letter of credit sub facility and had the ability to borrow 347 3 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 The Company s current financial covenants under the facility are as follows
Interest Coverage Ratio The Company is required to maintain a ratio of Earnings Before Interest and Taxes as Adjusted Adjusted EBIT per the Credit Facility to interest expense for the trailing twelve months of at least 2 75 1 Adjusted EBIT per the Credit Facility specifically excludes extraordinary and certain other defined items such as cash restructuring and acquisition related charges up to the lower of 20 0 million or 10 of EBITDA The facility allows for unlimited non cash charges including purchase accounting and goodwill adjustments At June 30 2024 the Company s Interest Coverage Ratio was 25 15 1
Leverage Ratio The Company s ratio of funded debt to trailing twelve month Adjusted EBITDA per the Credit Facility calculated as Adjusted EBIT per the Credit Facility plus depreciation and amortization may not exceed 3 5 1 Under certain circumstances in connection with a Material Acquisition as defined in the Facility the Facility allows for the leverage ratio to go as high as 4 0 1 for a four fiscal quarter period At June 30 2024 the Company s Leverage Ratio was 0 65 1
As of June 30 2024 we had borrowings under our facility of 150 0 million In order to manage our interest rate exposure on these borrowings we are party to 150 0 million of active floating to fixed rate swaps These swaps convert our interest payments from SOFR to a weighted average rate of 0 85 The effective rate of interest for our outstanding borrowings including the impact of the interest rate swaps was 2 46 Our primary cash requirements in addition to day to day operating needs include interest payments capital expenditures acquisitions share repurchases and dividends
Stockholders equity increased year over year by 14 0 million primarily as a result of current year net income of 73 1 million offset by 45 7 million of cash returned to shareholders in the form of dividends and stock repurchases The Company s net cash debt to capital percentage changed to 0 9 as of June 30 2024 from 3 8 in the prior year
At June 30 2024 we expect to pay estimated interest payments of 2 8 million within the next five years This estimate is based upon effective interest rates as of June 30 2024 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
Post retirement benefits and pension plan contribution payments represent future pension payments to comply with local funding requirements Our policy is to fund domestic pension liabilities in accordance with the minimum and maximum limits imposed by the Employee Retirement Income Security Act of 1974 ERISA federal income tax laws and the funding requirements of the Pension Protection Act of 2006 At June 30 2024 we expect to pay estimated post retirement benefit payments of 6 0 million during fiscal year 2025 See Item 8 Financial Statements and Supplementary Data Note 16 Employee Benefit Plans for additional information regarding these obligations
Inflation Certain of our expenses such as wages and benefits occupancy costs freight and equipment repair and replacement are subject to normal inflationary pressures Inflation for medical costs can impact both our employee benefit costs as well as our reserves for workers compensation claims We monitor the inflationary rate and make adjustments to reserves whenever it is deemed necessary Our ability to control worker compensation insurance medical cost inflation is dependent upon our ability to manage claims and purchase insurance coverage to limit the maximum exposure for us Each of our segments is subject to the effects of changing raw material costs caused by the underlying commodity price movements In the past year we have experienced price fluctuations for a number of materials including rhodium steel and other metal commodities These materials are some of the key elements in the products manufactured in these segments Wherever possible we will implement price increases to offset the impact of changing prices The ultimate acceptance of these price increases if implemented will be impacted by our affected divisions respective competitors and the timing of their price increases In general we do not enter into purchase contracts that extend beyond one operating cycle While Standex considers our relationship with our suppliers to be good there can be no assurances that we will not experience any supply shortage
Environmental Matters To the best of our knowledge we believe that we are presently in substantial compliance with all existing applicable environmental laws and regulations and do not anticipate any instances of non compliance that will have a material effect on our future capital expenditures earnings or competitive position
The Consolidated Financial Statements include accounts of the Company and all of our subsidiaries The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying Consolidated Financial Statements Although we believe that materially different amounts would not be reported due to the accounting policies described below the application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and as a result actual results could differ from these estimates We have listed a number of accounting policies which we believe to be the most critical
Revenue Recognition Most of the Company s contracts have a single performance obligation which represents the product or service being sold to the customer Some contracts include multiple performance obligations such as a product and the related installation and or extended warranty Additionally most of the Company s contracts offer assurance type warranties in connection with the sale of a product to customers Assurance type warranties provide a customer with assurance that the product complies with agreed upon specifications Assurance type warranties do not represent a separate performance obligation
In general the Company recognizes revenue at the point in time control transfers to their customer based on predetermined shipping terms Revenue is recognized over time under certain long term contracts within the Engineering Technologies and Engraving groups for highly customized customer products that have no alternative use and in which the contract specifies the Company has a right to payment for its costs plus a reasonable margin For products recognized over time the transfer of control is measured pro rata based upon current estimates of costs to complete such contracts Losses on contracts are fully recognized in the period in which the losses become determinable Revisions in profit estimates are reflected on a cumulative basis in the period in which the basis for such revision becomes known
Collectability of Accounts Receivable Accounts Receivable are reduced by an allowance for amounts that represent management s best estimate of estimated losses over the life of the underlying asset Our estimate for the allowance for credit loss accounts related to trade receivables includes evaluation of specific accounts where we have information that the customer may have an inability to meet its financial obligation together with a detailed review of the collectability of pooled assets based on a combination of qualitative and quantitative factors
Realizability of Inventories Inventories are valued at the lower of cost or market The Company regularly reviews inventory values on hand using specific aging categories and records a write down for obsolete and excess inventory based on historical usage and estimated future usage As actual future demand or market conditions may vary from those projected by management adjustments to inventory valuations may be required
Realization of Goodwill Goodwill and certain indefinite lived intangible assets are not amortized but instead are tested for impairment at least annually and more frequently whenever events or changes in circumstances indicate that the fair value of the asset may be less than its carrying amount of the asset The Company s annual test for impairment is performed using a May 31st measurement date We have identified six reporting units for impairment testing Electronics Engraving Scientific Engineering Technologies Federal and Hydraulics
As quoted market prices are not available for the Company s reporting units the fair value of the reporting units is determined using a discounted cash flow model income approach This method uses various assumptions that are specific to each individual reporting unit in order to determine the fair value In addition the Company compares the estimated aggregate fair value of its reporting units to its overall market capitalization
Our annual impairment testing at each reporting unit relied on assumptions surrounding general market conditions short term growth rates a terminal growth rate of 2 5 and detailed management forecasts of future cash flows prepared by the relevant reporting unit Fair values were determined primarily by discounting estimated future cash flows at a weighted average cost of capital of 11 0 During our annual impairment testing we evaluated the sensitivity of our most critical assumption the discount rate and determined that a 100 basis point change in the discount rate selected would not have impacted the test results Additionally the Company could reduce the terminal growth rate from its current 2 5 to 1 0 and the fair value of all reporting units would still exceed their carrying value
While we believe that our estimates of future cash flows are reasonable changes in assumptions could significantly affect our valuations and result in impairments in the future The most significant assumption involved in the Company s determination of fair value is the cash flow projections of each reporting unit
As a result of our annual assessment in the fourth quarter of fiscal year 2024 the Company determined that the fair value of the six reporting units substantially exceeded their respective carrying values Therefore no impairment charges were recorded in connection with our annual assessment during the fourth quarter of fiscal year 2024
Cost of Employee Benefit Plans We provide a range of benefits to certain retirees including pensions and some postretirement benefits We record expenses relating to these plans based upon various actuarial assumptions such as discount rates assumed rates of return compensation increases and turnover rates The expected return on plan assets assumption of 6 4 in the U S is based on our expectation of the long term average rate of return on assets in the pension funds and is reflective of the current and projected asset mix of the funds and considers the historical returns earned on the funds We have analyzed the rates of return on assets used and determined that these rates are reasonable based on the plans historical performance relative to the overall markets as well as our current expectations for long term rates of returns for our pension assets The U S discount rate of 5 6 reflects the current rate at which pension liabilities could be effectively settled at the end of the year The discount rate is determined by matching our expected benefit payments from a stream of AA or higher bonds available in the marketplace adjusted to eliminate the effects of call provisions We review our actuarial assumptions including discount rate and expected long term rate of return on plan assets on at least an annual basis and make modifications to the assumptions based on current rates and trends when appropriate Based on information provided by our actuaries and other relevant sources we believe that our assumptions are reasonable
The cost of employee benefit plans includes the selection of assumptions noted above A twenty five basis point change in the U S expected return on plan assets assumptions holding our discount rate and other assumptions constant would increase or decrease pension expense by approximately 0 4 million per year A twenty five basis point change in our discount rate holding all other assumptions constant would have no impact on 2024 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 See the Notes to the Consolidated Financial Statements for further information regarding pension plans
Business Combinations The accounting for business combinations requires estimates and judgments as to expectations for future cash flows of the acquired business and the allocation of those cash flows to identifiable intangible assets in determining the estimated fair values for assets acquired and liabilities assumed The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management s estimates and assumptions as well as other information compiled by management including valuations that utilize customary valuation procedures and techniques If the actual results differ from the estimates and judgments used in these fair values the amounts recorded in the consolidated financial statements could result in a possible impairment of the intangible assets and goodwill or require acceleration of the amortization expense of finite lived intangible assets
Allocations of the purchase price for acquisitions are based on estimates of the fair value of the net assets acquired and are subject to adjustment upon finalization of the purchase price allocation During this measurement period the Company will adjust assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date that if known would have resulted in the recognition of those assets and liabilities as of that date All changes that do not qualify as measurement period adjustments are included in current period earnings
See Item 8 Financial Statements and Supplementary Data Note 1 Summary of Accounting Policies for information regarding the effect of recently issued accounting pronouncements on our consolidated statements of operations comprehensive income stockholders equity cash flows and notes for the year ended June 30 2024
We are exposed to market risks from changes in interest rates commodity prices and changes in foreign currency exchange To reduce these risks we selectively use from time to time financial instruments and other proactive management techniques We have internal policies and procedures that place financial instruments under the direction of the Treasurer and restrict all derivative transactions to those intended for hedging purposes only The use of financial instruments for trading purposes except for certain investments in connection with the non qualified defined contribution plan or speculation is strictly prohibited The Company has no majority owned subsidiaries that are excluded from the consolidated financial statements Further we have no interests in or relationships with any special purpose entities
We are exposed to both transactional risk and translation risk associated with exchange rates The transactional risk is mitigated in large part by natural hedges developed with locally denominated debt service on intercompany accounts and the fact that most of our foreign currency sales are transacted in their functional currency We also mitigate certain of our foreign currency exchange rate risks by entering into forward foreign currency contracts from time to time The contracts are used as a hedge against anticipated foreign cash flows such as loan payments customer remittances and materials purchases and are not used for trading or speculative purposes The fair values of the forward foreign currency exchange contracts are sensitive to changes in foreign currency exchange rates as an adverse change in foreign currency exchange rates from market rates would decrease the fair value of the contracts 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 2024 and 2023 the fair value in the aggregate of the Company s open foreign exchange contracts was an asset of less than 0 1 million and liability of 1 7 million respectively
Our primary translation risk is with the Euro British Pound Sterling Peso Japanese Yen and Chinese Yuan A hypothetical 10 appreciation or depreciation of the value of any these foreign currencies to the U S Dollar at June 30 2024 would not result in a material change in our operations financial position or cash flows We hedge our most significant foreign currency translation risks primarily through cross currency swaps and other instruments as appropriate
The Company s effective interest rate on borrowings was 2 46 and 2 97 at June 30 2024 and 2023 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 At June 30 2024 we have 150 0 million of active floating to fixed rate swaps with terms ranging from one to three years These swaps convert our interest payments from SOFR to a weighted average rate of 2 46 At June 30 2024 the fair value in the aggregate of the Company s interest rate swaps were assets of 4 7 million At June 30 2023 the fair value in the aggregate of the Company s interest rate swaps were assets of 10 2 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
The Company is exposed to fluctuating market prices for all commodities used in its manufacturing processes Each of our segments is subject to the effects of changing raw material costs caused by the underlying commodity price movements In general we do not enter into purchase contracts that extend beyond one operating cycle While Standex considers our relationship with our suppliers to be good there can be no assurances that we will not experience any supply shortage
The Engineering Technologies Specialty Solutions and Electronics segments are all sensitive to price increases for steel and aluminum products other metal commodities such as rhodium and copper and petroleum based products We continue to experience price fluctuations for a number of materials including rhodium steel and other metal commodities These materials are some of the key elements in the products manufactured in these segments Wherever possible we will implement price increases to offset the impact of changing prices The ultimate acceptance of these price increases if implemented will be impacted by our affected divisions respective competitors and the timing of their price increases
Standex International Corporation Standex or the Company is a diversified industrial manufacturer in five broad business segments Electronics Engraving Scientific Engineering Technologies and Specialty Solutions with operations in the United States Europe Canada Japan Singapore Mexico Turkey India and China The accompanying consolidated financial statements include the accounts of Standex International Corporation and its subsidiaries and are prepared in accordance with accounting principles generally accepted in the United States of America GAAP All intercompany accounts and transactions have been eliminated in consolidation
The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure We evaluated subsequent events through the date and time our consolidated financial statements were issued
The preparation of consolidated financial statements in conformity with GAAP requires the use of estimates judgments and assumptions that affect the reported amounts of assets liabilities revenues and expenses and related disclosure of contingent assets and liabilities at the date of the financial statements and for the period then ended Estimates are based on historical experience actuarial estimates current conditions and various other assumptions that are believed to be reasonable under the circumstances These estimates form the basis for making judgments about the carrying values of assets and liabilities when they are not readily apparent from other sources These estimates assist in the identification and assessment of the accounting treatment necessary with respect to commitments and contingencies Actual results may differ from these estimates under different assumptions or conditions The estimates and assumptions used in the preparation of the consolidated financial statements have considered the implications on the Company as a result of ongoing global events and related economic impacts As a result there is heightened volatility and uncertainty around supply chain performance labor availability and customer demand However the magnitude of such impact on the Company s business and its duration is uncertain The Company is not aware of any specific event or circumstance that would require an update to its estimates or adjustments to the carrying value of its assets and liabilities as of June 30 2024 and the issuance date of this Annual Report on Form 10 K
The Company purchases investments for its non qualified defined contribution plan for employees who exceed certain thresholds under our traditional 401 k plan These investments are classified as trading and reported at fair value The investments generally consisting of mutual funds are included in other non current assets and amounted to 4 9 million at June 30 2024 and 3 7 million at June 30 2023 Gains and losses on these investments are recorded as other non operating income expense net in the Consolidated Statements of Operations
The Company has provided an allowance for credit losses All trade account receivables are reported net of allowances for expected credit losses The allowances for expected credit losses represent management s best estimate of the credit losses expected from our trade account receivables over the life of the underlying assets Assets with similar risk characteristics are pooled together for determination of their current expected credit losses The Company regularly performs detailed reviews of its pooled assets to evaluate the collectability of receivables based on a combination of past current and future financial and qualitative factors that may affect customers ability to pay In circumstances where the Company is aware of a specific customer s inability to meet its financial obligations a specific reserve is recorded against amounts due to reduce the recognized receivable to the amount reasonably expected to be collected
Long lived assets that are used in operations excluding goodwill and identifiable intangible assets are tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable Recognition and measurement of a potential impairment loss is performed on assets grouped with other assets and liabilities at the lowest level where identifiable cash flows are largely independent of the cash flows of other assets and liabilities An impairment loss is the amount by which the carrying amount of a long lived asset asset group exceeds its estimated fair value Fair value is determined based on discounted cash flows or appraised values depending upon the nature of the assets
At the inception of an arrangement we determine whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement Leases with a term greater than one year are recognized on the balance sheet as right of use assets and short term and long term lease liabilities as applicable We do not have material financing leases
Operating lease liabilities and their corresponding right of use assets are initially recorded based on the present value of lease payments over the expected remaining lease term The interest rate implicit in lease contracts is typically not readily determinable As a result we utilize our incremental borrowing rate to discount lease payments which reflects the fixed rate at which we could borrow on a collateralized basis the amount of the lease payments in the same currency for a similar term in a similar economic environment To estimate our incremental borrowing rate a credit rating applicable to the Company is estimated using a synthetic credit rating analysis since we do not currently have a rating agency based credit rating
We have elected not to recognize leases with an original term of one year or less on the balance sheet We typically only include an initial lease term in our assessment of a lease arrangement Options to renew a lease are not included in the Company s assessment unless there is reasonable certainty that the Company will renew
All business combinations are accounted for using the acquisition method Goodwill and identifiable intangible assets with indefinite lives are not amortized but are reviewed annually for impairment or more frequently if impairment indicators arise Definite lived identifiable intangible assets are amortized over the following useful lives
The financial instruments shown below are presented at fair value Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date Where available fair value is based on observable market prices or parameters or derived from such prices or parameters When observable prices or inputs are not available valuation models may be applied
Assets and liabilities recorded at fair value in the consolidated balance sheet are categorized based upon the level of judgment associated with the inputs used to measure their fair values Hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities and the methodologies used in valuation are as follows
Level 1 Quoted prices unadjusted in active markets for identical assets and liabilities The Company s deferred compensation plan assets consist of shares in various mutual funds for the deferred compensation plan investments are participant directed which invest in a broad portfolio of debt and equity securities These assets are valued based on publicly quoted market prices for the funds shares as of the balance sheet dates For pension assets see Note 16 Employee Benefit Plans securities are valued based on quoted market prices for securities held directly by the trust
Level 2 Inputs other than quoted prices in an active market that are observable either directly or indirectly through correlation with market data For foreign exchange forward contracts and interest rate swaps the Company values the instruments based on the market price of instruments with similar terms which are based on spot and forward rates as of the balance sheet dates For pension assets held in commingled funds see Note 16 Employee Benefit Plans the Company values investments based on the net asset value of the funds which are derived from the quoted market prices of the underlying fund holdings The Company has considered the creditworthiness of counterparties in valuing all assets and liabilities
The Company s financial liabilities based upon Level 3 inputs include contingent consideration arrangements relating to its acquisition of SEPL and GS Engineering The Company is contractually obligated to pay contingent consideration payments to the Sellers of these businesses based on the achievement of certain criteria
The Company is obligated to pay contingent consideration to the sellers of GS Engineering in the event that certain revenue and gross margin targets are achieved during the five years following acquisition The targets set in the GS stock purchase agreement were not met for the first second third or fourth year which concluded in the fourth quarter of fiscal years 2020 2021 2022 2023 and 2024 respectively As of June 30 2024 the Company has no further obligations under this contingent consideration arrangement The Company is obligated to pay contingent consideration to the sellers of SEPL in the event that certain financial targets are achieved during the two years following acquisition which occurred in the fourth quarter of fiscal year 2024 The maximum liability under this arrangement is 0 7 million
The Company has determined the fair value of the liabilities for the contingent consideration based on a probability weighted analysis This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy The fair value of the contingent consideration liability associated with future payments was based on several factors the most significant of which are typically the financial performance of the acquired businesses and the risk adjusted discount rate for the fair value measurement
The Company invested 2 0 million for equity securities of a company whose securities are not publicly traded and where fair value is not readily available This was recorded as an investment within other non current assets in the consolidated balance sheets to reflect the initial fair value of the stock acquired These investments are recorded using either the equity method of accounting or the cost minus impairment adjusted for observable price changes depending on ownership percentage and other factors that suggest significant influence The Company concluded it does not have a significant ownership percentage or influence The Company monitors this investment to evaluate whether any increase or decline in the value has occurred based on the implied value of recent company financings public market prices of comparable companies and general market conditions
In the third quarter of fiscal year 2023 the Company purchased 2 7 million of debt securities from the same privately held company The available for sale asset was recorded as a current asset in the prepaid expenses and other current assets line of the consolidated balance sheet to reflect the initial fair value of the instrument acquired This asset was originally due to mature one year from the date of issuance In fiscal year 2024 the maturity was extended to August 2024 Available for sale debt securities are recorded at fair market value and unrealized gains and losses are included in accumulated other comprehensive income loss in equity net of related tax effects Realized gains and losses are reported in other non operating income expense net
The Company is subject to credit risk through trade receivables Concentration of risk with respect to trade receivables is minimized because of the diversification of our operations as well as our large customer base and our geographical dispersion No individual customer accounts for more than 5 of revenues or accounts receivable in the periods presented
In general the Company recognizes revenue at the point in time control transfers to its customer based on predetermined shipping terms Revenue is recognized over time under certain long term contracts within the Engineering Technologies and Engraving groups for highly customized customer products that have no alternative use and in which the contract specifies the Company has a right to payment for its costs plus a reasonable margin For products manufactured over time the transfer of control is measured pro rata based upon current estimates of costs to complete such contracts Losses on contracts are fully recognized in the period in which the losses become determinable Revisions in profit estimates are reflected on a cumulative basis in the period in which the basis for such revision becomes known
The Company includes expenses in either cost of goods sold or selling general and administrative categories based upon the natural classification of the expenses Cost of goods sold includes expenses associated with the acquisition inspection manufacturing and receiving of materials for use in the manufacturing process These costs include inbound freight charges purchasing and receiving costs inspection costs internal transfer costs as well as depreciation amortization wages benefits and other costs that are incurred directly or indirectly to support the manufacturing process Selling general and administrative includes expenses associated with the distribution of our products sales effort administration costs and other costs that are not incurred to support the manufacturing process The Company records distribution costs associated with the sale of inventory as a component of selling general and administrative expenses in the Consolidated Statements of Operations These expenses include warehousing costs outbound freight charges and costs associated with salaried distribution personnel Our gross profit margins may not be comparable to those of other entities due to different classifications of costs and expenses
The expected cost associated with warranty obligations on our products is recorded when the revenue is recognized The Company s estimate of warranty cost is based on contract terms and historical warranty loss experience that is periodically adjusted for recent actual experience Since warranty estimates are forecasts based on the best available information claims costs may differ from amounts provided Adjustments to initial obligations for warranties are made as changes in the obligations become reasonably estimable
Restricted stock awards including performance based awards generally vest over terms from one to three years Compensation expense associated with these awards is recorded based on their grant date fair value and is generally recognized on a straight line basis over the vesting period Compensation cost for an award with a performance condition is based on the probable outcome of that performance condition The stated vesting period is considered non substantive for retirement eligible participants Accordingly the Company recognizes any remaining unrecognized compensation expense upon participant reaching retirement eligibility
The functional currency of our non U S operations is the local currency Assets and liabilities of non U S operations are translated into U S Dollars on a monthly basis using period end exchange rates Revenues and expenses of these operations are translated using monthly average exchange rates The resulting translation adjustment is reported as a component of comprehensive income loss in the consolidated statements of stockholders equity and comprehensive income Gains and losses from foreign currency transactions are included in results of operations and were not material for any period presented
Forward foreign currency exchange contracts are periodically used to limit the impact of currency fluctuations on certain anticipated foreign cash flows such as foreign purchases of materials and loan payments from subsidiaries The Company enters into such contracts for hedging purposes only The Company has designated certain of these currency contracts as hedges and changes in the fair value of these contracts are recognized in other comprehensive income until the hedged items are recognized in earnings Hedge ineffectiveness if any associated with these contracts will be reported in net income
The Company also uses interest rate swaps to manage exposure to interest rates on the Company s variable rate indebtedness The Company values the swaps based on contract prices in the derivatives market for similar instruments The Company has designated its interest rate swap agreements including any that may be forward dated as cash flow hedges and changes in the fair value of the swaps are recognized in other comprehensive income until the hedged items are recognized in earnings Hedge ineffectiveness if any associated with the swaps will be reported by the Company in interest expense
The income tax provision from continuing operations for the fiscal year ended June 30 2024 was 21 5 million or an effective rate of 22 6 compared to 24 8 million or an effective rate of 15 1 for the year ended June 30 2023 and 19 8 million or an effective rate of 24 4 for the year ended June 30 2022 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 U S versus outside the U S 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 2024 was impacted by the following items i a tax provision of 3 1 million due to the mix of income in various jurisdictions ii tax benefits of 2 8 million related to foreign tax credits of 0 7 million as well as Federal R D tax credits of 2 1 million iii a tax provision of 3 8 million related to officers compensation and iv a tax benefit of 3 9 million relating to share based compensation
The income tax provision from continuing operations for the fiscal year ended June 30 2023 was impacted by the following items i a tax benefit of 4 3 million due to the mix of income in various jurisdictions ii tax benefits of 14 3 million primarily related to foreign tax credits of 11 6 million as well as Federal R D tax credits of 2 7 million iii a tax provision of 11 3 million related to the U S tax effects of international operations and iv a tax benefit of 5 0 million relating to the partial release of the valuation allowance on capital loss carryforwards which were utilized against the capital gain recognized on the divestiture of the Procon business
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 up prior period provision amounts and iv a tax expense of 1 0 million related to uncertain tax position
From time to time new accounting pronouncements are issued by the FASB or other standard setting bodies that we adopt as of the specified effective date Unless otherwise discussed below the Company does not believe that the adoption of recently issued standards had or may have a material impact on its condensed consolidated financial statements or disclosures
In November 2023 the FASB issued ASU 2023 07 Segment Reporting Topic 280 ASU 2023 07 This update provides among other things enhanced segment disclosure requirements including disclosures about significant segment expenses ASU 2023 07 is effective for fiscal years beginning after December 15 2023 and interim periods within fiscal years beginning after December 15 2024 The Company will review the extent of new disclosures necessary in the coming quarters prior to implementation during fiscal year 2025 Other than additional disclosure the Company does not expect a change to its condensed consolidated financial statements upon adoption
In December 2023 the FASB issued ASU 2023 09 Income Taxes Topic 740 Improvements to Income Tax Disclosures This ASU is expected to enhance the transparency and decision usefulness of income tax disclosures by requiring public business entities on an annual basis to disclose specific categories in the rate reconciliation additional information for reconciling items that meet a quantitative threshold and certain information about income taxes paid This ASU is effective for fiscal years beginning after December 15 2024 The amendments in this ASU are required to be applied on a prospective basis and retrospective adoption is permitted The Company is currently evaluating the effect of adopting this new accounting guidance which would be applicable to fiscal year 2026
The Company s recent acquisitions are strategically significant to the future growth prospects of the Company At the time of the acquisition and June 30 2024 the Company evaluated the significance of each acquisition on a standalone basis and in aggregate considering both qualitative and quantitative factors
On July 31 2023 the Company paid 29 2 million in cash for the purchase of all the issued and outstanding equity interests of Minntronix a privately held company Minntronix designs and manufactures customized as well as standard magnetics components and products including transformers inductors current sensors coils chokes and filters The products are used in applications across cable fiber smart meters industrial control and lighting electric vehicles and home security markets Minntronix results are reported within the Company s Electronics segment
The purchase price was allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on a valuation of their fair values on the closing date Goodwill recorded from this transaction is attributable to Minntronix s technical and applications expertise which is highly complementary to the Company s existing business
Identifiable intangible assets of 10 7 million consist primarily of 3 2 million for indefinite lived tradenames and 7 5 million of customer relationships to be amortized over 15 years The goodwill of 13 9 million created by the transaction is not deductible for income tax purposes The accounting for business combinations requires estimates and judgments regarding expectations for future cash flows of the acquired business and the allocations of those cash flows to identifiable tangible and intangible assets in determining the assets acquired and liabilities assumed The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management s best estimates and assumptions as well as other information compiled by management including valuations that utilize customary valuation procedures and techniques
On February 19 2024 the Company completed the purchase of all the issued and outstanding equity interests of Sanyu Switch Co Ltd Sanyu a privately held company for 20 9 million net of cash acquired Sanyu designs and manufactures reed relays for test and measurement and other switching applications Products include surface mount relays high current relays high insulation relays high density relays for test boards and RF relays which are used in semi conductors other electronics manufacturing and other switching applications Sanyu s results are reported within the Company s Electronics segment The Company paid 22 2 million in cash in the third quarter of fiscal year 2024 and recorded 2 5 million as holdback amounts Holdback amounts are used to withhold a portion of the initial purchase price payment until certain post closing conditions are satisfied and are expected to be settled within 24 months from the date of acquisition
The purchase price was allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on a valuation of their fair values on the closing date Goodwill recorded from this transaction is attributable to Sanyu s technical and applications expertise which is highly complementary to the Company s existing business
Identifiable intangible assets of 2 6 million consist primarily of 0 7 million for indefinite lived tradenames and 1 9 million of customer relationships to be amortized over 12 years The goodwill of 8 2 million created by the transaction is not deductible for income tax purposes The accounting for business combinations requires estimates and judgments regarding expectations for future cash flows of the acquired business and the allocations of those cash flows to identifiable tangible and intangible assets in determining the assets acquired and liabilities assumed The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management s best estimates and assumptions as well as other information compiled by management including valuations that utilize customary valuation procedures and techniques
On May 3 2024 the Company purchased all of the issued and outstanding equity interests of Sanyu Electric Pte Ltd or SEPL a privately held company for 3 5 million Its results are reported within the Company s Electronics segment The Company paid 1 1 million net of cash acquired in the fourth quarter of fiscal year 2024 The goodwill of 1 9 million created by the transaction is not deductible for income tax purposes
Acquisition related expenses include costs related to acquired businesses and other pending acquisitions These costs consist of i deferred compensation arrangements and ii acquisition related professional service fees and expenses including financial advisory legal accounting and other outside services incurred in connection with acquisition activities and regulatory matters related to acquired entities These costs do not include purchase accounting expenses which the Company defines as acquired backlog and the step up of inventory to fair value or the amortization of the acquired intangible assets
Most of the Company s contracts have a single performance obligation which represents the product or service being sold to the customer Some contracts include multiple performance obligations such as a product and the related installation and or extended warranty Additionally most of the Company s contracts offer assurance type warranties in connection with the sale of a product to customers Assurance type warranties provide a customer with assurance that the product complies with agreed upon specifications Assurance type warranties do not represent a separate performance obligation
In general the Company recognizes revenue at the point in time control transfers to its customer based on predetermined shipping terms Revenue is recognized over time under certain long term contracts within the Engineering Technologies and Engraving groups for highly customized customer products that have no alternative use and in which the contract specifies the Company has a right to payment for its costs plus a reasonable margin For products manufactured over time the transfer of control is measured pro rata based upon current estimates of costs to complete such contracts Losses on contracts are fully recognized in the period in which the losses become determinable Revisions in profit estimates are reflected on a cumulative basis in the period in which the basis for such revision becomes known
Contract assets represent sales recognized in excess of billings related to work completed but not yet shipped for which revenue is recognized over time Contract assets are recorded as prepaid expenses and other current assets Contract liabilities are customer deposits for which revenue has not been recognized Current contract liabilities are recorded as accrued liabilities
When consideration is received from a customer prior to transferring goods or services to the customer under the terms of a contract a contract liability is recorded Contract liabilities are recognized as revenue after control of the goods and services are transferred to the customer and all revenue recognition criteria have been met
Goodwill and certain indefinite lived intangible assets are not amortized but instead are tested for impairment at least annually and more frequently whenever events or changes in circumstances indicate that the fair value of the asset may be less than its carrying amount The Company s annual test for impairment is performed using a May 31st measurement date
As quoted market prices are not available for the Company s reporting units the fair value of the reporting units is determined using a discounted cash flow model income approach This method uses various assumptions that are specific to each individual reporting unit in order to determine the fair value In addition the Company compares the estimated aggregate fair value of its reporting units to its overall market capitalization
While the Company believes that estimates of future cash flows are reasonable changes in assumptions could significantly affect valuations and result in impairments in the future The most significant assumption involved in the Company s determination of fair value is the cash flow projections of each reporting unit If the estimates of future cash flows for each reporting unit may be insufficient to support the carrying value of the reporting units the Company will reassess its conclusions related to fair value and the recoverability of goodwill
The Company completed its annual impairment testing as of May 31 in each of the last three fiscal years and determined that the fair value of each of its reporting units substantially exceeded each unit s respective carrying value therefore no impairment charges were recorded in connection with the testing and assessment
During the third quarter of fiscal year 2023 the Company entered into a Third Amended Restated Credit Agreement which renewed the existing Credit Agreement for an additional five year period Credit Facility or facility The facility has a borrowing limit of 500 million which can be increased by an amount of up to 250 million in accordance with specified conditions contained in the agreement The facility also includes a 10 million sublimit for swing line loans and a 35 million sublimit for letters of credit
Under the terms of the Credit Agreement we pay a variable rate of interest and a commitment fee on borrowed amounts as well as a commitment fee on unused amounts under the facility The amount of the commitment fee depends upon both the undrawn amount remaining available under the facility and the Company s funded debt to EBITDA as defined in the agreement ratio at the last day of each quarter As our funded debt to EBITDA ratio increases the commitment fee increases
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 2024 the Company had the ability to borrow 347 3 million under the facility based on our current EBITDA The facility contains customary representations warranties and restrictive covenants as well as specific financial covenants which the Company was compliant with as of June 30 2024 The Company s current financial covenants under the facility are as follows
Interest Coverage Ratio The Company is required to maintain a ratio of Earnings Before Interest and Taxes as Adjusted Adjusted EBIT per the Credit Agreement to interest expense for the trailing twelve months of at least 2 75 1 Adjusted EBIT per the Credit Agreement specifically excludes extraordinary and certain other defined items such as cash restructuring and acquisition related charges up to the lower of 20 million or 10 of EBITDA The facility also allows unlimited non cash charges including purchase accounting and goodwill adjustments At June 30 2024 the Company s Interest Coverage Ratio was 25 15 1
Leverage Ratio The Company s ratio of funded debt to trailing twelve month Adjusted EBITDA per the credit agreement calculated as Adjusted EBIT per the Credit Agreement plus depreciation and amortization may not exceed 3 5 1 Under certain circumstances in connection with a Material Acquisitions as defined in the Facility the Credit Agreement allows for the leverage ratio to go as high as 4 0 1 for a four fiscal quarter period At June 30 2024 the Company s Leverage Ratio was 0 65 1
The Company reported no losses for the years ended June 30 2024 2023 and 2022 as a result of hedge ineffectiveness Future changes in these swap arrangements including termination of the agreements may result in a reclassification of any gain or loss reported in accumulated other comprehensive income loss into earnings as an adjustment to interest expense Accumulated other comprehensive income loss related to these instruments is being amortized into interest expense concurrent with the hedged exposure
Forward foreign currency exchange contracts are used to limit the impact of currency fluctuations on certain anticipated foreign cash flows such as sales to foreign customers and loan payments between subsidiaries The Company enters into such contracts for hedging purposes only The Company has designated certain of these currency contracts as hedges and changes in the fair value of these contracts are recognized in other comprehensive income until the hedged items are recognized in earnings Hedge ineffectiveness if any associated with these contracts will be reported in net income At June 30 2024 and 2023 the Company had outstanding forward contracts related to hedges of intercompany loans with net unrealized gains of less than 0 1 million and net realized losses of 1 7 million respectively which approximate the unrealized gains or losses on the related loans The contracts have maturity dates in fiscal year 2025 which correspond to the related intercompany loans The notional amounts of these instruments by currency in thousands are as follows
The Company utilizes the asset and liability method of accounting for income taxes Deferred income taxes are determined based on the estimated future tax effects of differences between the financial and tax bases of assets and liabilities given the provisions of the enacted tax laws The components of the provision for income taxes on continuing operations in thousands were as shown below
The income tax provision from continuing operations for the fiscal year ended June 30 2024 was impacted by the following items i a tax provision of 3 1 million due to the mix of income in various jurisdictions ii tax benefits of 2 8 million related to foreign tax credits of 0 7 million as well as Federal R D tax credits of 2 1 million iii a tax provision of 3 8 million related to officers compensation and iv a tax benefit of 3 9 million relating to share based compensation
The income tax provision from continuing operations for the fiscal year ended June 30 2023 was impacted by the following items i a tax benefit of 4 3 million due to the mix of income in various jurisdictions ii tax benefits of 14 3 million primarily related to foreign tax credits of 11 6 million as well as Federal R D tax credits of 2 7 million iii a tax provision of 11 3 million related to the U S tax effects of international operations and iv a tax benefit of 5 0 million relating to the partial release of the valuation allowance on capital loss carryforwards which were utilized against the capital gain recognized on the divestiture of the Procon business
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 Company estimates the degree to which deferred tax assets including net operating loss and credit carry forwards will result in a benefit based on expected profitability by tax jurisdiction and provides a valuation allowance for tax assets and loss carry forwards that it believes will more likely than not go unrealized The valuation allowance at June 30 2024 applies to federal capital loss state loss foreign loss and state R D credit carryforwards which management has concluded that it is more likely than not that these tax benefits will not be realized The increase decrease in the valuation allowance from the prior year was due to the current year activity in those same federal state and foreign jurisdictions
As of June 30 2024 the Company had gross state net operating loss NOL and credit carry forwards of approximately 31 8 million and 3 9 million respectively which may be available to offset future state income tax liabilities and expire at various dates from 2024 through 2044 In addition the Company had foreign NOL carry forwards of approximately 4 1 million all of which carry forward indefinitely
Under ASU 2016 09 Improvements to Employee Share Based Payment Accounting all excess tax benefits and tax deficiencies are recognized as income tax expense or benefit in the statement of operations Accordingly we recorded an income tax benefit in the consolidated statement of operation of 3 9 million during the fiscal year ended June 30 2024 for the windfall of tax benefits related to equity compensation
U S tax law allows a 100 dividend received deduction for foreign dividends and the Company has begun to bring back cash from foreign subsidiaries However the permanent reinvestment assertion must still be assessed and made regarding potential liabilities for foreign withholding taxes As of June 30 2024 the Company maintained the assessment that previously undistributed earnings of certain foreign subsidiaries no longer meet the requirements for indefinite reinvestment under applicable accounting guidance Therefore the Company recognized deferred tax liabilities of approximately 0 7 million that relate to withholding taxes on the current earnings of various foreign subsidiaries It is expected that deferred tax liabilities will continue to be recorded on current earnings in future periods from these subsidiaries The Company maintains the permanent reinvestment assertion on earnings in certain foreign jurisdictions It is not practicable to estimate the amount of tax that might be payable on the remaining undistributed earnings
At June 30 2024 we had 9 8 million of non current liabilities included in accrued pension and other non current liabilities on the consolidated balance sheet for uncertain tax positions We are not able to provide a reasonable estimate of the timing of future payments related to these obligations The Company increased its uncertain tax position during the year due to state R D tax credit exposures
If the unrecognized tax benefits in the table above were recognized in a future period 9 8 million of the unrecognized tax benefit would impact the Company s effective tax rate The Company expects a decrease in net unrecognized tax benefits of approximately 8 0 million in the next twelve months as a result of the lapse in the statute of limitations
The Company s policy is to include interest expense and penalties related to unrecognized tax benefits within the provision for income taxes on the consolidated statements of operations At June 30 2024 and 2023 the company had 1 3 million and 1 2 million for accrued interest expense on unrecognized tax benefits
From time to time the Company is subject to various claims and legal proceedings including claims related to environmental remediation either asserted or unasserted that arise in the ordinary course of business While the outcome of these proceedings and claims cannot be predicted with certainty the Company s management does not believe that the outcome of any of the currently existing legal matters will have a material impact on the Company s consolidated financial position results of operations or cash flow The Company accrues for losses related to a claim or litigation when the Company s management considers a potential loss probable and can reasonably estimate such potential loss
In the second quarter of fiscal year 2019 a lawsuit was filed against Standex Electronics Inc a wholly owned subsidiary of the Company Electronics by Miniature Precision Components Inc a customer MPC seeking damages in connection with allegedly faulty sensors designed and manufactured by Electronics The subject sensors were incorporated by MPC into a subassembly sold by MPC to its customer an automotive manufacturer MPC alleges that the sensors incorrectly activated a diagnostic code in vehicles for which MPC s customer issued a service bulletin resulting in significant warranty costs for MPC During the fourth quarter of fiscal year 2022 the Company and MPC agreed to a full and comprehensive settlement of this matter As a result in fiscal year 2022 the Company recorded 5 7 million related to this litigation reported in accrued liabilities in the consolidated balance sheet and other operating expense in the consolidated statement of operations During the first quarter of fiscal year 2023 the liability was paid and the matter is considered settled
Under incentive compensation plans the Company is authorized to make grants of stock options restricted stock and performance share units to provide equity incentive compensation to key employees and directors The stock award program offers employees and directors the opportunity to earn shares of our stock over time rather than options that give the employees and directors the right to purchase stock at a set price The Company has stock plans for directors officers and certain key employees The Company uses shares acquired through treasury stock repurchases for the issuance of shares of common stock for the settlement of awards under its stock based compensation plans with the net effect of these transactions accounting for the change in common stock outstanding
Total compensation cost recognized in the consolidated statement of operations for equity based compensation awards was 9 8 million 11 7 million and 11 2 million for the years ended June 30 2024 2023 and 2022 respectively primarily within Selling General and Administrative Expenses The total income tax benefit recognized in the consolidated statement of operations for equity based compensation plans was 2 2 million 1 8 million and 2 7 million for the years ended June 30 2024 2023 and 2022 respectively
The Company may award shares of restricted stock to eligible employees and non employee directors of the Company at no cost giving them in most instances all of the rights of stockholders except that they may not sell assign pledge or otherwise encumber such shares and rights during the restriction period Such shares and rights are subject to forfeiture if certain employment conditions are not met During the restriction period recipients of the shares are entitled to dividend equivalents on such shares providing that such shares are not forfeited Dividends are accumulated and paid out at the end of the restriction period Restrictions on non vested stock awards generally lapse between fiscal year 2025 and fiscal year 2027 Compensation expense related to stock awards recognized was 6 0 million 4 8 million and 5 0 million respectively for fiscal years ended June 30 2024 2023 and 2022 Substantially all awards are expected to vest
Restricted stock awards granted during fiscal years 2023 and 2022 had a weighted average grant date fair value of 95 32 and 104 37 respectively The grant date fair value of restricted stock awards is determined based on the closing price of the Company s common stock on the date of grant The fair value of awards vested during fiscal years 2024 2023 and 2022 was 9 0 million 7 4 million and 6 8 million respectively
The Company operates a compensation program for key employees The plan contains both an annual component as well as a long term component Under the annual component participants may elect to defer up to 50 of their annual incentive compensation in restricted stock which is purchased at a discount to the market Additionally non employee directors of the Company may defer a portion of their director s fees in restricted stock units which is purchased at a discount to the market During the restriction period recipients of the shares are entitled to dividend equivalents on such units providing that such shares are not forfeited
Dividend equivalents are accumulated and paid out at the end of the restriction period The restrictions on the units expire after three years Restrictions on non vested annual component awards generally lapse between fiscal year 2025 and fiscal year 2027 The compensation expense associated with this incentive program is charged to income over the restriction period The Company recorded compensation expense related to this program of 0 9 million 0 2 million and 0 2 million for the years ended June 30 2024 2023 and 2022 respectively
Under the long term component grants of performance share units PSUs are made annually to key employees and the share units are earned based on the achievement of certain overall corporate financial performance targets over the performance period At the end of the performance period the number of shares of common stock issued will be determined by adjusting upward or downward from the target in a range between 50 and 200 No shares will be issued if the minimum performance threshold is not achieved The final performance percentage on which the payout will be based considering the performance metrics established for the performance period will be certified by the Compensation Committee of the Board of Directors
A participant s right to any shares that are earned will cliff vest in three years An executive whose employment terminates prior to the vesting of any award for a reason other than death disability retirement or following a change in control will forfeit the shares represented by that award In certain circumstances such as death disability or retirement PSUs are paid on a pro rata basis In the event of a change in control vesting of the awards granted is accelerated
Restricted stock awards granted under the annual component of this program in fiscal years 2024 2023 and 2022 had a weighted average grant date fair value of 81 41 98 36 and 108 92 respectively The PSUs granted in fiscal years 2023 and 2022 had a weighted average grant date fair value of 89 44 and 102 61 respectively The grant date fair value of the PSUs is determined based on the closing price of the Company s common stock on the date of grant The fair value of PSUs vested under the long term component of this program during the fiscal years ended June 30 2024 2023 and 2022 was 21 4 million 4 6 million and 0 4 million respectively
The Company recognized compensation expense related to the PSUs of 2 9 million 6 7 million and 6 0 million for the fiscal years ended June 30 2024 2023 and 2022 respectively based on the probability of the performance targets being met The total unrecognized compensation costs related to non vested performance share units was 3 8 million at June 30 2024 which is expected to be recognized over a weighted average period of 1 2 years
The Company has an Employee Stock Purchase Plan that allows employees to purchase shares of common stock of the Company at a discount from the market each quarter The ESPP plan which was effective as of July 1 2005 provided employees the option to purchase Standex stock at a discount of 5 The Plan was modified effective as of April 1 2017 to increase the stock purchase discount to 15 and is considered a compensatory Plan Under this amendment at the beginning of each calendar quarter employees may elect to purchase shares of Company stock at a value equal to 85 of the closing price on the last trading day of the quarter The 15 discount is recorded as a component of SG A in the Company s Consolidated Statements of Operations Shares of stock reserved for the plan were 38 234 at June 30 2024 Shares purchased under this plan aggregated to 3 778 in fiscal year 2024 6 256 in 2023 and 6 707 in 2022 at an average price of 137 38 91 78 and 83 22 respectively
The Company continues to focus our efforts to reduce cost and improve productivity across our businesses particularly through headcount reductions facility closures and consolidations Restructuring expenses primarily related to headcount reductions and other cost saving initiatives During fiscal year 2024 we also incurred restructuring expenses related to third party assistance with analysis and implementation of these activities
The Company continues to focus our efforts to reduce cost and improve productivity across our businesses particularly through headcount reductions facility closures and consolidations During fiscal years 2023 and 2022 the Company also incurred restructuring expenses related to headcount reductions facility rationalization and third party assistance with analysis and implementation of these activities
The Company has defined benefit pension plans covering certain current and former employees both inside and outside of the U S The Company s pension plan for U S employees is frozen for substantially all employees and participants in the plan have ceased accruing future benefits Obligations under the Company s defined benefit plan operated in Ireland have been transferred to the buyer of the Procon business as part of the divestiture in fiscal year 2023 Obligations under the unfunded defined benefit plan operated by the Sanyu business in Japan were transferred to the Company as of the date of acquisition in the third quarter of fiscal year 2024
Our investment policy for the U S pension plans targets a range of exposure to the various asset classes Standex rebalances the portfolio periodically when the allocation is not within the desired range of exposure The plan seeks to provide returns in excess of the various benchmarks The benchmarks include the following indices S P 500 Citigroup PMI EPAC Citigroup World Government Bond and Barclays Aggregate Bond A third party investment consultant tracks the plan s portfolio relative to the benchmarks and provides quarterly investment reviews which consist of a performance and risk assessment on all investment managers and on the portfolio
Included in the above are the following assumptions relating to the obligations for defined benefit pension plans in the United States at June 30 2024 a discount rate of 5 6 and expected return on assets of 6 4 The U S defined benefit pension plans represent the majority of our pension obligations The expected return on plan assets assumption is based on our expectation of the long term average rate of return on assets in the pension funds and is reflective of the current and projected asset mix of the funds The discount rate reflects the current rate at which pension liabilities could be effectively settled at the end of the year The discount rate is determined by matching our expected benefit payments from a stream of AA or higher bonds available in the marketplace adjusted to eliminate the effects of call provisions
Expected benefit payments for all plans during the next five fiscal years are as follows 2025 17 9 million 2026 17 5 million 2027 17 4 million 2028 17 7 million 2029 17 0 million and years thereafter 80 9 million The Company expects to make 6 3 million of contributions to its pension plans in fiscal year 2025
We contribute to two multiemployer defined benefit plans under the terms of collective bargaining agreements that cover our union represented employees These plans generally provide for retirement death and or termination benefits for eligible employees within the applicable collective bargaining units based on specific eligibility participation requirements vesting periods and benefit formulas The risks of participating in these multiemployer plans are different from single employer plans in the following aspects
If we choose to stop participating in some of our multiemployer plans we may be required to pay those plans an amount based on the underfunded status of the plan referred to as a withdrawal liability However cessation of participation in a multiemployer plan and subsequent payment of any withdrawal liability is subject to the collective bargaining process
The following table outlines the Company s participation in multiemployer pension plans for the periods ended June 30 2024 2023 and 2022 and sets forth the yearly contributions into each plan The EIN Pension Plan Number column provides the Employer Identification Number EIN and the three digit plan number The most recent Pension Protection Act zone status available in 2024 and 2023 relates to the plans two most recent fiscal year ends The zone status is based on information that we received from the plans administrators and is certified by each plan s actuary Among other factors plans certified in the red zone are generally less than 65 funded plans certified in the orange zone are both less than 80 funded and have an accumulated funding deficiency or are expected to have a deficiency in any of the next six plan years plans certified in the yellow zone are less than 80 funded and plans certified in the green zone are at least 80 funded The FIP RP Status Pending Implemented column indicates whether a financial improvement plan FIP for yellow orange zone plans or a rehabilitation plan RP for red zone plans is either pending or has been implemented For all plans the Company s contributions do not exceed 5 of the total contributions to the plan in the most recent year
The Company has two primary employee savings plans one for salaried employees and one for hourly employees Substantially all of our full time domestic employees are covered by these savings plans Under the provisions of the plans employees may contribute a portion of their compensation within certain limitations The Company at the discretion of the Board of Directors may make contributions on behalf of our employees under the plans Company contributions were 2 8 million 3 0 million and 2 9 million for the years ended June 30 2024 2023 and 2022 respectively At June 30 2024 the salaried plan holds approximately 82 000 shares of Company common stock representing approximately 4 4 of the holdings of the plan
Net sales include only transactions with unaffiliated customers and include no significant intersegment or export sales Operating income by segment and geographic area excludes general corporate and interest expenses Assets of the Corporate segment consist primarily of cash office equipment and other non current assets
Given the nature of our corporate expenses management concluded that it would not presently be appropriate to allocate the expenses associated with corporate activities to our operating segments These corporate expenses include the costs for the corporate headquarters salaries and wages for the personnel in corporate professional fees related to corporate matters and compliance efforts stock based compensation and post retirement benefits related to our corporate executives officers and directors and other compliance related costs The Company has a process to allocate and recharge certain direct costs to the operating segments when such direct costs are administered and paid at corporate Such direct expenses that are recharged on an intercompany basis each month include such costs as insurance workers compensation programs and audit fees The accounting policies applied by the reportable segments are the same as those described in the Summary of Accounting Policies footnote to the consolidated financial statements There are no differences in accounting policies which would be necessary for an understanding of the reported segment information
On February 28 2023 the Company divested its Procon pumps business Procon to Investindustrial a leading European investment and advisory group Procon generated approximately 21 2 million in revenue in the first eight months of fiscal year 2023 Procon which is reported within the Specialty Solutions Group was divested in order to focus on the continued simplification of the Company s portfolio and enable greater focus on managing larger platforms and pursuing growth opportunities The Company received 67 0 million cash consideration at closing which was presented as an investing cash flow for fiscal year 2023 Cash consideration received at closing excluded amounts held in escrow and was net of closing cash The Company recorded a pre tax gain on sale of the business of 62 1 million in fiscal year 2023 The operating unit s goodwill balance of 0 2 million was written off as a part of the transaction The sale transaction and financial results of Procon were classified as continuing operations in the Consolidated Financial Statements
During the first quarter of fiscal year 2024 the Company recorded an additional 0 3 million gain on the sale of the business due to cash received in the period related to closing cash adjustments During the third quarter of fiscal year 2024 the company received 7 5 million of cash held in escrow which was presented as an investing cash flow in fiscal year 2024
In the normal course of its business the Company enters into various leases as the lessee primarily related to certain transportation vehicles facilities office space and machinery and equipment These leases have remaining lease terms between one and fifty five years some of which may include options to extend the leases or options to terminate the leases Some lease arrangements require variable payments that are dependent on usage output or index based adjustments
We have audited the accompanying consolidated balance sheets of Standex International Corporation and subsidiaries the Company as of June 30 2024 and 2023 the related consolidated statements of operations comprehensive income stockholders equity and cash flows for the each of the three years in the period ended June 30 2024 and the related notes collectively referred to as the financial statements In our opinion the financial statements present fairly in all material respects the financial position of the Company as of June 30 2024 and 2023 and the results of its operations and its cash flows for each of the three years in the period ended June 30 2024 in conformity with accounting principles generally accepted in the United States of America
We have also audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the Company s internal control over financial reporting as of June 30 2024 based on criteria established in Internal Control Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 2 2024 expressed an unqualified opinion on the Company s internal control over financial reporting
These financial statements are the responsibility of the Company s management Our responsibility is to express an opinion on the Company s financial statements based on our audits We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audits in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement whether due to error or fraud Our audits included performing procedures to assess the risks of material misstatement of the financial statements whether due to error or fraud and performing procedures that respond to those risks Such procedures included examining on a test basis evidence regarding the amounts and disclosures in the financial statements Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the financial statements We believe that our audits provide a reasonable basis for our opinion
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that 1 relates to accounts or disclosures that are material to the financial statements and 2 involved our especially challenging subjective or complex judgments The communication of critical audit matters does not alter in any way our opinion on the financial statements taken as a whole and we are not by communicating the critical audit matter below providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates
Revenue is recognized over time under certain long term contracts within the Engineering Technologies and Engraving groups for highly customized customer products that have no alternative use and in which the contract specifies the Company has a right to payment for its costs plus a reasonable margin For products manufactured over time the transfer of control is measured pro rata based upon current estimates of costs to complete such contracts Losses on contracts are fully recognized in the period in which the losses become determinable Revisions in profit estimates are reflected on a cumulative basis in the period in which the basis for such revision becomes known
We identified revenue recognized over time as a critical audit matter because of the judgments and subjectivity involved in the determination of estimated costs to complete contracts This required extensive audit effort and a high degree of auditor judgment when performing audit procedures to audit costs incurred to date and management s estimates of margin at completion used to recognize revenue over time and evaluating the results of those procedures
evaluated whether the contracts were properly included in management s calculation of long term contract revenue based on the terms and conditions of each contract including whether continuous transfer of control to the customer occurred as progress was made toward fulfilling the performance obligation
The management of the Company including its Chief Executive Officer and Chief Financial Officer have conducted an evaluation of the effectiveness of the Company s disclosure controls and procedures as such term is defined in Rules 13a 15 e and 15 d 15 e under the Securities Exchange Act of 1934 as amended the Exchange Act as of the end of the period covered by this report Based on that evaluation the Chief Executive Officer and Chief Financial Officer concluded as of June 30 2024 that the disclosure controls and procedures are effective in ensuring that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is i recorded processed summarized and reported within the time periods specified in the Commission s rules and forms and ii that such information is accumulated and communicated to the Company s management including its Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure
SEC guidance permits the exclusion of an evaluation of the effectiveness of a registrant s disclosure controls and procedures as they relate to the internal control over financial reporting for an acquired business during the first year following such acquisition As discussed in Note 2 to the consolidated financial statements contained in this Report the Company acquired all of the outstanding stock of Sanyu Switch Co Ltd and Sanyu Electric Pte Ltd during fiscal year 2024 This acquisition represents approximately 0 8 and 1 0 respectively of the Company s consolidated continuing operations revenue and continuing operations income for the twelve months ended June 30 2024 and approximately 3 9 and 2 9 respectively of the Company s net and consolidated assets at June 30 2024 Management s evaluation and conclusion as to the effectiveness of the design and operation of the Company s disclosure controls and procedures as of June 30 2024 excludes any evaluation of the internal control over financial reporting of Sanyu Switch Co Ltd and Sanyu Electric Pte Ltd
There were no changes in the Company s internal control over financial reporting identified in connection with management s evaluation that occurred during the fourth quarter of our fiscal year ended June 30 2024 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting
The management of Standex is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Section 240 13a 15 f of the Exchange Act The Company s internal control over financial reporting is designed to provide reasonable assurance as to the reliability of the Company s financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles Management including the Chief Executive Officer and the Chief Financial Officer assessed the effectiveness of our internal control over financial reporting as of the end of the fiscal year covered by this report on Form 10 K In making this assessment management used the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control Integrated Framework 2013 These criteria are in the areas of control environment risk assessment control activities information and communication and monitoring Management s assessment included documenting evaluating and testing the design and operating effectiveness of our internal control over financial reporting
Based on the Company s processes as described above management including the Chief Executive Officer and the Chief Financial Officer has concluded that our internal control over financial reporting was effective as of June 30 2024 to provide reasonable assurance of achieving its objectives These results were reviewed with the Audit Committee of the Board of Directors Deloitte Touche LLP the independent registered public accounting firm that audited our consolidated financial statements included in this Annual Report on Form 10 K has issued an unqualified attestation report on the Company s internal control over financial reporting which is included below
No matter how well designed internal control over financial reporting has inherent limitations Internal control over financial reporting determined to be effective can provide only reasonable not absolute assurance with respect to financial statement preparation and may not prevent or detect all misstatements that might be due to error or fraud In addition a design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs Because of the inherent limitations in all control systems no evaluation of controls can provide absolute assurance that all control issues and instances of fraud if any within the Company have been detected
We have audited the internal control over financial reporting of Standex International Corporation and subsidiaries the Company as of June 30 2024 based on criteria established in Internal Control Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission COSO In our opinion the Company maintained in all material respects effective internal control over financial reporting as of June 30 2024 based on criteria established in Internal Control Integrated Framework 2013 issued by COSO
We have also audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the consolidated financial statements as of and for the year ended June 30 2024 of the Company and our report dated August 2 2024 expressed an unqualified opinion on those financial statements
As described in Management s Report on Internal Control over Financial Reporting management excluded from its assessment the internal control over financial reporting at Sanyu Switch Co Ltd and Sanyu Electric Pte Ltd which were acquired on February 20 2024 and May 3 2024 respectively and whose financial statements constitute 3 9 and 2 9 of net and total assets respectively 0 8 of revenues and 1 0 of net income of the consolidated financial statement amounts as of and for the year ended June 30 2024 Accordingly our audit did not include the internal control over financial reporting at Sanyu Switch Co Ltd and Sanyu Electric Pte Ltd
The Company s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management s Report on Internal Control over financial reporting Our responsibility is to express an opinion on the Company s internal control over financial reporting based on our audit We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audit in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects Our audit included obtaining an understanding of internal control over financial reporting assessing the risk that a material weakness exists testing and evaluating the design and operating effectiveness of internal control based on the assessed risk and performing such other procedures as we considered necessary in the circumstances We believe that our audit provides a reasonable basis for our opinion
A company s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles A company s internal control over financial reporting includes those policies and procedures that 1 pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company 2 provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company and 3 provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company s assets that could have a material effect on the financial statements
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
The Company will file with the Securities and Exchange Commission SEC a definitive Proxy Statement no later than 120 days after the close of the fiscal year ended June 30 2024 the Proxy Statement The information required by this item and not provided in Part 1 of this report under Item 1 Executive Officers of Standex is incorporated by reference from the Proxy Statement under the captions Election of Directors Stock Ownership in the Company Other Information Concerning the Company Board of Directors and its Committees and Section 16 a Beneficial Ownership Reporting Compliance
There have been no material changes to the procedures by which security holders may recommend nominees to our Board of Directors Information regarding the process for identifying and evaluating candidates for director are set forth and incorporated in reference to the information in the Proxy Statement under the caption Corporate Governance Nominating Committee Report
Information regarding the Audit Committee Financial Expert and the identification of the Audit Committee is incorporated by reference to the information in the Proxy Statement under the caption Other Information Concerning the Company Board of Directors and its Committees Audit Committee The Audit Committee is established in accordance with Section 3 a 58 A of the Securities Exchange Act
We maintain a corporate governance section on our website which includes our code of ethics for senior financial management that applies to our chief executive officer principal financial officer principal accounting officer controller or persons performing similar functions Our corporate governance section also includes our code of business conduct and ethics for all employees In addition we will promptly post any amendments to or waivers of the code of ethics for senior financial management on our website You can find this and other corporate governance information at www standex com
Information regarding executive compensation is incorporated by reference from the Proxy Statement under the captions and sub captions Executive Compensation Compensation Discussion and Analysis Compensation Committee Report 2024 Summary Compensation Table Other Information Concerning the Company Board of Directors and Its Committees and Directors Compensation
The stock ownership of each person known to Standex to be the beneficial owner of more than 5 of its Common Stock is incorporated by reference in the Proxy Statement under the caption Stock Ownership of Certain Beneficial Owners The beneficial ownership of Standex Common Stock of all directors and executive officers of the Company is incorporated by reference in the Proxy Statement under the caption and sub caption Stock Ownership in the Company and Stock Ownership by Directors Nominees for Director and Executive Officers respectively
The Company has one equity compensation plan approved by stockholders under which equity securities of the Company have been authorized for issuance to employees and non employee directors During fiscal year 2022 shareholders approved an amendment to and restatement of the 2018 Omnibus Equity compensation plan The change increased the number of shares authorized for grants under the 2018 Omnibus Equity compensation plan by 400 000 to 900 000 shares of our common stock
This Information in addition to information regarding aggregate fees billed for each of the last two fiscal years for professional services rendered by the professional accountant for audit of the Company s annual financial statements and review of financial statements included in the Company s Form 10 K as well as others are incorporated by reference in the Proxy Statement under the caption Independent Auditors Fees

Company Name	STANDEX INTERNATIONAL CORP/DE/ Vist SEC web-site
Category	REFRIGERATION & SERVICE INDUSTRY MACHINERY
Trading Symbol	SXI