UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2016
Commission File Number 1-7233
STANDEX INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its Charter)
DELAWARE
(State of incorporation)
31-0596149
(I.R.S. Employer Identification No.)
11 KEEWAYDIN DRIVE, SALEM, NEW
HAMPSHIRE
(Address of principal executive offices)
03079
(Zip Code)
(603) 893-9701
(Registrant’s telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE
SECURITIES EXCHANGE ACT OF 1934:
Title of Each Class
Common Stock, Par Value $1.50 Per Share
Name of Each Exchange on Which Registered
New York Stock Exchange
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES [X] NO [ ]
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES [ ] NO [X]
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will
not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer X Accelerated filer Non-accelerated filer __ Smaller Reporting
Company __
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES [ ] NO [X]
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant at the close of
business on December 31, 2015 was approximately $1,038,609,853. Registrant’s closing price as reported on the New York
Stock Exchange for December 31, 2015 was $83.15 per share.
The number of shares of Registrant's Common Stock outstanding on August 22, 2016 was 12,777,502
1
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Registrant’s 2016 Annual Meeting of Stockholders (the “Proxy Statement”) are
incorporated by reference into Part III of this report.
Forward Looking Statement
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,” “intends,” “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 may cause the actual results of operations in future periods to differ materially from those currently
expected or desired. These factors include, but are not limited to material adverse or unforeseen 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, general and international recessionary economic conditions,
including the impact, length and degree of the current slow growth conditions on the customers and markets we
serve and more specifically food service equipment, automotive, construction, aerospace, energy, transportation and
general industrial markets, lower-cost competition, the relative mix of products which impact margins and
operating efficiencies, both domestic and foreign, in certain of our businesses, the impact of higher raw material
and component costs, particularly steel, petroleum based products and refrigeration components, an inability to
realize the expected cost savings from restructuring activities, effective completion of plant consolidations, cost
reduction efforts, restructuring including procurement savings and productivity enhancements, capital management
improvements, strategic capital expenditures, and the implementation of lean enterprise manufacturing techniques,
the inability to achieve the savings expected from the sourcing of raw materials from and diversification efforts in
emerging markets, the inability to attain expected benefits from strategic alliances or acquisitions and the inability
to achieve synergies contemplated by the Company. Other factors that could impact the Company include the
impact of cybersecurity, and 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.
PART I
Item 1. Business
Standex International Corporation was incorporated in 1975 and is the successor of a corporation organized in 1955.
As used in this report, the terms “we,” “us,” “our,” the “Company” and “Standex” mean Standex International
Corporation and its subsidiaries. We have paid dividends each quarter since Standex became a public corporation in
November 1964.
Unless otherwise noted, references to years are to fiscal years.
We are a leading manufacturer of a variety of products and services for diverse commercial and industrial markets.
We have 11 operating segments, aggregated and organized for reporting purposes into five segments: Food Service
Equipment, Engraving, Engineering Technologies, Electronics and Hydraulics. Overall management, strategic
development and financial control are maintained by the executive staff from our corporate headquarters located in
Salem, New Hampshire.
Our corporate long term strategy has several primary components to build larger industrial platforms through a value
creation system that assists management in meeting specific corporate and business unit financial and strategic
performance goals in order to create and sustain shareholder value. The Balanced Performance Plan process aligns
annual goals throughout the business and provides a standard reporting, management and review process. It is
focused on setting and meeting annual and quarterly targets that support our short term and long term goals. The
2
Standex Growth Disciplines use a set of tools and processes including market maps, growth lane ways, and market
tests to identify opportunities to expand the business organically and through acquisitions. Standex Operational
Excellence employs a standard playbook and processes, including LEAN, to eliminate waste and improve
profitability, cash flow and customer satisfaction. Finally, the Standex Talent Management is an organizational
development process that provides training, development, and succession planning for our employees throughout
our worldwide organization. The Standex Value Creation System provides standard tools and processes throughout
Standex to deliver our business objectives:
It is our objective to grow larger and more profitable business units through both organic initiatives and
acquisitions. On an ongoing basis we identify and implement organic growth initiatives such as new
product development, geographic expansion, introduction of products and technologies into new markets
and applications, key accounts and strategic sales channel partners. Also, we have a long-term objective to
create sizable business platforms by adding strategically aligned or “bolt on” acquisitions to strengthen the
individual businesses, create both sales and cost synergies with our core business platforms, and accelerate
their growth and margin improvement. We have a particular focus on identifying and investing in
opportunities that complement our products and will increase the global presence and capabilities of our
businesses. From time to time we have divested and likely will continue to divest businesses that we feel
are not strategic or do not meet our growth and return expectations.
We create “Customer Intimacy” by utilizing the Standex Growth Disciplines to partner with our customers
in order to develop and deliver custom solutions or engineered components that solve problems for our
customers or otherwise meet their needs. This relationship generally provides us with the ability to
improve sales and profit growth over time and provide operating margins that enhance shareholder returns.
Further, we have made a priority of developing new sales channels and leveraging strategic customer
relationships.
Standex Operational Excellence drives continuous improvement in the efficiency of our businesses. We
recognize that our businesses are competing in a global economy that requires us to improve our
competitive position. We have deployed a number of management competencies to drive improvements in
the cost structure of our business units including operational excellence through lean enterprise, the use of
low cost manufacturing facilities in countries such as Mexico, and China. The consolidation of
manufacturing facilities to achieve economies of scale and leveraging of fixed infrastructure costs, alternate
sourcing to achieve procurement cost reductions, and capital improvements to increase shop floor
productivity.
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 the strategic growth programs described
above, (including acquisitions and investments for organic growth), and to return cash to our shareholders
through payment of dividends and stock buybacks.
Please visit our website at www.standex.com to learn more about us or to review our most recent SEC filings. The
information on our website is for informational purposes only and is not incorporated into this Annual Report on
Form 10-K.
Description of Segments
Food Service Equipment
The Food Service Equipment business is comprised of three groups. The Refrigeration Solutions group
manufactures walk-in and cabinet coolers and freezers used in commercial food facilities and some industrial, life
science and scientific applications. The Cooking Solutions group manufacturers cooking equipment such as ovens,
fryers, warmers and grills used in commercial food preparation and service. The Specialty Solutions group consists
of a specialty pump used in beverage applications and custom display merchandising.
Our products are used throughout the entire commercial food service process – from storage, to preparation, to
cooking and to display. The equipment that we design and manufacture is utilized in restaurants, convenience
3
stores, quick-service restaurants, supermarkets, drug stores and institutions such as hotels, hospitals, and both
corporate and school cafeterias to meet the challenges of providing food and beverages that are fresh and appealing
while at the same time providing for food safety, energy efficiency and reliability of the equipment performance. In
the scientific markets, our product portfolio is used for research, testing and storage of pharmaceuticals, reagents,
enzymes, plasma, whole blood, bone marrow, viruses, stem cells DNA and plant samples.
Food Service Equipment products are manufactured in Hudson, WI; New Albany, MS; Nogales, Mexico;
Simpsonville, SC; San Antonio, TX; Belleville, WI; and Mountmellick, Ireland. In addition, we have our culinary
demonstration center in Allen, TX. Our products are sold predominantly in North America directly, through dealers,
and through industry representatives in the Americas, Europe, Asia and Middle East.
Our product brands include:
NorLake® walk-in coolers and freezers and reach-in and under counter refrigerated cabinets to meet food
service and scientific needs;
Master-Bilt® refrigerated reach-in and under counter refrigerated cabinets, cases, display units, and walk-in
coolers and freezers;
APW Wyott®, Bakers Pride®, and Tri-Star ovens, char broilers, commercial ranges, griddles, toasters,
warmers, roller grills and countertop merchandisers used in cooking, toasting, warming and merchandising
food;
BKI® and Barbecue King® commercial cook and hold units, rotisseries, pressure fryers, ovens and baking
equipment;
Ultrafryer® commercial deep fryers for restaurant and commercial installations;
Federal merchandizing display cases for bakery, deli and confectionary products; and
Procon® pump systems used in beverage and industrial fluid handling applications.
We continue to expand this segment through new product introductions and acquisitions.
Engraving
The Engraving segment consists of three product lines. Mold-Tech is a world-wide leader in applying textures to
molds on which manufacturers produce a final product with the desired surface textures on molded plastic parts,
slush-molded and in-mold grained parts. Mold-Tech serves the global auto industry as well as consumer goods.
Innovent is a specialized supplier of tools and machines used to produce diapers and products which contain
absorbent materials between layers of non-woven fabric.
We simplify the supply chain for global Original Equipment Manufacturers, “OEM”, as a single source texture
solutions supplier. We provide texturizing services for the production of automotive components, particularly for
interior dashboards and upholstery, textiles for paper towels and hygiene products, consumer products and cosmetic
appearances, construction applications, various synthetic flooring products, and surfaces in electronics such as
computers, cell phones and printers.
Our worldwide Mold-Tech locations enable us to better serve our customers within key geographic areas on 6
continents including in the United States, Canada, Europe, China, India, Southeast Asia, Korea, Australia, South
Africa, and South America. Our products are primarily sold directly through our global sales network. The
Engraving segment serves a number of industries including automotive, plastics, building products, synthetic
materials, converting, textile and paper, computer, housewares, hygiene product tooling and aerospace industries.
Subsequent to our fiscal 2016 year-end, we sold our U.S. Roll Plate and Machinery business as it was not strategic,
and did not meet our growth and return expectations. This divestiture also allows our Engraving management to
focus on higher growth and better return businesses within the segment.
The Engraving segment brands include:
Mold-Tech® which provides design and program management services texturizes molds used in the production
of plastic parts and manufactures nickel shell slush mold tooling.
Mullen® Burst Testers.
4
Innovent is an engineering and manufacturing company delivering innovative product and service solutions to
hygiene, aerospace and other industrial clients around the world.
We are particularly focused on growth through the establishment of new “greenfield” facilities in emerging markets
and development of proprietary digital based process technology. Our extensive worldwide network of 38
manufacturing and design centers provides uniform engravings to satisfy the needs of our global customers. We
expect to continue to strengthen our market leadership position through continuously expanding the breadth of
products and services we provide customers globally.
Engineering Technologies
The Engineering Technologies segment, “ETG”, provides critical engineered parts in all workable metal alloys
using various forming processes combined with the essential value added processes for innovative cost effective
solutions. Our competitive advantage is to deliver components or assemblies that can be inserted directly into the
production line with no or little surface finishing required. Our precision manufacturing capabilities include metal
spinning, metal forming, press forming, stretch forming, hydroforming, heat treating and brazing, computer
numerical control and electrical discharge machining, high speed milling, and other fabrication services in all
thickness and size ranges for all workable metal alloys.
ETG solutions are in a wide variety of advanced applications, where the utilization of our broad metal forming
capabilities with vertically integrated operations are used to reduce part count, decrease input material, and/or
optimize the manufacturing process. These solutions are found in the aviation, defense, energy, industrial, medical,
marine, oil and gas, and manned and unmanned space markets. Our components and assemblies have been present
on major commercial aviation aircraft engines and nacelles as well as defense and navy nuclear programs. We
provide complex assemblies and formed solutions for the energy and oil and gas OEM’s, MRI machine formed
components, and single piece formed and machined fuel and liquid oxygen tanks and tank domes for commercial
and government space programs.
The segment includes our Spincraft units, with locations in North Billerica, MA, New Berlin, WI, and Newcastle
upon Tyne in the U.K, along with, Enginetics, which has plants in Huber Heights and Eastlake, OH. Our sales are
direct with the OEM’s and the Tier One’s in the particular markets, throughout the world, with the majority of our
sales in North America and Europe.
Electronics
The Electronics segment is a manufacturer of custom magnetic sensing and power conversion components and
assemblies. The magnetic sensing products employ technologies such as reed switches, hall effect, and magneto-
resistive to produce reed relays, fluid level sensors, flow, pressure differential, proximity, as well as custom
electronics assemblies containing these devices. The power conversion products include custom wound transformers
and inductors for low and high frequency applications, value added assemblies and mechanical packaging and
advanced planar transformers technology.
The Electronics segment is a global components solutions provider which designs and manufactures innovative
engineered components and assemblies to solve our customers’ application needs with a Partner/Solve/Deliver®
approach. Our mission and vision is to be a strategic partner with customers, utilize our innovative capabilities and
solutions to solve customer problems and deliver quality products that meet or exceed customer expectations. The
products are vital to a diverse array of markets to provide safe and efficient power transformation, monitoring and
isolation, as well as critical feedback to control systems for function and safety. The end user is typically an OEM
industrial equipment manufacturer. End-user markets include, but are not limited to transportation, smart-grid,
alternative energy, appliances, HVAC, security, military, medical, aerospace, test and measurement, power
distribution, and general industrial applications.
Components are manufactured in plants located in the USA, Mexico, the U.K., Germany and China. The business
sells globally through a direct sales force, regional sales managers, field applications engineers, commissioned
agents, representative groups, and distribution channels. The products are sold globally with approximately fifty
percent of sales within North America, forty percent within Europe and the balance in Asia.
5
The brand names are Standex Electronics, Standex-Meder Electronics, and Northlake Engineering. The Company
continues to expand the business through organic growth with current customers, new customers, developing new
products and technologies, geographic expansion, and strategic acquisitions.
Hydraulics
The Hydraulics segment is a global manufacturer of mobile hydraulic cylinders including single or double acting
telescopic and piston rod hydraulic cylinders. Additionally we manufacture a specialty pneumatic cylinder and
promote complete wet line kits, which are complete hydraulic systems that include a pump, valves, hoses and
fittings.
Industries that use our products are construction equipment, refuse, airline support, mining, oil and gas, and other
material handling applications. Our products are utilized by OEMs on vehicles such as dump trucks, dump trailers,
bottom dumps, garbage trucks, container roll off vehicles, hook lift trucks, liquid waste handlers, compactors, balers,
airport catering vehicles, container handling equipment for airlines, lift trucks, yard tractors, and underground
mining vehicles.
We manufacture our cylinders in Hayesville, OH and Tianjin, China. Our products are sold directly to OEMs, as
well as distributors, dealers, and aftermarket repair outlets primarily in North America with some sales in South
America and Asia.
We provide Custom Hoists® branded single and double acting telescopic hydraulic cylinders and single stage,
welded type piston rod hydraulic cylinders for use in the mobile hydraulics industry.
Responsiveness to new opportunities drives continuous top line growth. We leverage our full line of products for
the dump truck and trailer market and deep expertise in their application to expand into new markets, targeting
challenging custom applications. Our flexible design capability and global supply chain enable us to be successful
in our expansion efforts. Our team is dedicated to superior customer service through our technical engineering
support and on-time delivery.
Raw Materials
Raw materials and components necessary for the manufacture of our products are generally available from
numerous sources. Generally, we are not dependent on a single source of raw materials and supplies. We do not
foresee unavailability of materials or supplies which would have a significant adverse effect on any of our
businesses, nor any of our segments, in the near term.
Seasonality
We are a diversified business with generally low levels of seasonality; however, our fiscal third quarter is typically
the period with the lowest level of sales volume.
Patents and Trademarks
We hold approximately 39 United States patents and patents pending covering processes, methods and devices and
approximately 43 United States trademarks. Many counterparts of these patents have also been registered in various
foreign countries. In addition, we have various foreign registered and common law trademarks.
Due to the diversity of our businesses and the markets served, the loss of any single patent or trademark would not,
in our opinion, materially affect any individual segment.
While we believe that many of our patents are important, we credit our competitive position in our niche markets to
customer intimacy, engineering capabilities, manufacturing techniques and skills, marketing and sales promotions,
service and the delivery of quality products.
6
Customers
Our business is not dependent upon a single customer or a few large customers, the loss of any one of which would
not have a material adverse effect on our operations. No customer accounted for more than 5% of our consolidated
revenue in fiscal 2016 or any of the years presented.
Working Capital
Our primary source of working capital is the cash generated from continuing operations. No segments require any
special working capital needs outside of the normal course of business.
7
Backlog
Backlog includes all active or open orders for goods and services that have a firm fixed customer purchase order
with defined delivery dates. Backlog also includes any future deliveries based on executed customer contracts, so
long as such deliveries are based on agreed upon delivery schedules. Backlog is not generally a significant factor in
the Company’s businesses because of our relatively short delivery periods and rapid inventory turnover with the
exception of Engineering Technologies. 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.
Backlog orders in place at June 30, 2016 and 2015 are as follows (in thousands):
Food Service Equipment
Engraving
Engineering Technologies
Electronics
Hydraulics
Total
Net realizable beyond one year
Net realizable within one year
2016
37,202
19,046
90,241
44,713
4,951
196,153
33,257
162,896
$
$
2015
46,147
18,992
93,012
38,445
4,776
201,372
33,215
168,157
$
$
Backlog realizable within one year decreased $5.3 million, or 3.1%, to $162.9 million at June 30, 2016 from
$168.2 million at June 30, 2015. The backlog decrease of $8.9 million in Food Service Equipment resulted
primarily from lower demand in the refrigeration markets. The increase in Electronics backlog of $6.3 million is
primarily a result of the recently acquired Northlake business.
Competition
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 product performance and technology, price, delivery schedule, quality of services, and other terms
and conditions.
International Operations
We have international operations in all of our business segments. International operations are conducted at 60
locations, in Europe, Canada, China, India, Southeast Asia, Korea, Australia, Mexico, Brazil, and South Africa. See
the Notes to Consolidated Financial Statements for international operations financial data. Our international
operations contributed approximately 27% of operating revenues in 2016 and 2015. 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.
Research and Development
Developing new and improved products, broadening the application of established products, continuing efforts to
improve our methods, processes, and equipment continues to drive our success. However, due to the nature of our
manufacturing operations and the types of products manufactured, expenditures for research and development are
not significant to any individual segment or in the aggregate. Research and development costs are quantified in the
Notes to Consolidated Financial Statements. We develop and design new products to meet customer needs in order
to offer enhanced products or to provide customized solutions for customers.
Environmental Matters
8
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 any instances of non-compliance
that will have a material effect on our future capital expenditures, earnings or competitive position.
Financial Information about Geographic Areas
Information regarding revenues from external customers attributed to the United States, all foreign countries and
any individual foreign country, if material, is contained in the Notes to Consolidated Financial Statements for
“Industry Segment Information.”
Number of Employees
As of June 30, 2016, we employed approximately 5,300 employees of which approximately 2,100 were in the
United States. About 300 of our U.S. employees were represented by unions. Approximately 44% of our
production workforce is situated in low-cost manufacturing regions such as Mexico, Brazil and Asia.
Executive Officers of Standex
The executive officers of the Company as of June 30, 2016 were as follows:
Name
Age
Principal Occupation During the Past Five Years
David Dunbar
54
President and Chief Executive Officer of the Company since January 2014. President of the
Valves and Controls global business unit of Pentair Ltd from 2009 through 2013.
Thomas D. DeByle
56 Vice President and Chief Financial Officer of the Company since March 2008.
Alan J. Glass
52 Vice President, Chief Legal Officer and Secretary of the Company since April 2016. Vice
Ross McGovern
President, General Counsel and Secretary of CIRCOR International, Inc. from 2000 through
2016.
38 Vice President of Human Resources of the Company since August 2015. Director of Human
Resources of Keurig Green Mountain 2015, Vice President of Human Resources of Datacolor
from 2012 through 2015, and Global Human Resources Manager of R&D GE Healthcare,
Medical Diagnostics, a subsidiary of General Electric from 2009 through 2011.
Sean Valashinas
Anne De Greef-Safft
44
54
Chief Accounting Officer and Assistant Treasurer of the Company since October 2007.
Segment President of Food Service Equipment since January 2015; President of Danaher’s
Gems, Setra, Sonix and Anderson Companies, where she directed the worldwide operations,
marketing and sales, engineering, accounting and human resources functions of these
businesses from 2009 through 2014.
Paul Burns
43 Vice President of Strategy and Business Development since July 2015, Director of Corporate
Development and Global Mergers & Acquisitions at General Motors from 2013 through 2015,
Director of Strategy and Business Development at Tyco Flow Control from 2011 through 2013.
The executive officers are elected each year at the first meeting of the Board of Directors subsequent to the annual
meeting of stockholders, to serve for one-year terms of office. There are no family relationships among any of the
directors or executive officers of the Company.
Long-Lived Assets
Long-lived assets are described and discussed in the Notes to Consolidated Financial Statements under the caption
“Long-Lived Assets.”
Available Information
Standex’s corporate headquarters are at 11 Keewaydin Drive, Salem, New Hampshire 03079, and our telephone
9
number at that location is (603) 893-9701.
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. All reports that we file with the SEC may be read and copied at the SEC’s
Public Reference Room at 100 F Street, N.E., Washington, DC 20549. Information about the operation of the
Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. 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, 11 Keewaydin Drive, Salem, New Hampshire,
03079.”
The certifications of Standex’s Chief Executive Officer and Chief Financial Officer, as required by the rules adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, are filed as exhibits to this Form 10-K.
Item 1A. Risk Factors
An investment in the Company’s common shares involves various risks, including those mentioned below and those
that are discussed from time to time in our other periodic filings with the SEC. Investors should carefully consider
these risks, along with the other information filed in this report, before making an investment decision regarding our
common shares. All of these risks could have a material adverse effect on our financial condition, results of
operations and/or value of our common shares.
A deterioration in the domestic and international economic environment could adversely affect our operating
results and financial condition.
Recessionary economic conditions coupled with a tightening of credit could adversely impact major markets served
by our businesses, including cyclical markets such as automotive, heavy construction vehicle, general industrial and
food service. An economic recession could adversely affect our business by:
•
•
•
•
•
•
•
•
•
reducing demand for our products and services, particularly in markets where demand for our products
and services is cyclical;
causing delays or cancellations of orders for our products or services;
reducing capital spending by our customers;
increasing price competition in our markets;
increasing difficulty in collecting accounts receivable;
increasing the risk of excess or obsolete inventories;
increasing the risk of impairment to long-lived assets due to reduced use of manufacturing facilities;
increasing the risk of supply interruptions that would be disruptive to our manufacturing processes;
and
reducing the availability of credit for our customers.
We rely on our credit facility to provide us with sufficient capital to operate our businesses.
We rely on our revolving credit facility to provide us with sufficient capital to operate our businesses. 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
10
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 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.
Our credit facility contains covenants that restrict our activities.
Our revolving credit facility contains covenants that restrict our activities, including our ability to:
•
•
•
•
•
incur additional indebtedness;
make investments;
create liens;
pay cash dividends to shareholders unless we are in compliance with the financial covenants set forth
in the credit facility; and
sell material assets.
Our global operations subject us to international business risks.
We operate in 54 locations outside of the United States in Europe, Canada, China, India, Singapore, Korea,
Australia, Mexico, Brazil, Turkey, Malaysia, and South Africa. 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 business, results of operations or financial condition. Those international business risks include:
•
•
•
•
•
•
•
•
•
fluctuations in currency exchange rates;
changes in government regulations;
restrictions on repatriation of earnings;
import and export controls;
political, social and economic instability;
potential adverse tax consequences;
difficulties in staffing and managing multi-national operations;
difficulties in our ability to enforce legal rights and remedies; and
changes in regulatory requirements.
Failure to achieve expected savings and synergies could adversely impact our operating profits and cash flows.
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 supplement sales and growth. If we were unable to successfully execute these programs, this 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.
Violation of anti-bribery or similar laws by our employees, business partners or agents could result in fines,
penalties, damage to our reputation or other adverse consequences.
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 US or
international laws relating to anti-bribery or similar topics. An action resulting in 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.
We face significant competition in our markets and, if we are not able to respond to competition in our markets,
our net sales, profits and cash flows could decline.
11
Our businesses operate in highly competitive markets. In order to effectively compete, we must retain long standing
relationships with significant customers, offer attractive pricing, 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. If we are unable to compete effectively, our
net sales, profitability and cash flows could decline. Pricing pressures resulting from competition may adversely
affect our net sales and profitability.
If we are unable to successfully introduce new products and product enhancements, our future growth could be
impaired.
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.
Increased prices or significant shortages of the commodities that we use in our businesses could result in lower
net sales, profits and cash flows.
We purchase large quantities of steel, refrigeration components, freight services, foam insulation and other metal
commodities for the manufacture of our products. Historically, prices for commodities 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 could adversely affect our operating profits if we
cannot timely mitigate the price increases by successfully sourcing lower cost commodities or by passing the
increased costs on to customers. Shortages or other disruptions in the supply of these commodities could delay
sales or increase costs.
An inability to identify or complete future acquisitions could adversely affect our future growth.
As part of our growth strategy, we intend to pursue acquisitions that provide opportunities for profitable growth for
our businesses and which 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.
We may experience difficulties in integrating acquisitions.
Integration of acquired companies involves a number of risks, including:
•
•
•
•
•
inability to operate acquired businesses profitably;
failure to accomplish strategic objectives for those acquisitions;
unanticipated costs relating to acquisitions or to the integration of the acquired businesses;
difficulties in achieving planned cost savings synergies and growth opportunities; and
possible future impairment charges for goodwill and non-amortizable intangible assets that are
recorded as a result of acquisitions.
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.
Impairment charges could reduce our profitability.
We test goodwill and our other intangible assets with indefinite useful lives for impairment on an annual basis or on
an interim basis if an event occurs that might reduce the fair value of the reporting unit below its carrying value.
12
Various uncertainties, including continued 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 and could be a
material effect to us.
Material adverse or unforeseen legal judgments, fines, penalties or settlements could have an adverse impact on
our profits and cash flows.
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 matters. In accordance with United States generally accepted accounting
principles, we have established reserves based on our assessment of contingencies. 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.
The costs of complying with existing or future environmental regulations, and of correcting any violations of
these regulations, could increase our expenses and reduce our profitability.
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. 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.
Strategic divestitures could negatively affect our results and contingent liabilities from businesses that we have
sold could adversely affect our results of operations and financial condition.
We have retained responsibility for some of the known and unknown contingent liabilities related to a number of
businesses we have sold, such as lawsuits, tax liabilities, product liability claims, and environmental matters and
have agreed to indemnify purchasers of these businesses for certain of those contingent liabilities.
The trading price of our common stock has been volatile, and investors in our common stock may experience
substantial losses.
The trading price of our common stock has been volatile and may become volatile again in the future. The trading
price of our common stock could decline or fluctuate in response to a variety of factors, including:
•
our failure to meet the performance estimates of securities analysts;
13
•
•
•
•
•
•
changes in financial estimates of our net sales and operating results or buy/sell recommendations by
securities analysts;
fluctuations in our quarterly operating results;
substantial sales of our common stock;
changes in the amount or frequency of our payment of dividends or repurchases of our common stock;
general stock market conditions; or
other economic or external factors.
Decreases in discount rates and actual rates of return could require future pension contributions to our pension
plans which could limit our flexibility in managing our Company.
Key assumptions inherent in our actuarially calculated pension plan obligations and pension plan expense are the
discount rate and the expected rate of return on plan assets. 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 business could be negatively impacted by cybersecurity threats, information systems and network
interruptions, and other security threats or disruptions.
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 in particular, are persistent,
evolve quickly, and include, but are not limited to, computer viruses, 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.
Various restrictions in our charter documents, Delaware law and our credit agreement could prevent or delay a
change in control of us that is not supported by our board of directors.
We are subject to a number of provisions in our charter documents, Delaware law and our credit facility that may
discourage, delay or prevent a merger, acquisition or change of control that a stockholder may consider favorable.
These anti-takeover provisions include:
•
•
•
•
•
maintaining a classified board and imposing advance notice procedures for nominations of candidates
for election as directors and for stockholder proposals to be considered at stockholders' meetings;
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 Standex to a third party or the issuance or transfer by Standex 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;
requiring the affirmative vote of the holders of at least 80% of the outstanding shares of our common
stock for stockholders to amend our amended and restated by-laws;
covenants in our credit facility restricting mergers, asset sales and similar transactions; and
the Delaware anti-takeover statute contained in Section 203 of the Delaware General Corporation Law.
14
Section 203 of the Delaware General Corporation Law prohibits a merger, consolidation, asset sale or other similar
business combination between Standex 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.
15
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We have a total of 96 facilities, of which we operate 83 manufacturing plants and warehouses located throughout
the United States, Europe, Canada, Australia, Southeast Asia, Korea, China, India, Brazil, South Africa, and
Mexico. The Company owns 24 of the facilities and the balance are leased. For the year ended June 30, 2016 the
approximate building space utilized by each segment is as follows:
Segment location
EMEA(1)
Other Americas
United States
Food Service Equipment
Asia Pacific
EMEA(1)
Other Americas
United States
Engraving
EMEA(1)
United States
Engineering Technologies
Asia Pacific
EMEA(1)
Other Americas
United States
Electronics
Asia Pacific
Other Americas
United States
Hydraulics
United States
Corporate & Other
Total
Number of Facilities
3
3
15
21
13
14
5
6
38
3
7
10
2
5
3
5
15
2
1
6
9
3
3
96
Area in Square Feet (in thousands)
Owned
10
185
789
984
-
56
-
105
161
-
171
171
-
89
56
61
206
-
-
101
101
22
22
1,645
Leased
24
32
354
410
244
141
65
56
506
80
273
353
37
8
17
31
93
65
1
20
86
150
150
1,598
Total
34
217
1,143
1,394
244
197
65
161
667
80
444
524
37
97
73
92
299
65
1
121
187
172
172
3,243
(1) EMEA consists primarily of Europe, Middle East and S. Africa.
In general, the buildings are in sound operating condition and are considered to be adequate for their intended
purposes and current uses.
We own substantially all of the machinery and equipment utilized in our businesses.
Item 3. Legal Proceedings
Discussion of legal matters is incorporated by reference to Part II, Item 8, Note 12, “CONTINGENCIES,” in the
Notes to the Consolidated Financial Statements.
Item 4. Mine Safety Disclosures
Not Applicable
16
PART II
Item 5. Market for Standex Common Stock
Related Stockholder Matters and Issuer Purchases of Equity Securities
The principal market in which the Common Stock of Standex is traded is the New York Stock Exchange under the
ticker symbol “SXI”. The high and low sales prices for the Common Stock on the New York Stock Exchange and
the dividends paid per Common Share for each quarter in the last two fiscal years are as follows:
Common Stock Price Range
2015
2016
Dividends Per Share
Year Ended June 30
First quarter
Second quarter
Third quarter
Fourth quarter
High
$ 83.20
93.10
82.45
89.29
Low
$ 66.98
72.94
65.53
75.59
High
$ 76.99
87.05
83.98
84.47
Low
$ 65.01
70.25
66.72
77.62
2016
$ 0.12
0.14
0.14
0.14
2015
$ 0.10
0.12
0.12
0.12
The approximate number of stockholders of record on July 31, 2016 was 1,641.
Additional information regarding our equity compensation plans is presented in the Notes to Consolidated Financial
Statements under the caption “Stock-Based Compensation and Purchase Plans” and Item 12 “Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder Matters.”
Issuer Purchases of Equity Securities (1)
Quarter Ended June 30, 2016
(a) Total
Number of
Shares (or units)
Purchased
(b) Average
Price Paid per
Share (or unit)
(c) Total Number
of Shares (or units)
Purchased as Part
of Publicly
Announced Plans
or Programs
(d) Maximum Number (or
Appropriate Dollar Value)
of Shares (or units) that
May Yet Be Purchased
Under the Plans or
Programs
2,167
25,615
2,916
30,698
$ 78.77
$ 79.76
$ 87.21
$ 80.40
2,167
27,782
30,698
30,698
$ 99,829,305
$ 97,786,253
$ 97,531,949
$ 97,531,949
Period
April 1 - April 30, 2016
May 1 - May 31, 2016
June 1 - June 30, 2016
TOTAL
(1) The Company has a Stock Buyback Program (the “Program”) which was originally announced on January 30, 1985 and most
recently amended on April 26, 2016. Under the Program, the Company was authorized to repurchase up to an aggregate of $100
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.
17
The following graph compares the cumulative total stockholder return on the Company’s Common Stock as of the
end of each of the last five fiscal years, with the cumulative total stockholder return on the Standard & Poor’s Small
Cap 600 (Industrial Segment) Index and on the Russell 2000 Index, assuming an investment of $100 in each at their
closing prices on June 30, 2011 and the reinvestment of all dividends.
18
Item 6. Selected Consolidated Financial Data
Selected financial data for the five years ended June 30, is as follows:
See Item 7 for discussions on comparability of the below.
2016
SUMMARY OF OPERATIONS (in thousands)
Net sales
Food Service Equipment
Engraving
Engineering Technologies
Electronics
Hydraulics
Total
Gross profit
Operating income (loss)
Food Service Equipment
Engraving
Engineering Technologies
Electronics
Hydraulics
Restructuring (1)
Gain on sale of real estate
Other operating income
(expense), net
Corporate and Other
Total
Interest expense
Other non-operating (loss) income
Provision for income taxes
Income from continuing operations
Income/(loss) from discontinued
(7,458)
(24,996)
$ 70,344
(2,871)
1,052
(16,295)
52,230
$ 40,142
29,579
8,258
21,104
7,947
(4,232)
-
2015
2014
2013
2012
$ 381,867
124,120
82,235
118,319
45,045
$ 751,586
$ 252,253
$ 408,706
110,781
97,018
114,196
41,441
$ 772,142
$ 247,486
$ 377,848
109,271
79,642
114,881
34,538
$ 716,180
$ 238,269
$ 367,008
93,380
74,838
108,085
30,079
$ 673,390
$ 218,191
$ 364,759
93,611
74,088
48,206
29,922
$ 610,586
$ 201,736
$ 38,389
17,896
14,305
8,715
4,403
(1,685)
4,776
-
(23,443)
$ 63,356
(2,280)
519
(15,699)
45,896
$ 37,456
24,250
13,097
20,884
7,013
(3,443)
-
$ 38,203
22,145
12,676
19,732
5,781
(10,077)
-
$ 37,533
15,596
13,241
16,147
4,968
(2,666)
-
438
(21,051)
$ 78,644
(3,161)
634
(20,874)
55,243
3,462
(26,054)
$ 65,868
(2,249)
4,184
(18,054)
49,749
-
(22,924)
$ 61,895
(2,469)
(128)
(15,244)
44,054
operations
Net income
(174)
$ 52,056
(500)
$ 54,743
(6,883)
$ 42,866
794
$ 44,848
(14,991)
$ 30,905
(1) See discussion of restructuring activities in Note 16 of the consolidated financial statements.
2016
2015
2014
2013
2012
PER SHARE DATA
Basic
Income from continuing operations
Income/(loss) from discontinued operations
Total
Diluted
Income from continuing operations
Income/(loss) from discontinued operations
Total
$ 4.12
(0.01)
$ 4.11
$ 4.37
(0.04)
$ 4.33
$ 3.94
(0.55)
$ 3.39
$ 3.51
0.06
$ 3.57
$ 3.67
(1.20)
$ 2.47
$ 4.09
(0.01)
$ 4.08
$ 4.31
(0.04)
$ 4.27
$ 3.89
(0.54)
$ 3.35
$ 3.45
0.06
$ 3.51
$ 3.59
(1.17)
$ 2.42
Dividends declared
$ 0.54
$ 0.46
$ 0.38
$ 0.31
$ 0.27
19
BALANCE SHEET (in thousands)
Total assets
$ 690,457
$ 659,063
$ 577,785
$ 509,947
$ 478,935
2016
2015
2014
2013
2012
Accounts receivable
Inventories
Accounts payable
Goodwill
Long-term debt
Total debt
Less cash
Net debt (cash)
103,974
105,402
77,099
157,354
110,478
108,305
80,764
154,732
107,674
97,065
85,206
125,965
97,995
81,811
67,552
111,905
96,493
70,802
60,229
100,633
$ 92,114
92,114
121,988
(29,874)
$ 101,753
101,753
96,128
5,625
$ 44,681
44,681
74,260
(29,579)
$ 49,446
49,446
51,064
(1,618)
$ 49,124
49,124
54,749
(5,625)
Stockholders' equity
369,959
348,570
340,726
290,988
242,907
KEY STATISTICS
Gross profit margin
Operating income margin
2016
33.6%
9.4%
2015
32.1%
10.2%
2014
33.3%
9.2%
2013
32.4%
9.2%
2012
33.0%
10.4%
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
We are a leading manufacturer of a variety of products and services for diverse commercial and industrial markets.
We have five reportable segments: Food Service Equipment, Engraving, Engineering Technologies, Electronics, and
the Hydraulics.
Our long term strategy is to build larger industrial platforms through a value creation system that assists
management in meeting specific corporate and business unit financial and strategic performance goals in order to
create, improve, and enhance shareholder value. The Standex Value Creation System is a standard methodology
which provides consistent tools used throughout the company in order to achieve our organization’s goals. The
value creation system has four components. The Balanced Performance Plan process aligns annual goals throughout
the business and provides a standard reporting, management and review process. It is focused on setting and
meeting annual and quarterly targets that support our short term and long term goals. The Standex Growth
Disciplines use a set of tools and processes including market maps, growth lane ways, and market tests to identify
opportunities to expand the business organically and through acquisitions. Standex Operational Excellence employs
a standard playbook and processes, including LEAN, to eliminate waste and improve profitability, cash flow and
customer satisfaction. Finally, the Standex Talent Management process is an organizational development process
that provides training, development, and succession planning for our employees throughout our worldwide
organization. The Standex Value Creation System ties all disciplines in the organization together under a common
umbrella by providing standard tools and processes to deliver our business objectives:
It is our objective to grow larger and more profitable business units through both organic initiatives and
acquisitions. On an ongoing basis we identify and implement organic growth initiatives such as new
product development, geographic expansion, introduction of products and technologies into new markets
and applications, key accounts and strategic sales channel partners. Also, we have a long-term objective to
create sizable business platforms by adding strategically aligned or “bolt on” acquisitions to strengthen the
individual businesses, create both sales and cost synergies with our core business platforms, and accelerate
their growth and margin improvement. We have a particular focus on identifying and investing in
opportunities that complement our products and will increase the global presence and capabilities of our
20
businesses. From time to time we have divested and likely will continue to divest businesses that we feel
are not strategic or do not meet our growth and return expectations.
As part of this ongoing strategy, during fiscal year 2016, we acquired Northlake Engineering, Inc., a
designer, manufacturer and distributor of high reliability magnetics serving the North American power
distribution and medical equipment markets. This investment complements our Electronics segment and
allows us to provide broader solutions to our customers. Subsequent to our fiscal 2016 year-end, we sold
our U.S. Roll Plate and Machinery business as it was not strategic, and did not meet our growth and return
expectations. This divestiture also allows our Engraving management to focus on higher growth and better
return businesses within the segment.
We create “Customer Intimacy” by utilizing the Standex Growth Disciplines to partner with our customers
in order to develop and deliver custom solutions or engineered components that provide technology-driven
solutions to our customers. This relationship generally provides us with the ability to improve sales and
profit growth over time and provide operating margins that enhance shareholder returns. Further, we have
made a priority of developing new sales channels and leveraging strategic customer relationships.
Standex Operational Excellence drives continuous improvement in the efficiency of our businesses. We
recognize that our businesses are competing in a global economy that requires us to improve our
competitive position. We have deployed a number of management competencies to drive improvements in
cost structure of our business units including operational excellence through lean enterprise, the use of low
cost manufacturing facilities in countries such as Mexico, and China, the consolidation of manufacturing
facilities to achieve economies of scale and leveraging of fixed infrastructure costs, alternate sourcing to
achieve procurement cost reductions, and capital improvements to increase shop floor productivity.
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 the strategic growth programs described
above, (including acquisitions and investments for organic growth), and to return cash to our shareholders
through payment of dividends and stock buybacks.
Our business units are actively engaged in initiating new product introductions, expansion of product offerings
through private labeling and sourcing agreements, geographic expansion of sales coverage, the development of new
sales channels, leveraging strategic customer relationships, development of energy efficient products, new
applications for existing products and technologies, and next generation products and services for our end-user
markets.
Restructuring expenses reflect costs associated with the Company’s efforts to continuously improve operational
efficiency and expand globally in order to remain competitive in the end-user markets we serve. Each year the
Company incurs costs for actions to size its businesses to a level appropriate for current economic conditions and to
improve its cost structure to enhance our competitive position and operating margins. Such expenses include costs
for moving facilities to low-cost locations, starting up plants after relocation, or 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,
moving, and relocation costs. Vacant facility costs include maintenance, utilities, property taxes, and other costs.
We continue to focus on our efforts to reduce cost and improve productivity across our businesses. Our refrigeration
division and businesses that serve the oil and gas industry have both been negatively impacted by reduced customer
spending and customer consolidation. Due to these changing market conditions and consolidations we have and will
continue to implement appropriate cost reductions to align our costs to appropriate sales levels. We continue to
evaluate our products and production processes and expect to execute similar cost reductions and restructuring
programs on an ongoing basis.
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 their businesses 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.
21
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 in the
discussion 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 the discussed KPI.
We believe that the discussion of these items provides enhanced information to investors by disclosing their
consequence on the overall trend in order to provide a clearer comparative view of the KPI where 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 to
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.
Unless otherwise noted, references to years are to fiscal years.
Consolidated Results from Continuing Operations (in thousands):
Net sales
Gross profit margin
Restructuring costs
Other income/(expense) operating
Income from operations
Backlog (realizable within 1 year)
Net sales
Components of change in sales:
Effect of acquisitions
Effect of exchange rates
Organic sales growth
$
$
$
2016
2015
751,586 $
33.6%
4,232
(7,458)
70,344
772,142 $
32.1%
3,443
438
78,644
2014
716,180
33.3%
10,077
3,462
65,868
162,896 $
168,157 $
143,132
2016
751,586 $
2015
772,142 $
2014
716,180
11,672
(15,011)
(17,217)
38,155
(16,423)
34,230
297
3,954
38,539
Net sales for the fiscal year 2016 decreased by $20.6 million, or 2.7%, when compared to the prior year. The
decrease is driven by $17.2 million, or 2.3% of organic sales declines and $15.0 million, or 1.9%, of unfavorable
foreign exchange partially offset by $11.7 million, or 1.5% from the Northlake and Enginetics acquisitions. The
organic sales decrease was primarily driven by lower sales to the refrigeration and oil and gas markets, partially
offset by higher sales to the automotive and other markets. We anticipate continued soft demand in the refrigeration
and oil and gas markets during the first half of fiscal year 2017. We expect unfavorable foreign exchange sales
impacts in 2017 primarily associated with declines in the British Pound due to the Brexit vote. During fiscal year
2016, 3.0% of our consolidated revenue was recorded in the U.K.
Net sales for the fiscal year 2015 increased by $56.0 million, or 7.8%, when compared to the prior year. The
increase was driven by $34.2 million or 4.8% of organic sales growth from three of our segments, $38.2 million or
5.3% of acquisitions from Enginetics, Ultrafryer, and Planar partially offset by unfavorable foreign exchange of
$16.4 million or 2.3% primarily from the strength of the U.S. dollar as compared to the Euro and Pound. Sales
growth was a result of success of our top-line growth initiatives and improvements in end-user markets.
Gross Profit Margin
During 2016, gross margin increased to 33.6% as compared to 32.1% in 2015. The increase is a result of higher
sales in the Engraving segment which typically carry higher margins than sales in our other segments and
operational improvements in our Food Service Equipment segment as our Operational Excellence initiatives
22
continue to generate positive gross margin results. We also experienced gross margin improvements due to reduced
purchase accounting charges of $1.3 million. During fiscal year 2016 we incurred $0.4 million of purchase
accounting charges related to the Northlake acquisition as compared to charges of $1.7 million in the prior year for
the Enginetics and Ultrafryer acquisitions.
During 2015, gross margin decreased to 32.1% as compared to 33.3% in 2014. This decrease is primarily a result of
exchange rate declines, an unfavorable sales mix as compared to the prior year, coupled with $1.7 million of
purchase accounting charges associated with the Enginetics and Ultrafryer acquisitions.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses, (“SG&A”) for the fiscal year 2016 were $170.2 million or 22.6% of
sales compared to $165.8 million or 21.5% of sales during the prior year. The increase in SG&A is due to higher
health care expenses, compensation, along with SG&A embedded in the Northlake business partially offset by
declines in distribution expense.
Selling, general, and administrative expenses, (“SG&A”) for the fiscal year 2015 were $165.8 million or 21.5% of
sales compared to $165.8 million or 23.1% of sales during the prior year. The decline in SG&A as a percentage of
sales relates to three primary items: the absence of $3.9 million of management transition costs in 2014; increased
selling and distribution expense in the then current year associated with a 4.8% increase in organic sales during the
year; and $6.6 million of incremental expenses as a result of the Ultrafryer and Enginetics acquisitions.
Income from Operations
Income from operations for the fiscal year 2016 decreased by $8.3 million or 10.6%, when compared to the prior
year. The decrease is a result of a $7.3 million non-cash loss incurred to adjust the net realizable value of the Roll
Plate and Machinery business, increases in health care and compensation expenses, partially offset by gross profit
improvements as a result of business segment mix. Discussion of the performance of all of our reportable segments
is more fully explained in the segment analysis that follows.
Income from operations for the fiscal year 2015 increased by $12.8 million or 19.4%, when compared to the prior
year. The increase was primarily driven by $56.0 million of sales increases, increasing gross profit by $9.2 million,
along with a $6.6 million decline in restructuring expenses, and a reduction in net gain from insurance proceeds of
$3.0 million.
Interest Expense
Interest expense for the fiscal year 2016 was $2.9 million, a decrease of $0.3 million as compared to the prior year.
The decrease is primarily due to lower average borrowings outstanding during the year.
Interest expense for the fiscal year 2015 was $3.2 million, an increase of $0.9 million as compared to the prior
year. The increase is primarily due to higher average borrowings outstanding during the year as a result of the
Enginetics acquisition and increased capital spending to support strategic growth programs.
Income Taxes
The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2016 was $16.3
million, or an effective rate of 23.8%, compared to $20.9 million, or an effective rate of 27.4% for the year ended
June 30, 2015. Changes in the effective tax rates from period to period may be significant as they depend on many
factors including, but not limited to, the amount of the Company's income or loss, the mix of income earned in the
US versus outside the US, the effective tax rate in each of the countries in which we earn income, and any one time
tax issues which occur during the period. We anticipate our tax rate will be approximately 28% in the coming fiscal
year due to mix of income earned in jurisdictions with higher tax rates.
The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2016 was
impacted by the following items: (i) a benefit of $4.9 million due to the mix of income earned in jurisdictions with
23
beneficial tax rates, (ii) a net benefit of $0.9 million related to a bargain-sale of idle property to a charitable
organization, and (iii) a benefit of $0.7 million related to the R&D tax credit.
The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2015 was $20.9
million, an effective rate of 27.4%, compared to $18.1 million, an effective rate of 26.6% for the year ended June 30,
2014. The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2015 was
impacted by the following items: (i) a benefit of $0.5 million related to the R&D tax credit that expired during the
fiscal year on December 31, 2014 (ii) a benefit of $4.0 million due to the mix of income earned in jurisdictions with
beneficial tax rates.
The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2014 was
impacted by the following items: (i) a benefit of $0.5 million related to the R&D tax credit that expired during the
fiscal year on December 31, (ii) a benefit of $0.5 million related to a decrease in the statutory tax rate in the United
Kingdom on prior period deferred tax liabilities recorded during the first quarter during the fiscal year, (iii) a benefit
of $1.1 million due to non-taxable life insurance proceeds received in the third quarter and (iv) a benefit of $3.8
million due to the mix of income earned in jurisdictions with beneficial tax rates.
Capital Expenditures
In general, our capital expenditures over the long term are expected to be approximately 2% to 3% of net sales.
During 2016, capital expenditures decreased to $17.9 million or 2.4% of net sales as compared to $22.6 million or
2.9% of net sales in the prior year. We anticipated 2016 capital spending to be approximately $24 million, however
due to project delays, spending was $8 million below our target. We anticipate capital expenditures in the range of
$26.0 million to $28.0 million in 2017, which includes amounts not spent in 2016. The 2017 capital spending will
be focused on completion of the new Engineering Technologies facility in Wisconsin along with growth, cost
reduction, and typical maintenance capital programs.
Backlog
Backlog includes all active or open orders for goods and services that have a firm fixed customer purchase order
with defined delivery dates. Backlog also includes any future deliveries based on executed customer contracts, so
long as such deliveries are based on agreed upon delivery schedules. Backlog is not generally a significant factor in
the Company’s businesses because of our relatively short delivery periods and rapid inventory turnover with the
exception of Engineering Technologies. 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.
Backlog orders in place at June 30, 2016 and 2015 are as follows (in thousands):
Food Service Equipment
Engraving
Engineering Technologies
Electronics
Hydraulics
Total
Net realizable beyond one year
Net realizable within one year
2016
$37,202
19,046
90,241
44,713
4,951
196,153
33,257
$162,896
$
$
2015
46,147
18,992
93,012
38,445
4,776
201,372
33,215
168,157
$
$
Backlog realizable within one year decreased $5.3 million, or 3.1%, to $162.9 million at June 30, 2016 from
$168.2 million at June 30, 2015. The backlog decrease of $8.9 million in the Food Service Equipment segment
resulted primarily from lower demand in the refrigeration markets. The increase in Electronics backlog of $6.3
million is primarily a result of the recently acquired Northlake business.
24
Segment Analysis (in thousands)
Food Service Equipment
(in thousands except
percentages)
2016 compared to 2015
2015 compared to 2014
2016
2015
Change
2015
2014
Change
%
%
Net sales
Income from operations
Operating income margin
$ 381,867
40,142
10.5%
$ 408,706
37,456
9.2%
-6.6%
7.2%
$ 408,706
37,456
9.2%
$ 377,848
38,203
10.1%
8.2%
-2.0%
Net sales for fiscal year 2016 decreased $26.8 million, or 6.6% when compared to the prior year. The reduction was
primarily in the Refrigeration Solutions group where sales decreased by 12.2%. Three factors contributed to the
Refrigeration sales decline: (i) loss of market share into the dollar store market, (ii) reduced sales to major chains
due to reduced capital spending, and (iii) reduced sales in Canada due to the strength of the U.S. dollar. We
anticipate that capital spending by our major chain customers will remain soft into the first half of fiscal year 2017
but will begin to increase in the second half of fiscal year 2017. Sales from the Cooking Solutions group increased,
by 0.5% year over year due to growth in sales to retail supermarkets. Specialty Solutions sales decreased 1.1% as
our European pump business was impacted by a weak Euro early in the year.
Net sales for fiscal year 2015 increased $30.9 million, or 8.2%, when compared to the prior year. The sales growth
was driven by organic sales increases of 4.9%, sales increases of 3.9% due to our acquisition of Ultrafyer, partially
offset by foreign exchange declines. The Refrigerated Solutions group sales increased 4.7% as the group saw a
return of the drug retail business in 2015 and strong sales into the dollar store market. This strength was partially
offset by weakness in national food service chains. Sales from the Cooking Solutions group increased, by 22.2%
year over year. Excluding the Ultrafryer acquisition, Cooking Solutions group sales grew at 4.2% as compared to
2014. Growth was driven by increased spending by U.S. retail supermarket customers. Specialty Solutions sales
increased 1.1% as our European pump business was impacted by the weakening of the Euro during the year.
Foreign exchange losses in the group were offset by sales growth in our specialty merchandising business as several
new chains have signed on for development of customized solutions.
Income from operations for fiscal year 2016 increased $2.7 million, or 7.2%, when compared to the prior year, and
operating income margin grew from 9.2% to 10.5%, up 130 basis points. Operating efficiencies, portfolio focus,
paring of low-margin products and expense controls have increased our leverage and have positively impacted
income from operations for the segment. Our focus in fiscal year 2017 is to generate positive operating income
growth through product rationalization, sales volume increases and margin improvement through future deployment
of Standex Operational Excellence.
Income from operations for fiscal year 2015 decreased $0.7 million, or 2.0%, when compared to the prior year, and
operating income margin declined from 10.1% to 9.2%. The positive impact of the year-over-year volume increase
was offset by a combination of adverse market channel, product and customer mix changes; negative foreign
exchange impacts and disruptions resulting from a factory closure.
Engraving
(in thousands except
percentages)
Net sales
Income from operations
Operating income margin
2016 compared to 2015
2015 compared to 2014
%
%
2016
2015
Change
2015
2014
Change
$ 124,120
29,579
23.8%
$ 110,781
24,250
21.9%
12.0%
22.0%
$ 110,781
24,250
21.9%
$ 109,271
22,145
20.3%
1.4%
9.5%
Net sales for fiscal year 2016 increased by $13.3 million or 12.0%, compared to the prior year. Sales growth
excluding foreign exchange losses of $8.7 million is driven by sales gains at Mold-Tech for new automotive model
introductions along with market share gains throughout the world. The Engraving segment also experienced sales
25
gains in its Roll Plate and Machinery business and core forming tooling business. We expect moderate Mold-Tech
sales growth in 2017 as new automotive model launches occur in the coming year.
Subsequent to our fiscal 2016 year-end, the Company sold its U.S. Roll Plate and Machinery business as it was not
strategic and did not meet our growth and return expectations. This divestiture also allows the Company’s
management to focus on higher growth and better return businesses within the Engraving segment. In preparation of
this sale, during the fourth quarter of 2016, we recorded a $7.3 million non-cash loss to adjust the net assets of this
business to their net realizable value. This expense is recorded as a component of Other Operating Income
(Expense), net.
The Roll Plate and Machinery business sales increased in fiscal 2016 by $2.8 million up to $17.4 million. The sales
(in millions) for the Roll Plate and Machinery business from the first to the fourth quarter of fiscal year 2016 were
$4.2, $4.9, $4.0, and $4.3, respectively.
Net sales for fiscal year 2015 increased by $1.5 million or 1.4%, compared to the prior year. Unfavorable foreign
exchange impacted sales $7.2 million. Sales growth excluding foreign exchange losses were primarily driven by
continued expansion of our Asia Pacific Mold-Tech business as a result of increased market share. North American
sales volumes were down for the year due to lower new automotive model activity and some automotive projects
that were pushed out from the fourth quarter to the first half of 2016. Sales of core forming tooling grew 25% or
$2.4 million as compared to prior year.
Income from operations in fiscal year 2016 increased by $5.3 million, or 22%, when compared to the prior year.
The operating income improvement is driven by increased volume in all regions, partially offset by unfavorable
foreign exchange and market declines in South America.
The Roll Plate and Machinery business operating income increased in fiscal 2016 by $1.1 million up to $1.2 million.
The operating income (in thousands) for the Roll Plate and Machinery business from the first to the fourth quarter of
fiscal year 2016 were $89, $242, $378, and $493, respectively.
Income from operations in fiscal year 2015 increased by $2.1 million, or 9.5%, when compared to the prior year.
The increase is driven by increased volume in Asia Pacific partially offset by unfavorable foreign exchange and
fewer new model launches which impeded margin growth in the mold texturing business.
Engineering Technologies
(in thousands except
percentages)
2016 compared to 2015
2015 compared to 2014
2016
2015
Change
2015
2014
Change
%
%
Net sales
Income from operations
Operating income margin
$ 82,235
8,258
10.0%
$ 97,018
13,097
13.5%
-15.2%
-36.9%
$ 97,018
13,097
13.5%
$ 79,642
12,676
15.9%
21.8%
3.3%
Net sales in the fiscal year 2016 decreased $14.8 million or 15.2% when compared to the prior year. Sales
distribution by market in 2016 was as follows: 46% aviation, 27% space, 10% oil and gas, 8% medical, 9% other
markets. Sales in the land based gas turbine and oil and gas markets were down over 60% from the prior year level.
The decline was a result of reduced demand in the oil and gas industry due to lower oil prices. We expect this
market to remain soft for an extended period of time and have and will continue to reduce costs to align with
demand. Total space sales decreased by 20.5% due to the completion of project based contracts in the manned space
market. Sales in the unmanned space market were up 18.0% compared to the prior year. Aviation sales increased
29.7% from the prior year due to strong customer demand and recent contract awards. We anticipate that aviation
sales will continue to increase during 2017 and will be approximately 50% of the segment’s sales for the year.
Net sales in the fiscal year 2015 increased $17.4 million, or 21.8%, when compared to the prior year. Acquisitions
contributed $22.5 million or 28.3%, partially offset by organic sales declines of $4.6 million, or 5.8%. Sales in the
land based gas turbine and oil and gas markets were down 24.9% from the prior year level. The decline was a result
of reduced demand due to lower oil prices. Space market sales increased 26.3% from the prior year driven by higher
26
sales in both the launch vehicle and the manned space market currently in the development phase. Legacy sales in
the aviation market were up 24% compared to the prior year due to recent contract awards. Defense related sales
were down 41.2% due to the timing of project based contracts. Sales in the medical market were down 14.4%
primarily due to a shift in product mix.
Income from operations in the fiscal year 2016 decreased $4.8 million or 36.9% when compared to the prior year.
Operating income results were negatively impacted by the significant sales declines in both the energy and oil and
gas related markets. This impact was partially offset by improved margins in the aviation market along with cost
reduction programs implemented as a result of lower volume. We expect that our new Aluminum Center of
Excellence facility will be fully operational beginning in the first quarter of 2017.
Income from operations in the fiscal year 2015 increased $0.4 million, or 3.3%, when compared to the prior year.
Operating income was negatively impacted by $1.1 million of purchase accounting expenses associated with the
Enginetics acquisition and lower volume from oil and gas customers.
Electronics
(in thousands except
percentages)
2016 compared to 2015
2015 compared to 2014
2016
2015
Change
2015
2014
Change
%
%
Net sales
Income from operations
Operating income margin
$ 118,319
21,104
17.8%
$ 114,196
20,884
18.3%
3.6%
1.1%
$ 114,196
20,884
18.3%
$ 114,881
19,732
17.2%
-0.6%
5.8%
Net sales in the fiscal year 2016 increased $4.1 million, 3.6%, when compared to the prior year. Organic sales
growth was $0.7 million, or 0.6%, while the Northlake acquisition contributed $7.5 million. Foreign exchange rates
adversely affected sales by $4.1 million. Sales growth in local currency was particularly strong in Europe driven by
volume increases in the sensor components. We experienced sales declines in both Asia and North America due to
general market softness, particularly earlier in the fiscal year. We expect North American and European sales to
increase in fiscal year 2017 which will be partially offset by continued weakness in Asia.
Net sales in the fiscal year 2015 decreased $0.7 million, 0.6%, when compared to the prior year. Organic sales
growth of $4.8 million or 4.2% were more than offset by exchange rate declines of $6.2 million. Almost all of the
growth came from the sensor, relay and planar product lines across all major geographic areas. Sales growth in local
currency was particularly strong in Europe and Asia.
Income from operations in the fiscal year 2016 increased $0.2 million, or 1.1%, when compared to the prior year.
The operating improvements were a result of a facility consolidation into our Northlake site partially offset by $0.4
million of purchase accounting charges associated with the Northlake acquisition.
Income from operations in the fiscal year 2015 increased $1.2 million, or 5.8%, when compared to the prior year.
The improvement were driven by the organic sales growth; operational improvements; material and labor cost
savings; favorable product mix due to increased sensor and relay sales; facility consolidations; and improved
efficiencies in our new Mexico facility partially offset by a negative impact due to foreign exchange rates.
Hydraulics
(in thousands except
percentages)
2016 compared to 2015
2015 compared to 2014
%
%
2016
2015
Change
2015
2014
Change
Net sales
Income from operations
Operating income margin
$ 45,045
7,947
17.6%
$ 41,441
7,013
16.9%
8.7%
13.3%
$ 41,441
7,013
16.9%
$ 34,538
5,781
16.7%
20.0%
21.3%
27
Net sales in fiscal year 2016 increased $3.6 million, or 8.7% compared to the prior year. Sales distribution by
market in 2016 was as follows: 40% dump trailer and truck, 22% refuse, 22% after market, 6% export, and 10%
other markets. Strong demand in the traditional North American dump trailer and truck markets was the largest
contributor for the net sales increase in addition to market share gains experienced in the refuse market. In the first
quarter of fiscal year 2017 we will complete the expansion of our Tianjin, China facility in order to support
continued global market growth.
Net sales in the fiscal year 2015 increased $6.9 million, or 20.0% when compared to the prior year. Diversification
of our OEM business into refuse and construction equipment along with strong demand for cylinder requirements in
the traditional North American dump truck and trailer markets drove the increase in net sales. The business has
focused on delivering custom engineered cylinder solutions to OEM customers, including single and double acting
telescopic hydraulic cylinders, hydraulic rod cylinders, and most recently pneumatic cylinders. New applications for
these products are being utilized on roll off container handlers, garbage trucks, airline support equipment, lift trucks,
and specialty loading equipment.
Income from operations in the fiscal year 2016 increased $0.9 million or 13.3% when compared to the prior year
due to market growth, increased sales volume and cost containment efforts.
Income from operations in the fiscal year 2015 increased $1.2 million or 21.3% when compared to the prior year due
to increased sales volume and better facility utilization.
Corporate, Restructuring and Other
(in thousands except
percentages)
Corporate
Restructuring
Other operating income
(expense), net
2016 compared to 2015
2015 compared to 2014
2016
$ (24,996)
(4,232)
2015
$ (21,051)
(3,443)
%
Change
2015
2014
18.7%
22.9%
$ (21,051)
(3,443)
$ (26,054)
(10,077)
%
Change
-19.2%
-65.8%
(7,458)
438
-1,802.7%
438
3,462
-87.3%
Corporate expenses in fiscal year 2016 increased $3.9 million or 18.7% when compared to the prior year. The
increase is due to increased health care expenses, compensation, and professional services.
Corporate expenses in fiscal year 2015 decreased $5.0 million or 19.2% when compared to the prior year. The
decrease is primarily due to the absence of management transition cost of $3.9 million incurred in 2014.
Restructuring expenses during fiscal year 2016 were $4.2 million primarily related to a $1.7 million non-cash
charge from the sale of a vacant property and a $0.7 million non-cash charge to discontinue a product line at our
Refrigeration Solutions group. We also have taken restructuring actions to downsize a Canadian facility in
connection with the Northlake acquisition and have reduced personnel in those of our locations impacted by the
slowdown in the oil and gas market.
Restructuring expense during fiscal year 2015 was $3.4 million compared to $10.1 million the prior year.
Restructuring expense consisted of $2.6 million related to facility closures and consolidations in the Food Service
Equipment.
The Company anticipates further restructuring charges in 2017 based upon market conditions and cost reduction
activities to improve our competitive advantage.
During fiscal year 2016, other operating income (expense), net was primarily due to a non-cash loss of $7.3 million
incurred to adjust the net realizable value of the U.S. Roll Plate and Machinery business in preparation for its sale on
July 1, 2016.
During fiscal year 2015, other operating income (expense), net decreased by $3.0 million from the prior year. The
28
decrease was primarily a reduction of insurance proceeds received related to the catastrophic failure of a large
vertical machining center located at our Engineering Technologies facility in Massachusetts.
Discontinued Operations
In pursuing our business strategy, we have divested certain businesses and recorded activities of these businesses as
discontinued operations.
In June 2014, the Company divested the American Foodservice Company, (“AFS”) a manufacturer of custom design
and fabrication of counter systems and cabinets, in our Food Service Equipment segment. In connection with this
sale, the Company received proceeds of $3.1 million and recorded a net loss on disposal of $3.2 million.
On March 30, 2012, the Air Distribution Products Group, (“ADP”) was sold to a private equity buyer for
consideration of $16.1 million consisting of $13.1 million in cash and a $3.0 million promissory note from the
buyer. The note was secured by a mortgage on the ADP real estate sold in the transaction in Detroit Lakes, MN,
Medina, NY, and Powder Springs, GA. During the first quarter 2016, the private equity buyer of ADP sold one of
the facilities securing the note. The Company released all mortgages on the properties and accepted an advanced
payment of $2.8 million during October 2015 in order to reduce repayment risk and settle all obligations under the
note. The Company recorded a $0.2 million loss in discontinued operations during the first quarter 2016 related to
this transaction.
The Company remained the obligor of ADP’s Philadelphia, PA facility and administrative offices. We have entered
into a renewable sublease agreement with a third party for this space. Our total obligation with respect to the lease
is $0.7 million, of which $0.3 million was recorded as a liability at June 30, 2016. We do not expect to record
additional charges related to these obligations.
During 2014, the Company received notice that its obligations under a guarantee provided to the buyers of ADP
were triggered as a result of its withdrawal from both of the multi-employer pension plans in which ADP previously
participated. The last of these obligations were settled in July of fiscal year 2016 by a $0.5 million payment to the
final multi-employer plan.
The following table summarizes the Company’s discontinued operations activity, by operation, for the years ended
June 30, (in thousands):
Year Disposed
2016
2015
2014
Sales:
American Foodservice Company
2014
$
- $
- $
20,556
Income (loss) before taxes:
American Foodservice Company (1)
Air Distribution Products Group
Other loss from discontinued operations
Income (loss) before taxes from discontinued operations
(Provision) benefit for tax
Net income (loss) from discontinued operations
2014
2012
$
3
(225)
(7)
(229)
55
(174)
$
(492)
(137)
(130)
(759)
259
(500)
(8,339)
(1,849)
(387)
10,575
3,692
$ (6,883)
(1) American Foodservice Company incurred a pretax operational loss of $3.5 million and pretax loss on
sale of $4.8 million in 2014.
Liquidity and Capital Resources
At June 30, 2016, our total cash balance was $122.0 million, of which $111.5 million was held by foreign
subsidiaries. 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. Our current plans are not expected to require a repatriation of
29
cash to fund our U.S. operations and as a result, we intend to indefinitely reinvest our foreign earnings to fund our
overseas growth. If the undistributed earnings of our foreign subsidiaries are needed for operations in the United
States, we would be required to accrue and pay U.S. taxes upon repatriation.
30
Cash Flow
Net cash provided by operating activities from continuing operations for the year ended June 30, 2016 was $81.2
million, compared to $66.2 million for the same period in 2015. Changes to net cash provided by operating
activities of $15.1 million primarily related to net working capital changes of $17.8 million between periods. Net
cash used in investing activities from continuing operations for the year ended June 30, 2016 was $31.6 million,
consisting primarily of $17.9 million for capital expenditure and $13.7 million to acquire Northlake Engineering,
Inc. Net cash used by financing activities for continuing operations for the year ended June 30, 2016, was $20.7
million consisting of debt repayments of $10.0 million, cash dividends of $6.8 million, and repurchased treasury
stock of $5.6 million.
Net cash provided by operating activities from continuing operations for the year ended June 30, 2015 was $66.2
million, compared to $72.0 million for the same period in 2014. Changes to net cash provided by operating
activities of $5.8 million primarily related to increases to net income of $5.5 million and $2.9 million of decreases
to non-cash stock compensation expenses which were more than offset by the use of cash for net working capital
needs during the year. Net cash used in investing activities from continuing operations for the year ended June 30,
2015 was $78.5 million, consisting primarily of $57.1 million for the acquisitions and $22.6 million for capital
expenditures. Net cash provided by financing activities for continuing operations for the year ended June 30, 2015,
was $44.6 million consisting of net borrowings of $58.0 million primarily related to acquisitions during the year,
partially offset by dividends paid of $5.8 million, and repurchased treasury stock of $10.4million.
Capital Structure
During fiscal year 2015, the Company entered into an Amended and Restated Credit Agreement (“Credit Facility”,
or “facility”). This five-year Credit Facility expires in December 2019 and has a borrowing limit of $400 million,
which can be increased by an amount of up to $100 million, in accordance with specified conditions contained in
the agreement. The facility also includes a $10 million sublimit for swing line loans and a $30 million sublimit for
letters of credit.
Under the terms of the Credit Facility, we will 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
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. As our funded debt to EBITDA ratio
increases, the commitment fee will increase.
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, 2016, the Company has used $7.7 million
against the letter of credit sub-facility and had the ability to borrow $254.4 million under the facility based on our
current 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
3.0:1. Adjusted EBIT per the Credit Facility specifically excludes extraordinary and certain other defined items
such as cash restructuring and acquisition-related charges up to $7.5 million, and unlimited non-cash charges
including gains or losses on sale of property and goodwill adjustments. At June 30, 2016, the Company’s Interest
Coverage Ratio was 28.76:1.
Leverage Ratio - The Company’s ratio of funded debt to trailing twelve month Adjusted EBITDA per the facility,
calculated as Adjusted EBIT per the Credit Facility plus depreciation and amortization, may not exceed 3.5:1. At
June 30, 2016, the Company’s Leverage Ratio was 1.01:1.
As of June 30, 2016, we had borrowings under our facility of $93.0 million and the effective rate of interest for
outstanding borrowings under the facility was 1.76%. Our primary cash requirements in addition to day-to-day
operating needs include interest payments, capital expenditures, acquisitions, share repurchases, and dividends.
31
Our primary sources of cash for these requirements are cash flows from continuing operations and borrowings
under the facility. We expect to spend between $26.0 and $28.0 million on capital expenditures during 2017, and
expect that depreciation and amortization expense will be between $18.0 and $19.0 million and $3.0 and $4.0
million, respectively.
In order to manage our interest rate exposure, at June 30, 2016 we are party to $50.0 million of active floating to
fixed rate swaps. These swaps convert our interest payments from LIBOR to a weighted average rate of 1.43%.
The following table sets forth our capitalization at June 30, (in thousands):
Long-term debt, net of issuance cost
Less cash and cash equivalents
Net (cash) debt
Stockholders’ equity
Total capitalization
2016
2015
$
$
92,114
121,988
(29,874)
369,959
340,085
$
$
101,753
96,128
5,625
348,570
354,195
Stockholders’ equity increased year over year by $21.4 million, primarily as a result of current year net income of
$52.1 million partially offset by $11.3 million of unfavorable foreign currency translation, $6.8 million dividends
paid, $13.4 million of unrealized pension loss. The Company's net (cash) debt to capital percentage changed to
(8.8%) net cash to capital for the year ended June 30, 2016 from 1.6% net debt to capital for the year ended June 30,
2015. The change in net debt to capital is primarily driven by a reduction in borrowings and cash generated through
operations.
We sponsor five defined benefit plans including two in the U.S. and one in Germany, U.K. and Ireland. The
Company’s pension plan is frozen for U.S. employees and participants in the plan ceased accruing future benefits.
The fair value of the Company's U.S. pension plan assets was $197.9 million at June 30, 2016 and the projected
benefit obligation in the U.S. was $269.2 million at that time. As a result of past contributions, the plan is not
expected to be 100% funded under ERISA rules at June 30, 2016, but we do not expect to make mandatory
contributions to the plan until 2018. We expect to pay $1.4 million in prescribed contributions to our U.K. defined
benefit plan and other unfunded defined benefit plans in both the U.S. and Europe during fiscal year 2017.
We have evaluated the current and long-term cash requirements of our defined benefit and defined contribution
plans as of June 30, 2016 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 six retired executives.
Current executives and new hires are not eligible for this program. At June 30, 2016 the underlying policies had a
cash surrender value of $19.5 million and are reported net of loans of $10.2 million for which we have the legal right
of offset.
Contractual obligations of the Company as of June 30, 2016 are as follows (in thousands):
Contractual Obligations
Long-term debt obligations
Operating lease obligations
Estimated interest payments (1)
Post-retirement benefit payments (2)
Total
$
Total
93,018
36,399
6,596
44,546
$ 180,559
$
$
Payments Due by Period
Less
than 1
Year
12
7,442
1,987
1,402
10,843
1-3
Years
6
9,954
3,705
16,519
30,184
$
3-5
Years
93,000
5,394
904
22,577
$ 121,875
$
$
32
More
than 5
Years
-
13,609
-
4,048
17,657
$
$
(1) Estimated interest payments are based upon effective interest rates as of June 30, 2016, and
include the impact of interest rate swaps. See Item 7A for further discussions surrounding
interest rate exposure on our variable rate borrowings.
(2) Post-retirement benefits and pension plan contribution payments represents’ 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, 2016, we had $2.5 million of non-current liabilities for uncertain tax positions. We are not able to
provide a reasonable estimate of the timing of future payments related to these obligations.
Off Balance Sheet Items
In March 2012, the Company sold substantially all of the assets of the ADP business. In connection with the
divestiture, the Company remained the obligor of ADP’s Philadelphia, PA facility and administrative offices. On
February 4, 2015 we entered into a one year renewable, sublease agreement for this building. Our total obligation
with respect to the remaining Philadelphia leases is $0.7 million, of which $0.3 million was recorded as a liability at
June 30, 2016. We do not expect to record additional charges related to these obligations.
At June 30, 2016, and 2015, the Company had standby letters of credit outstanding, primarily for insurance and
trade financing purposes, of $7.7 million and $7.2 million, respectively.
We had no other material off balance sheet items at June 30, 2016, other than the operating leases summarized
above in the “Contractual obligations” table.
Other Matters
Inflation – Certain of our expenses, such as wages and benefits, occupancy costs and equipment repair and
replacement, are subject to normal inflationary pressures. Inflation for medical costs can impact both our reserves
for self-insured medical plans 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 manage medical
costs 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 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.
Foreign Currency Translation – Our primary functional currencies used by our non-U.S. subsidiaries are the Euro,
British Pound Sterling (Pound), Mexican (Peso), and Chinese (Yuan). During the current year, the Pound, Euro,
Peso and Yuan all decreased in value related to the U.S. Dollar, our reporting currency. Since June 30, 2015 the
Pound, Euro, Peso, and Yuan have depreciated by 15.3%, 0.3%, 17.6%, and 6.5% respectively (all relative to the
U.S. Dollar). These exchange values were used in translating the appropriate non-U.S. subsidiaries’ balance sheets
into U.S. Dollars at the end of the current year.
Defined Benefit Pension Plans – We record expenses related to these plans based upon various actuarial
assumptions such as discount rates and assumed rates of returns. The Company’s pension plan was frozen for
substantially all remaining eligible U.S. employees in 2015 and participants in the plan ceased accruing future
benefits.
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.
Seasonality – We are a diversified business with generally low levels of seasonality, however our fiscal third quarter
33
is typically the period with the lowest level of activity.
Employee Relations – The Company has labor agreements with a number of union locals in the United States and a
number of European employees belong to European trade unions. There are two union contracts in the U.S. expiring
during fiscal year 2017. The first has been successfully negotiated in July of 2016 and the second will not expire
until October 2016.
Critical Accounting Policies
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.
The Company’s product sales are recorded when persuasive evidence of an arrangement exists, delivery has
occurred, the price to the buyer is fixed or determinable, and collectability is reasonably assured. For products that
include installation, and if the installation meets the criteria to be considered a separate element, product revenue is
recognized upon delivery, and installation revenue is recognized when the installation is complete. Revenues under
certain fixed price contracts are generally recorded when deliveries are made.
Sales and estimated profits under certain long-term contracts are recognized under the percentage-of-completion
methods of accounting, whereby profits are recorded pro rata, based upon current estimates of costs to complete
such contracts. Losses on contracts are provided for 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. Any excess of the billings over cost and estimated earnings on long-term contracts is included in
deferred revenue.
Collectability of Accounts Receivable – Accounts Receivable are reduced by an allowance for amounts that may
become uncollectible in the future. Our estimate for the allowance for doubtful 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 general provision for unknown but existing doubtful accounts.
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 provision 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 our reporting units for impairment testing as our eleven operating segments, which are
aggregated into our five reporting segments as disclosed in Note 18 – Industry Segment Information.
The test for impairment is a two-step process. The first step compares the carrying amount of the reporting unit to
its estimated fair value (Step 1). To the extent that the carrying value of the reporting unit exceeds its estimated fair
value, a second step is performed, wherein the reporting unit’s carrying value is compared to the implied fair value
(Step 2). To the extent that the carrying value exceeds the implied fair value, impairment exists and must be
recognized.
34
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 10.31%. An increase in the weighted average cost of capital of
approximately 200 basis points in the analysis would not result in the identification of any impairments.
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. Certain reporting units
have been significantly impacted by the current global economic downturn and if the effects of the current global
economic environment are protracted or the recovery is slower than we have projected estimates of future cash flows
for each reporting unit may be insufficient to support the carrying value of the reporting units, requiring the
Company to re-assess its conclusions related to fair value and the recoverability of goodwill.
As a result of our annual assessment, the Company determined that the fair value of the reporting units exceeded
their respective carrying values. Therefore, no impairment charges were recorded in connection with our annual
assessment during 2016. Subsequent to our annual impairment test, we disposed of $273 thousand of goodwill
recorded in the Engraving segment in connection with our sale of the Roll, Plate, and Machinery business.
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 7.10% 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 4.0% 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 expected return on plan assets assumptions, holding our discount rate and other assumptions constant,
would increase or decrease pension expense by approximately $0.6 million per year. A twenty-five basis point
change in our discount rate, holding all other assumptions constant, would have no impact on 2016 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.
35
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.
36
Recently Issued Accounting Pronouncements
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, 2016.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Risk Management
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.
Exchange Risk
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. 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 dividend payments, loan payments, 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, 2016 and 2015, the fair value, in the
aggregate, of the Company’s open foreign exchange contracts was $0.1 million and an asset of $0.7 million,
respectively.
Our primary translation risk is with the Euro, British Pound Sterling, Peso, 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, 2016, would
not result in a material change in our operations, financial position, or cash flows. We do not hedge our translation
risk. As a result, fluctuations in currency exchange rates can affect our stockholders’ equity.
Interest Rate
The Company’s effective rate on variable-rate borrowings under the revolving credit agreement is 1.76% and 1.46%
at June 30, 2016 and 2015, respectively. Our interest rate exposure is limited primarily to interest rate changes on
our variable rate borrowings. From time to time, we will use interest rate swap agreements to modify our exposure
to interest rate movements. We currently have $50.0 million of active floating to fixed rate swaps with terms
ranging from one to three years. These swaps convert our interest payments from LIBOR to a weighted average rate
of 1.43%. At June 30, 2016 and 2015, the fair value, in the aggregate, of the Company’s interest rate swaps was
$1.0 million and $0.6 million, respectively. Due to the impact of the swaps, an increase in interest rates would not
materially impact our annual interest expense at June 30, 2016.
Concentration of Credit Risk
We have a diversified customer base. As such, the risk associated with concentration of credit risk is inherently
minimized. As of June 30, 2016, no one customer accounted for more than 5% of our consolidated outstanding
receivables or of our sales.
37
Commodity Prices
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, Food Service Equipment, Electronics, and Hydraulics segments are all sensitive to
price increases for steel products, other metal commodities and petroleum based products. In the past year, we have
experienced price fluctuations for a number of materials including steel, copper wire, other metal commodities,
refrigeration components and foam insulation. 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.
Item 8. Financial Statements and Supplementary Data
Consolidated Balance Sheets
Standex International Corporation and Subsidiaries
As of June 30 (in thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, net
Inventories
Prepaid expenses and other current assets
Income taxes receivable
Deferred tax asset
Assets held for sale
Total current assets
Property, plant and equipment, net
Intangible assets, net
Goodwill
Deferred tax asset
Other non-current assets
Total non-current assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
Accrued liabilities
Income taxes payable
Liabilities held for sale
Total current liabilities
Long-term debt
Deferred income taxes
Pension obligations
Other non-current liabilities
Total non-current liabilities
38
2016
2015
$
$
$
121,988
103,974
105,402
4,784
1,325
16,013
2,363
355,849
106,686
40,412
157,354
11,361
18,795
334,608
$
96,128
110,478
108,305
7,070
747
12,674
-
335,402
108,536
38,048
154,732
917
21,428
323,661
690,457
$
659,063
77,099
50,785
4,695
1,528
134,107
92,114
5,941
78,013
10,323
186,391
$
80,764
47,742
10,285
-
138,791
101,753
7,368
53,422
9,159
171,702
Commitments and Contingencies (Notes 11 and 12)
Stockholders' equity:
Common stock, par value $1.50 per share -
60,000,000 shares authorized, 27,984,278
issued, 12,674,458 and 12,651,488 shares
outstanding in 2016 and 2015
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury shares (15,309,820 shares in 2016
and 15,332,790 shares in 2015)
Total stockholders' equity
41,976
52,374
678,002
(117,975)
(284,418)
369,959
41,976
47,254
632,864
(93,017)
(280,507)
348,570
Total liabilities and stockholders' equity
$
690,457
$
659,063
See notes to consolidated financial statements.
Consolidated Statements of Operations
Standex International Corporation and Subsidiaries
For the Years Ended June 30
(in thousands, except per share data)
Net sales
Cost of sales
Gross profit
$
Selling, general and administrative
Restructuring costs
Other operating (income) expense, net
Income from operations
Interest expense
Other non-operating (income) expense, net
Total
Income from continuing operations before income taxes
Provision for income taxes
Income from continuing operations
2016
2015
2014
$
751,586
499,333
252,253
170,219
4,232
7,458
70,344
2,871
(1,052)
1,819
68,525
16,295
52,230
$
772,142
524,656
247,486
165,837
3,443
(438)
78,644
3,161
(634)
2,527
76,117
20,874
55,243
716,180
477,911
238,269
165,786
10,077
(3,462)
65,868
2,249
(4,184)
(1,935)
67,803
18,054
49,749
Income (loss) from discontinued operations, net of tax
(174)
(500)
(6,883)
Net income
$
52,056
$
54,743
$
42,866
Basic earnings per share:
Income (loss) from continuing operations
Income (loss) from discontinued operations
Total
Diluted earnings per share:
Income (loss) from continuing operations
Income (loss) from discontinued operations
$
$
$
4.12
(0.01)
4.11
$
$
4.37
(0.04)
4.33
$
$
3.94
(0.55)
3.39
4.09
(0.01)
$
4.31
(0.04)
$
3.89
(0.54)
39
Total
$
4.08
$
4.27
$
3.35
See notes to consolidated financial statements.
Consolidated Statements of Comprehensive Income
Standex International Corporation and Subsidiaries
For the Years Ended June 30 (in thousands)
2016
2015
2014
Net income (loss)
Other comprehensive income (loss):
Defined benefit pension plans:
Actuarial gains (losses) and other changes in unrecognized costs
Amortization of unrecognized costs
Derivative instruments:
Change in unrealized gains and (losses)
Amortization of unrealized gains and (losses) into interest expense
Amortization of unrealized gains and (losses) into cost of goods sold
Foreign currency translation gains (losses)
Other comprehensive income (loss) before tax
Income tax (provision) benefit:
Defined benefit pension plans:
Actuarial gains (losses) and other changes in unrecognized costs
Amortization of unrecognized costs
Derivative instruments:
Change in unrealized gains and (losses)
Amortization of unrealized gains and (losses) into interest expense
Amortization of unrealized gains and (losses) into cost of goods sold
Income tax (provision) benefit to other comprehensive income (loss)
$
52,056
$
54,743
$
42,866
$
(26,619)
4,779
$
(27,344)
4,690
$
(604)
4,855
(1,010)
567
112
(11,303)
(33,474)
(687)
1,034
-
(23,133)
(45,440)
(194)
1,031
-
6,055
11,143
$
$
10,075
(1,685)
$
10,045
(1,671)
$
362
(1,724)
384
(216)
(42)
8,516
$
262
(394)
-
8,242
74
(394)
-
(1,682)
$
(24,958)
27,098
(37,198)
17,545
9,461
52,327
$
$
$
$
$
$
Other comprehensive income (loss), net of tax
Comprehensive income (loss)
See notes to consolidated financial statements.
Consolidated Statements of Stockholders' Equity
Standex International Corporation and Subsidiaries
For the Years Ended June 30
(in thousands, except as specified)
Balance, June 30, 2013
Stock issued for employee stock
option and purchase plans,
including related income tax
benefit and other
Stock-based compensation
Treasury stock acquired
Common
Stock
41,976 $
Additional
Paid-in
Capital
37,199 $
$
(441)
6,630
40
Accumulated
Other
Comprehensive
Treasure Stock
Retained
Earnings
546,031 $
Income
(Loss)
Shares
(65,280) 15,435 $
Total
Stockholders’
Equity
290,988
Amount
(268,938) $
(222)
3,895
132
(7,790)
3,454
6,630
(7,790)
Comprehensive income:
Net Income
Foreign currency translation
adjustment
Pension and OPEB adjustments,
net of tax of ($1.3) million
Change in fair value of
derivatives, net of tax of
($0.3) million
Dividends declared ($.38 per
share)
Balance, June 30, 2014
Stock issued for employee stock
option and purchase plans,
including related income tax
benefit and other
Stock-based compensation
Treasury stock acquired
Comprehensive income:
Net Income
Foreign currency translation
adjustment
Pension and OPEB adjustments,
net of tax of $8.4 million
Change in fair value of
derivatives, net of tax of
($0.2) million
Dividends declared ($.46 per
share)
Balance, June 30, 2015
Stock issued for employee stock
option and purchase plans,
including related income tax
benefit and other
Stock-based compensation
Treasury stock acquired
Comprehensive income:
Net Income
Foreign currency translation
adjustment
Pension and OPEB adjustments,
net of tax of $8.4 million
Change in fair value of
derivatives, net of tax of $0.2
million
Dividends declared ($.54 per
share)
42,866
6,055
2,889
517
$
41,976 $
43,388 $
(4,883)
584,014 $
(55,819) 15,345 $
(272,833) $
102
3,764
54,743
(150)
2,682
138
(10,356)
(23,133)
(14,280)
215
$
41,976 $
47,254 $
(5,893)
632,864 $
(93,017) 15,333 $
(280,507) $
31
5,089
52,056
(94)
1,725
71
(5,636)
(11,303)
(13,450)
(205)
(6,918)
678,002 $
(117,975) 15,310 $
(284,418) $
42,866
6,055
2,889
517
(4,883)
340,726
2,784
3,764
(10,356)
54,743
(23,133)
(14,280)
215
(5,893)
348,570
1,756
5,089
(5,636)
52,056
(11,303)
(13,450)
(205)
(6,918)
369,959
Balance, June 30, 2016
$
41,976 $
52,374 $
See notes to consolidated financial statements.
Consolidated Statements of Cash Flows
Standex International Corporation and Subsidiaries
For the Years Ended June 30 (in thousands)
Cash Flows from Operating Activities
Net income
Income (loss) from discontinued operations
Income (loss) from continuing operations
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
52,056
(174)
52,230
2016
$
2015
2014
$
$
54,743
(500)
55,243
42,866
(6,883)
49,749
41
17,953
5,089
(6,756)
2,323
7,267
191
(795)
-
16,684
3,764
(249)
(171)
-
-
(2,088)
-
4,144
1,729
(1,320)
1,092
(3,368)
6,731
(5,289)
81,221
(897)
80,324
(17,851)
(13,700)
(417)
-
383
-
(31,585)
(5,564)
(6,073)
(1,484)
4,619
(3,657)
(4,334)
9,477
66,167
(2,128)
64,039
(22,561)
(57,149)
(408)
-
66
1,536
(78,516)
14,591
6,630
(3,343)
5,982
-
925
(1,650)
(3,353)
(6,614)
(10,041)
(1,527)
(6,388)
15,166
6,192
5,673
71,992
(1,693)
70,299
(18,832)
(23,075)
(444)
3,654
118
2,964
(35,615)
2,803
(28,782)
65,000
(75,000)
942
795
(5,636)
(6,846)
(20,745)
(4,937)
25,860
96,128
121,988
-
(78,516)
2,452
(33,163)
274,700
(216,700)
696
2,088
(10,356)
(5,820)
44,608
(8,263)
21,868
74,260
96,128
$
$
71,000
(76,000)
1,098
1,650
(7,790)
(4,793)
(14,835)
895
23,196
51,064
74,260
$
$
$
2,351
24,769
$
$
2,547
12,891
$
$
1,834
14,048
Depreciation and amortization
Stock-based compensation
Deferred income taxes
Non-cash portion of restructuring charge
Loss on assets held for sale
Disposal of real estate and equipment
Excess tax benefit from share-based payment activity
Life insurance benefit
Increase/(decrease) in cash from changes in assets and liabilities, net of effects
from discontinued operations and business acquisitions:
Accounts receivables, net
Inventories
Contributions to defined benefit plans
Prepaid expenses and other
Accounts payable
Accrued payroll, employee benefits and other liabilities
Income taxes payable
Net cash provided by operating activities from continuing operations
Net cash used for operating activities from discontinued operations
Net cash provided by operating activities
Cash Flows from Investing Activities
Expenditures for capital assets
Expenditures for acquisitions, net of cash acquired
Expenditures for executive life insurance policies
Proceeds withdrawn from life insurance policies
Proceeds from sale of real estate and equipment
Other investing activity
Net cash provided by (used for) investing activities from continuing
operations
Net cash provided by (used for) investing activities from discontinued
operations
Net cash provided by (used for) investing activities
Cash Flows from Financing Activities
Proceeds from borrowings
Payments of debt
Stock issued under employee stock option and purchase plans
Excess tax benefit from share-based payment activity
Purchase of treasury stock
Cash dividends paid
Net cash provided by (used for) financing activities
Effect of exchange rate changes on cash
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest
Income taxes, net of refunds
See notes to consolidated financial statements.
42
STANDEX INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
SUMMARY OF ACCOUNTING POLICIES
Basis of Presentation and Consolidation
Standex International Corporation (“Standex” or the “Company”) is a diversified manufacturing company with
operations in the United States, Europe, Asia, Africa, and Latin America. 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.
Accounting Estimates
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.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments purchased with a maturity of three months or less.
These investments are carried at cost, which approximates fair value. At June 30, 2016 and 2015, the Company’s
cash was comprised solely of cash on deposit.
Trading Securities
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 consist of mutual funds, are included in other non-current assets and amounted to
$2.3 million at June 30, 2016 and 2015. Gains and losses on these investments are recorded as other non-operating
income (expense), net in the Consolidated Statements of Operations.
Accounts Receivable Allowances
The Company has provided an allowance for doubtful accounts reserve which represents the best estimate of
probable loss inherent in the Company’s account receivables portfolio. This estimate is derived from the
Company’s knowledge of its end markets, customer base, products, and historical experience.
43
The changes in the allowances for uncollectible accounts during 2016, 2015, and 2014 were as follows (in
thousands):
Balance at beginning of year
Acquisitions and other
Provision charged to expense
Write-offs, net of recoveries
Balance at end of year
2016
2,226
3
8
(118)
2,119
$
$
$
$
2015
2,282
4
496
(556)
2,226
$
$
2014
2,325
93
375
(511)
2,282
Inventories
Inventories are stated at the lower of (first-in, first-out) cost or market.
Long-Lived Assets
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.
Property, Plant and Equipment
Property, plant and equipment are reported at cost less accumulated depreciation. Depreciation is recorded on assets
over their estimated useful lives, generally using the straight-line method. Lives for property, plant and equipment
are as follows:
Buildings
Leasehold improvements
Machinery and equipment
Furniture and Fixtures
Computer hardware and software
40 to 50 years
Lesser of useful life or term, unless renewals
are deemed to be reasonably assured
8 to 15 years
3 to 10 years
3 to 7 years
Routine maintenance costs are expensed as incurred. Major improvements are capitalized. Major improvements to
leased buildings are capitalized as leasehold improvements and depreciated over the lesser of the lease term or the
life of the improvement.
Routine maintenance costs are expensed as incurred. Major improvements are capitalized. Major improvements to
leased buildings are capitalized as leasehold improvements and depreciated over the lesser of the lease term or the
life of the improvement.
Amortization of computer hardware and software of $0.6 million, $0.5 million, and $0.4 million is included as a
component of depreciation expense for the years ended June 30, 2016, 2015, and 2014, respectively.
Goodwill and Identifiable Intangible Assets
All business combinations are accounted for using the acquisition method. Goodwill and identifiable intangible
assets with indefinite lives, are not amortized, but are reviewed annually for impairment or more frequently if
44
impairment indicators arise. Identifiable intangible assets that are not deemed to have indefinite lives are amortized
on an accelerated basis over the following useful lives:
Customer relationships
Patents
Non-compete agreements
Other
Trade names
5 to 16 years
12 years
5 to 10 years
10 years
Indefinite life
See discussion of the Company’s assessment of impairment in Note 5 – Goodwill, and Note 6 – Intangible Assets.
Fair Value of Financial Instruments
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 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 17 – 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 17 – 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.
Level 3– Unobservable inputs based upon the Company’s best estimate of what market participants would
use in pricing the asset or liability.
We did not have any transfers of assets and liabilities between Level 1 and Level 2 of the fair value measurement
hierarchy at June 30, 2016 and 2015.
Cash and cash equivalents, accounts receivable, accounts payable and debt are carried at cost, which approximates
fair value.
45
The fair values of our financial instruments at June 30, 2016 and 2015 were (in thousands):
Financial Assets
Marketable securities - deferred compensation plan
Foreign Exchange contracts
$
2,333
11
$
2,333
-
$
- $
11
-
-
Total
Level 1
Level 2
Level 3
2016
Financial Liabilities
Foreign Exchange contracts
Interest rate swaps
$
94
1,038
$
- $
-
94
1,038
$
-
-
Total
Level 1
Level 2
Level 3
2015
Financial Assets
Marketable securities - deferred compensation plan
Foreign Exchange contracts
$
2,324
844
$
2,324
-
$
- $
844
-
-
Financial Liabilities
Foreign Exchange contracts
Interest rate swaps
Concentration of Credit Risk
$
193
551
$
- $
-
193
551
$
-
-
The Company is subject to credit risk through trade receivables and short-term cash investments. 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.
Short-term cash investments are placed with high credit-quality financial institutions. The Company monitors the
amount of credit exposure in any one institution or type of investment instrument.
Revenue Recognition
The Company’s product sales are recorded when persuasive evidence of an arrangement exists, delivery has
occurred, the price to the buyer is fixed or determinable, and collectability is reasonably assured. For products that
include installation, and if the installation meets the criteria to be considered a separate element, product revenue is
recognized upon delivery, and installation revenue is recognized when the installation is complete. Revenues under
certain fixed price contracts are generally recorded when deliveries are made.
Sales and estimated profits under certain long-term contracts are recognized under the percentage-of-completion
methods of accounting, whereby profits are recorded pro rata, based upon current estimates of costs to complete
such contracts. Losses on contracts are provided for 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. Any excess of the billings over cost and estimated earnings on long-term contracts is included in
deferred revenue.
Cost of Goods Sold and Selling, General and Administrative Expenses
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
46
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 distribution personnel. Our gross profit margins may not be
comparable to those of other entities due to different classifications of costs and expenses.
The Company purchased $3.3 million, $2.1 million, and $1.6 million from a 20% owned equity interest during the
years ended June 30, 2016, 2015, and 2014 respectively. The inventory was purchased under customary terms and
conditions and sold to customers in the ordinary course of business. Earning from this investment are not material
and are accounted for under the equity method.
Our total advertising expenses, which are classified under selling, general, and administrative expenses are primarily
related to trade shows, and totaled $4.3 million, $5.0 million, and $4.6 million for the years ended June 30, 2016,
2015, and 2014, respectively.
Research and Development
Research and development expenditures are expensed as incurred. Total research and development costs, which are
classified under selling, general, and administrative expenses, were $4.9 million, $4.1 million, and $4.8 million for
the years ended June 30, 2016, 2015, and 2014, respectively.
Warranties
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.
The changes in continuing operations warranty reserve, which are recorded as accrued liabilities, during 2016, 2015,
and 2014 were as follows (in thousands):
Balance at beginning of year
Acquisitions and other charges
Warranty expense
Warranty claims
Balance at end of year
2016
7,436
(5)
13,503
(11,849)
9,085
$
$
2015
6,941
3
11,086
(10,594)
7,436
$
$
$
$
2014
6,782
274
3,937
(4,052)
6,941
The increase in warranty expense during 2016 compared to 2015 is primarily due to the introduction of a longer
warranty period for sales in our Refrigeration services group.
Stock-Based Compensation Plans
Restricted stock awards generally vest over a three-year period. Compensation expense associated with these
awards is recorded based on their grant-date fair values and is generally recognized on a straight-line basis over the
vesting period except for awards with performance conditions, which are recognized on a graded vesting schedule.
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.
Foreign Currency Translation
47
The functional currency of our non-U.S. operations is generally 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 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.
Derivative Instruments and Hedging Activities
The Company recognizes all derivatives on its balance sheet at fair value.
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. For hedges of intercompany loan payments, the
Company records derivative gains and losses directly to the statement of operations due to the general short-term
nature and predictability of the transactions.
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 the swaps as cash flow hedges, and changes in the fair value of the
swaps are recognized in other comprehensive income (loss) 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 Company does not hold or issue derivative instruments for trading purposes.
Income Taxes
Deferred assets and liabilities are recorded for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the
differences between the financial statements and the tax bases of assets and liabilities using enacted tax rates.
Valuation allowances are provided when the Company does not believe it more likely than not the benefit of
identified tax assets will be realized.
The Company provides reserves for potential payments of tax to various tax authorities related to uncertain tax
positions and other issues. The Company accounts for uncertain tax positions based on a determination of whether
and how much of a tax benefit taken by the Company in its tax filings or positions is more likely than not to be
realized following resolution of any potential contingencies present related to the tax benefit, assuming that the
matter in question will be raised by the tax authorities. Interest and penalties associated with such uncertain tax
positions are recorded as a component of income tax expense.
Earnings Per Share
(share amounts in thousands)
Basic – Average Shares Outstanding
Effect of Dilutive Securities – Stock Options and
Restricted Stock Awards
Diluted – Average Shares Outstanding
2016
12,682
102
12,784
2015
12,655
150
12,805
2014
12,613
165
12,778
Both basic and dilutive income is the same for computing earnings per share. There were no outstanding
instruments that had an anti-dilutive effect at June 30, 2016, 2015 and 2014.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) and the International Accounting Standards
Board jointly issued a comprehensive new revenue recognition standard, ASU 2014-09, Revenue from Contract with
48
Customers, that will supersede nearly all existing revenue recognition guidance under US GAAP and IFRS. The
standard’s primary principle is that a company will recognize revenue when it transfers promised goods or services
to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange
for those goods or services. The original standard was effective for fiscal years beginning after December 15, 2016;
however, in July 2015, the FASB approved a one-year deferral of this standard, with a new effective date for fiscal
years beginning after December 15, 2017. We expect to adopt this standard in the quarter ending September 30,
2018. The Company is continuing to evaluate the impact of adopting ASU 2014-09 on its consolidated financial
statements
In April 2015, the FASB issued accounting standard update ASU 2015-3, Simplifying the Presentation of Debt
Issuance Cost. The standard is effective for annual and interim periods with those annual periods beginning after
December 15, 2015. Early adoption is permitted and retrospective application is required. We adopted this standard
in the quarter ended September 30, 2015. The Company’s adoption of ASU 2015-3 has been completed and is
reflected herein by the reclass of debt issuance cost from Other non-current assets to Long-term debt.
In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory.
The standard is effective for annual and interim periods with those annual periods beginning after December 15,
2016. The amendment is to be applied prospectively. The Company is continuing to evaluate the impact of adopting
ASU 2015-11 but currently we do not expect the adoption to have a material impact on the Company’s consolidated
financial statements.
In September 2015, the FASB issued ASU 2015-16, Business Combination (Topic 805): Simplifying the Accounting
for Measurement Period Adjustments. The Standard is effective for fiscal years beginning after December 15, 2015,
including interim periods within those fiscal years. The amendments of this standard will not materially impact the
Company.
In November 2015, the FASB issued ASC Update 2015-17, Income Taxes (Topic 740): Balance Sheet Classification
of Deferred Taxes, as part of its simplification initiatives. This update requires deferred tax liabilities and assets to
be classified as non-current on the consolidated condensed balance sheet for fiscal years beginning after
December 15, 2016, and interim periods within those annual periods. Early application is permitted. An entity can
elect adoption prospectively or retrospectively to all periods presented. The Company is continuing to evaluate the
impact of adopting ASU 2015-17.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition
and measurement of financial assets and financial liabilities. ASU 2016-01 addresses certain aspects of recognition,
measurement, presentation and disclosure of financial instruments. This standard is effective for annual reporting
periods beginning after December 15, 2017 and interim periods within those fiscal years and early application is
permitted. The adoption of this standard is not expected to have a material impact on the financial position or results
of operations.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 increases transparency and
comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing
key information about leasing arrangements. For leases with a term or twelve months or less, a lessee is permitted
to make an accounting policy election by class of underlying asset not to recognize lease assets and liabilities. ASU
2016-02 is effective for fiscal years beginning after December 15, 2018. The Company is continuing to evaluate
the impact of adopting ASU 2016-02.
In March 2016 the FASB issued ASU 2016- 09, Compensation—Stock Compensation (Topic 718): Improvements to
Employee Share-Based Payment Accounting. The standard is applied effective for annual periods beginning after
December 15, 2016, and interim periods within those annual periods. The Company is continuing to evaluate the
impact of adopting ASU 2016-09.
2. ACQUISITIONS
49
The Company’s recent acquisitions are strategically significant to the future growth prospects of the Company,
however at the time of the acquisition and June 30, 2016, we concluded, that historical results of the acquired
Companies both individually and in the aggregate, were immaterial to the Company’s consolidated financial results
and therefore additional proforma disclosures are not presented.
50
Northlake
On October 1, 2015, the Company acquired Northlake Engineering, Inc., (“Northlake”), a Wisconsin-based
designer, manufacturer and distributor of high reliability electromagnetic products and solutions serving the North
America power distribution and medical equipment markets. Northlake reports to our Electronics segment.
The Company paid $13.7 million in cash for 100% of the outstanding stock of Northlake and has recorded intangible
assets of $6.8 million, consisting of $4.1 million of customer relationships which primarily are expected to be
amortized over a period of twelve and half years, $2.4 million of trademarks which are indefinite-lived and $0.3
million of non-compete which are expected to amortized over a period of five years. Acquired goodwill of $5.1
million is deductible for income tax purposes. The Company finalized the purchase price allocation during the
quarter ending June 30, 2016.
The components of the fair value of the Northlake acquisition, including the allocation of the purchase price at June
30, 2016, are as follows (in thousands):
Fair value of business combination:
Cash payments
Less: cash acquired
Total
Identifiable assets acquired and liabilities
assumed:
Current assets
Property, plant, and equipment
Identifiable intangible assets
Goodwill
Other non-current assets
Liabilities assumed
Expected final payments
Total
Enginetics
Preliminar
y
Allocation
Adjustmen
ts
Final
$
$
$
$
13,859
(315)
13,544
$
$
156
$
-
156
$
14,015
(315)
13,700
2,810
1,407
4,124
7,821
158
(2,620)
(156)
13,544
$ -
-
2,700
$
(2,700)
-
-
156
156
$
$
2,810
1,407
6,824
5,121
158
(2,620)
-
13,700
On September 4, 2014, the Company acquired Enginetics Corporation (“Enginetics”), a leading producer of aircraft
engine components for all major aircraft platforms. This investment complements our Engineering Technologies
segment and allows us to provide broader solutions to the aviation market.
The Company paid $55.0 million in cash for 100% of the outstanding stock of MPE Aeroengines, Inc., of which
Enginetics is a wholly owned subsidiary and has recorded intangible assets of $10.6 million, consisting of $9.1
million of customer relationships which are expected to be amortized over a period of fifteen years and $1.5 million
of trademarks which are indefinite-lived. Acquired goodwill of $34.8 million is not deductible for income tax
purposes due to the nature of the transaction. The Company finalized the purchase price allocation during the fourth
quarter ended June 30, 2015.
The components of the fair value of the Enginetics acquisition, including the allocation of the purchase price at
June 30, 2015, are as follows (in thousands):
51
Fair value of business combination:
Cash payments
Less: cash acquired
Total
Identifiable assets acquired and liabilities assumed:
Current assets
Property, plant, and equipment
Identifiable intangible assets
Goodwill
Other non-current assets
Liabilities assumed
Deferred taxes
Total
Ultrafryer
Final
55,021
(113)
54,908
12,134
8,808
10,600
34,790
158
(5,449)
(6,133)
54,908
$
$
$
$
The Company paid a total of $23.0 million, in cash, to acquire all of the outstanding stock of Ultrafryer Systems,
Inc. (“Ultrafryer”), a producer of commercial deep fryers for restaurant and commercial installations on June 20,
2014. The stock purchase agreement included, a $2.2 million disbursement made in September of fiscal 2015
related to the purchase of land and building associated with the business.
3.
INVENTORIES
Inventories are comprised of (in thousands):
June 30
Raw materials
Work in process
Finished goods
Total
2016
2015
$
$
46,616
26,541
32,245
105,402
$
$
46,865
29,165
32,275
108,305
Distribution costs associated with the sale of inventory are recorded as a component of selling, general and
administrative expenses and were $20.1 million, $23.3 million, and $20.8 million in 2016, 2015, and 2014,
respectively.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following (in thousands):
June 30
2016
2015
Land, buildings and
leasehold improvements
Machinery, equipment and other
$
67,187
177,745
$
71,517
181,394
Total
Less accumulated depreciation
Property, plant and equipment - net
244,932
138,246
106,686
$
252,911
144,375
108,536
$
Depreciation expense for the years ended June 30, 2016, 2015, and 2014 totaled $13.7 million, $13.4 million, and
$12.2 million, respectively.
52
During the fourth quarter of fiscal year 2015, the Company classified land and buildings valued at $1.9 million, net
related to a vacant building that was sold in the first quarter of 2016 as available for sale within other current assets.
5. 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.
The Company has identified our reporting units for impairment testing as its eleven operating segments, which are
aggregated into five reporting segments as disclosed in Note 18 – Industry Segment Information.
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.
As a result of our annual assessment, the Company determined that the fair value of the reporting units exceeded
their respective carrying values. Therefore, no impairment charges were recorded in connection with its assessments
during 2016 and 2015. Subsequent to our annual impairment test, we disposed of $273 thousand of goodwill
recorded in the Engraving segment in connection with the July 1, 2016 sale of the Roll, Plate, and Machinery
business.
Changes to goodwill during the years ended June 30, 2016 and 2015 are as follows (in thousands):
Balance at beginning of year
Accumulated impairment losses
Balance at beginning of year, net
Acquisitions
Disposals
Foreign currency translation
Balance at end of year
6.
INTANGIBLE ASSETS
2016
172,671
17,939
154,732
5,121
(273)
(2,226)
157,354
2015
143,904
17,939
125,965
34,881
-
(6,114)
154,732
$
$
$
$
Intangible assets consist of the following (in thousands):
June 30, 2016
Cost
Accumulated amortization
Balance, June 30, 2016
June 30, 2015
Cost
Customer
Relationships
Trademarks
(Indefinite-lived)
Other
Total
$
$
46,297
(24,892)
21,405
$
17,263
$
-
$
17,263
$
4,471
(2,727)
1,744
$
$
68,031
(27,619)
40,412
$
43,493
$
15,514
$
4,096
$
63,103
53
Accumulated amortization
Balance, June 30, 2015
(22,628)
20,865
$
-
$
15,514
$
(2,427)
1,669
$
(25,055)
38,048
Amortization expense from continuing operations for the years ended June 30, 2016, 2015, and 2014 totaled $3.6
million, $2.8 million, and $2.6 million, respectively. At June 30, 2016, aggregate amortization expense is
estimated to be $3.8 million in fiscal 2017, $3.5 million in fiscal 2018, $3.2 million in fiscal 2019, $2.8 million in
fiscal 2020, $2.3 million in fiscal 2021, and $7.5 million thereafter.
During the fourth quarter of 2016, the Company discontinued a previously acquired product line within the Food
Service Equipment Group. As part of this discontinuation, the Company concluded that the trademark value
assigned to this product line was no longer realizable and the Company recorded a $600 thousand expense to reduce
the trademark to zero.
7.
DEBT
Long-term debt is comprised of the following at June 30 (in thousands):
Bank credit agreements
Other
Total funded debt
Issuance Cost
Total long-term debt
2016
93,000
18
93,018
(904)
92,114
2015
103,000
31
103,031
(1,278)
101,753
$
$
$
$
Long-term debt is due as follows (in thousands):
$
2017
2018
2019
2020
2021
Thereafter
Funded Debt
Issuance costs
Debt, net issuance cost
Bank Credit Agreements
12
6
-
93,000
-
-
93,018
(904)
92,114
During fiscal year 2015, the Company entered into an Amended and Restated Credit Agreement (“Credit Facility”,
or “facility”). This five-year Credit Facility expires in December 2019 and has a borrowing limit of $400 million,
which can be increased by an amount of up to $100 million, in accordance with specified conditions contained in
the agreement. The facility also includes a $10 million sublimit for swing line loans and a $30 million sublimit for
letters of credit. The facility amends and restates a previously existing $225 million revolving credit agreement,
which was scheduled to expire in January 2017.
Under the terms of the Credit Agreement, we will 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
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. As our funded debt to EBITDA ratio
increases, the commitment fee will increase.
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, 2016, the Company had the ability to borrow
54
$254.4 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, 2016. 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 3.0:1. Adjusted EBIT per the Credit Agreement specifically excludes extraordinary and certain other defined
items such as cash restructuring and acquisition-related charges up to $7.5 million, and unlimited non-cash charges
including gains or losses on sale of property and goodwill adjustments. At June 30, 2016, the Company’s Interest
Coverage Ratio was 28.76:1.
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. At June 30, 2016, the Company’s Leverage Ratio was 1.01:1.
As of June 30, 2016, we had borrowings under our facility of $93.0 million and the effective rate of interest for
outstanding borrowings under the facility was 1.76%. Our primary cash requirements in addition to day-to-day
operating needs include interest payments, capital expenditures, and dividends. Our primary sources of cash for
these requirements are cash flows from continuing operations and borrowings under the facility.
In order to manage our interest rate exposure, we are party to $50.0 million of active floating to fixed rate swaps.
These swaps convert our interest payments from LIBOR to a weighted average rate of 1.43%.
Other Long-Term Borrowings
At June 30, 2016, and 2015, the Company had standby letter of credit sub-facility outstanding, primarily for
insurance and commercial trade purposes of $7.7 million and $7.2 million, respectively.
8. ACCRUED LIABILITIES
Accrued expenses recorded in our Consolidated Balance Sheets at June 30, consist of the following (in thousands):
Payroll and employee benefits
Workers' compensation
Warranty
Other
Total
2016
28,375
1,984
9,085
11,341
50,785
2015
26,329
2,586
8,066
10,761
47,742
$
$
$
$
9. DERIVATIVE FINANCIAL INSTRUMENTS
Interest Rate Swaps
In order to manage our interest rate exposure, we are party to $50.0 million of active floating to fixed rate swaps.
These swaps convert our interest payments from LIBOR to a weighted average rate of 1.43% at June 30, 2016.
The fair value of the swaps recognized in accrued liabilities and in other comprehensive income (loss) at June 30,
2016 and 2015 is as follows (in thousands):
Effective Date
March 15, 2012
$
December 19, 2014
Notional
Amount
10,000
20,000
Fixed
Interest Rate
2.75%
1.18%
Maturity
March 15, 2016
December 19, 2017
$
Fair Value at June 30,
2016
- $
(201)
2015
(186)
(140)
55
December 19, 2014
December 18, 2015
December 19, 2015
5,000
15,000
10,000
1.20%
1.46%
2.01%
December 19, 2017
December 19, 2018
December 19, 2019
(52)
(325)
(460)
(1,038)
$
(36)
(39)
(150)
(551)
$
The Company reported no losses for the years ended June 30, 2016, 2015, and 2014, 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.
Foreign Exchange Contracts
Forward foreign currency exchange contracts are used to limit the impact of currency fluctuations on certain
anticipated foreign cash flows, such as foreign purchases of materials and loan payments to and from subsidiaries.
The Company enters into such contracts for hedging purposes only. For hedges of intercompany loan payments, the
Company has not elected hedge accounting due to the general short-term nature and predictability of the
transactions, and records derivative gains and losses directly to the consolidated statement of operations. At June
30, 2016 and 2015 the Company had outstanding forward contracts related to hedges of intercompany loans with net
unrealized gain / (losses) of $(0.1) million and $0.7 million, respectively, which approximate the unrealized gains or
losses on the related loans. The contracts have maturity dates ranging from 2017-2019, which correspond to the
related intercompany loans. The notional amounts of these instruments, by currency, are as follows:
Currency
2016
2015
Euro
Pound Sterling
2,476,683
593,799
10,134,797
1,730,542
The table below presents the fair value of derivative financial instruments as well as their classification on the
balance sheet at June 30, (in thousands):
2016
2015
Asset Derivatives
Derivative designated as
hedging instruments
Foreign exchange contracts
Balance
Sheet
Line Item
Other Assets
Fair Value
$
11
Balance
Sheet
Line Item
Other Assets
Fair Value
$
844
Liability Derivatives
2016
2015
Derivative designated as
hedging instruments
Interest rate swaps
Foreign exchange contracts
Balance
Sheet
Line Item
Accrued Liabilities
Accrued Liabilities
Balance
Sheet
Line Item
Accrued Liabilities
Accrued Liabilities
Fair Value
$
$
1,038
94
1,132
Fair Value
551
193
744
$
$
The table below presents the amount of gain (loss) recognized in comprehensive income on our derivative financial
instruments (effective portion) designated as hedging instruments and their classification within comprehensive
income for the periods ended (in thousands):
Interest rate swaps
Foreign exchange contracts
$
2016
(743)
(267)
$
2015
(533)
(154)
$
2014
(194)
-
56
$
(1,010)
$
(687)
$
(194)
The table below presents the amount reclassified from accumulated other comprehensive income (loss) to Net
Income for the periods ended (in thousands):
57
Details about Accumulated
Other Comprehensive
Income (Loss) Components
Interest rate swaps
Foreign exchange contracts
10.
INCOME TAXES
2016
567
112
679
$
$
2015
1,034
-
1,034
$
$
2014
1,031
-
1,031
$
$
Affected line item
in the Statements
of Operations
Interest expense
Cost of goods sold
The components of income from continuing operations before income taxes are as follows (in thousands):
U.S. Operations
Non-U.S. Operations
Total
$
$
23,996
44,529
68,525
$
$
33,161
42,956
76,117
$
$
26,965
40,838
67,803
2016
2015
2014
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:
Current:
Federal
State
Non-U.S.
Total Current
Deferred:
Federal
State
Non-U.S.
Total Deferred
Total
2016
2015
2014
$
$
$
11,014
523
11,514
23,051
(5,214)
(1,060)
(482)
(6,756)
16,295
$
$
$
9,195
556
11,372
21,123
556
(495)
(310)
(249)
20,874
$
9,653
415
11,329
21,397
$
$
(2,017)
(376)
(950)
(3,343)
18,054
The following is a reconciliation from the U.S. Federal income tax rate on continuing operations to the total tax
provision is as follows (in thousands):
Provision at statutory tax rate
State taxes
Impact of foreign operations
Federal tax credits
Life insurance proceeds
Contributions, net
Other
Effective income tax provision
2015
35.0%
0.1%
-5.0%
-1.2%
0.0%
0.0%
-1.5%
27.4%
2014
35.0%
0.0%
-5.6%
-0.7%
-1.7%
0.0%
-0.4%
26.6%
2016
35.0%
-0.5%
-6.7%
-1.8%
0.0%
-1.3%
-0.9%
23.8%
58
Changes in the effective tax rates from period to period may be significant as they depend on many factors
including, but not limited to, size of the Company’s income or loss and any one-time activities occurring during the
period.
The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2016 was
impacted by the following items: (i) a net benefit of $0.9 million related to a bargain-sale of idle property to a
charitable organization, and (ii) a benefit of $0.7 million related to the R&D tax credit, and (iii) a benefit of $4.9
million due to the mix of income earned in jurisdictions with beneficial tax rates.
The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2015 was
impacted by the following items: (i) a benefit of $0.5 million related to the R&D tax credit that expired during the
fiscal year on December 31, and (ii) a benefit of $4.0 million due to the mix of income earned in jurisdictions with
beneficial tax rates.
The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2014 was
impacted by the following items: (i) a benefit of $0.5 million related to the R&D tax credit that expired during the
fiscal year on December 31, (ii) a benefit of $0.5 million related to a decrease in the statutory tax rate in the United
Kingdom on prior period deferred tax liabilities recorded during the first quarter during the fiscal year, (iii) a benefit
of $1.1 million due to non-taxable life insurance proceeds received in the third quarter and (iv) a benefit of $3.8
million due to the mix of income earned in jurisdictions with beneficial tax rates.
Significant components of the Company’s deferred income taxes are as follows (in thousands):
Deferred tax liabilities:
Depreciation and amortization
Total deferred tax liability
Deferred tax assets:
Accrued compensation
Accrued expenses and reserves
Pension
Inventory
Other
Net operating loss and credit carry forwards
Total deferred tax asset
Less: Valuation allowance
Net deferred tax asset (liability)
$
$
$
$
$
2016
2015
(27,437)
(27,437)
$
$
(31,126)
(31,126)
3,707
6,154
29,730
2,548
1,432
5,948
49,519
(649)
21,433
$
$
$
3,911
6,680
19,624
2,066
1,741
3,983
38,005
(656)
6,223
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, 2016 applies to state and foreign loss carry forwards, which management has
concluded that it is more likely than not that these tax benefits will not be realized. The increase (decrease) in the
valuation allowance from the prior year was less than $0.1 million.
As of June 30, 2016, the Company had gross state net operating loss ("NOL") and credit carry forwards of
approximately $44.0 million and $2.7 million, respectively, which may be available to offset future state income tax
liabilities and expire at various dates from 2016 through 2035. In addition, the Company had foreign NOL carry
forwards of approximately $2.6 million, $1.3 million of which carry forward indefinitely and $1.3 million that carry
forward for 10 years.
The Company’s income taxes currently payable for federal and state purposes have been reduced by the benefit of
the tax deduction in excess of recognized compensation cost from employee stock compensation transactions. The
59
provision for income taxes that is currently payable has not been adjusted by approximately $2.1 million and $2.1
million of such benefits as they have been allocated to additional paid in capital in 2016 and 2015, respectively.
A provision has not been made for U.S. or additional non-U.S. taxes on $194.5 million of undistributed earnings of
international subsidiaries that could be subject to taxation if remitted to the U.S. It is not practicable to estimate the
amount of tax that might be payable on the remaining undistributed earnings. Our intention is to reinvest these
earnings permanently or to repatriate the earnings only when it is tax effective to do so. Accordingly, we believe
that U.S. tax on any earnings that might be repatriated would be substantially offset by U.S. foreign tax credits.
The total provision for income taxes included in the consolidated financial statements was as follows (in thousands):
Continuing operations
Discontinued operations
2016
2015
$
$
16,295
(55)
16,240
$
$
20,874
(259)
20,615
$
$
2014
18,054
(3,692)
14,362
The changes in the amount of gross unrecognized tax benefits during 2016, 2015 and 2014 were as follows (in
thousands):
Beginning Balance
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Ending Balance
2016
1,054
2,125
-
(201)
2,978
$
$
$
$
2015
1,033
17
4
-
1,054
$
$
2014
1,286
25
-
(278)
1,033
If the unrecognized tax benefits in the table above were recognized in a future period, $2.5 million of the
unrecognized tax benefit would impact the Company’s effective tax rate.
Within the next twelve months, the statute of limitations will close in various U.S., state and non-U.S. jurisdictions.
As a result, it is reasonably expected that net unrecognized tax benefits from these various jurisdictions would be
recognized within the next twelve months. The recognition of these tax benefits is not expected to have a material
impact to the Company's financial statements. The Company does not reasonably expect any other significant
changes in the next twelve months. The following tax years, in the major tax jurisdictions noted, are open for
assessment or refund:
Country
United States
Canada
Germany
Ireland
Portugal
United Kingdom
Years Ending June 30,
2014 to 2016
2012 to 2016
2011 to 2016
2016 to 2016
2013 to 2016
2012 to 2016
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 both June 30, 2016 and June 30, 2015,
the company had less than $0.1 million for accrued interest expense on unrecognized tax benefits.
11. COMMITMENTS
60
The Company leases certain property and equipment under agreements with initial terms ranging from one to twenty
years. Rental expense related to continuing operations for the years ended June 30, 2016, 2015, and 2014 was
approximately $6.6 million, $6.1 million and $5.5 million, respectively.
The gross minimum annual rental commitments under non-cancelable operating leases, principally real-estate at
June 30, 2016:
61
$
(in thousands)
2017
2018
2019
2020
2021
Thereafter
Lease
7,442
4,818
5,136
2,958
2,436
13,609
$
Sublease
Net obligation
$
350
87
-
-
-
-
7,092
4,731
5,136
2,958
2,436
13,609
12. CONTINGENCIES
From time to time, the Company is subject to various claims and legal proceedings, including claims related to
environmental remediation, either asserted or unasserted, that arise in the ordinary course of business. While the
outcome of these proceedings and claims cannot be predicted with certainty, the Company’s management does not
believe that the outcome of any of the currently existing legal matters will have a material impact on the Company’s
consolidated financial position, results of operations or cash flow. 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.
13. STOCK-BASED COMPENSATION AND PURCHASE PLANS
Stock-Based Compensation Plans
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.
Total compensation cost recognized in income for equity based compensation awards was $5.1million, $3.8 million,
and $6.6 million for the years ended June 30, 2016, 2015, and 2014, respectively, primarily within Selling, General,
and Administrative Expenses. The total income tax benefit recognized in the consolidated statement of operations
for equity-based compensation plans was $1.8 million, $1.3 million, and $2.3 million for the years ended June 30,
2016, 2015 and 2014, respectively.
319,211 shares of common stock were reserved for issuance under various compensation plans at June 30, 2016.
Restricted Stock Awards
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. During 2016, 2015, and 2014, the Company
granted 48,984, 43,598, and 62,698 shares, respectively, of restricted stock to eligible participants. Restrictions on
the stock awards generally lapse between fiscal 2017 and fiscal 2019. For the years ended June 30, 2016, 2015, and
2014, $2.6 million, $2.3 million, and $3.3 million, respectively, was recognized as compensation expense related to
restricted stock awards. Substantially all awards are expected to vest.
62
A summary of restricted stock awards activity during the year ended June 30, 2016 is as follows:
Outstanding, June 30, 2015
Granted
Exercised / vested
Canceled
Outstanding, June 30, 2016
Restricted Stock Awards
Number
of
Shares
Aggregate
Intrinsic
Value
105,079
48,984
(42,580)
(6,958)
104,525
$
8,398,964
$
1,069,817
$
8,636,901
Restricted stock awards granted during 2016, 2015 and 2014 had a weighted average grant date fair value of $77.38,
$76.47, and $58.84, respectively. The grant date fair value of restricted stock awards is determined based on the
closing price of the Company’s common stock on the date of grant. The total intrinsic value of awards exercised
during the years ended June 30, 2016, 2015, and 2014 was $1.1million, $2.8 million, and $3.1 million, respectively.
As of June 30, 2016, there was $3.1 million of unrecognized compensation costs related to awards expected to be
recognized over a weighted-average period of 1.49 years.
Executive Compensation Program
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. At June 30, 2016
and 2015, respectively, 30,597 and 43,549 shares of restricted stock units are outstanding and subject to restrictions
that lapse between fiscal 2017 and fiscal 2019. 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 $0.2 million, $0.3 million, and $0.7 million for the years ended June 30, 2016, 2015 and 2014, respectively.
As of June 30, 2016, there was $0.3 million of unrecognized compensation costs related to awards expected to be
recognized over a weighted-average period of 1.28 years
The fair value of the awards under the annual component of this incentive program is measured using the Black-
Scholes option-pricing model. Key assumptions used to apply this pricing model are as follows:
Risk-free interest rates
Expected life of option grants (in years)
Expected volatility of underlying stock
Expected quarterly dividends (per share)
2016
1.10%
3
26.6%
0.12
$
2015
0.88%
3
32.0%
0.10
$
$
2014
0.70%
3
38.9%
0.08
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.
63
The awards granted by the Committee provided that the PSUs will be converted to shares of common stock if the
Company’s EBITDA (earnings before interest, taxes, depreciation and amortization) and return on assets meet
specified levels approved by the Committee. A participant’s right to any shares that are earned will vest in three
equal installments. An executive whose employment terminates prior to the vesting of any installment for a reason
other than death, disability, retirement, or following a change in control, will forfeit the shares represented by that
installment. 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.
A summary of the awards activity under the executive compensation program during the year ended June 30, 2016 is
as follows:
Annual Component
Number
of
Shares
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
Non-vested, June 30, 2015
Granted
Vested
Forfeited
Non-vested, June 30, 2016
43,549
12,383
(19,899)
(5,436)
30,597
$
$
$
$
$
41.70
58.35
31.50
50.58
52.62
$
794,828
$
880,209
$
286,195
Performance Stock Units
Number
of
Shares
28,450
34,124
(341)
(7,497)
54,736
Aggregate
Intrinsic
Value
$
1,873,626
$
18,577
$ 3,926,057
Restricted stock awards granted under the annual component of this program in fiscal 2016, 2015, and 2014 had a
grant date fair value of $82.79, $80.98, and $69.47, respectively. The PSUs granted in fiscal 2016, 2015 and 2014
had a grant date fair value of $76.61, $74.82, and $54.48, respectively. The total intrinsic value of awards vested
under the executive compensation program during the years ended June 30, 2016, 2015 and 2014 was $2.3 million,
$1.5 million, and $2.2 million, respectively.
The Company recognized compensation expense related to the PSUs of $2.3 million, $1.3 million, and $2.7 million
for the years ended June 30, 2016, 2015 and 2014, respectively based on the probability of the performance targets
being met. The total unrecognized compensation costs related to non-vested performance share units was $1.6
million at June 30, 2016, which is expected to be recognized over a weighted average period of 1.30 years.
Employee Stock Purchase Plan
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. Shares of our stock may be purchased by employees
quarterly at 95% of the fair market value on the last day of each quarter. Shares of stock reserved for the plan were
90,679 at June 30, 2016. Shares purchased under this plan aggregated 3,809, 3,382, and 4,473 in 2016, 2015 and
2014, respectively, at an average price of $75.66, $74.42, and $58.54, respectively.
14. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The components of the Company’s accumulated other comprehensive income (loss) at June 30 are as follows (in
thousands):
Foreign currency translation adjustment
Unrealized pension losses, net of tax
Unrealized losses on derivative instruments, net of tax
Total
15. DISCONTINUED OPERATIONS
64
2016
$
$
(24,636)
(92,698)
(641)
(117,975)
$
$
2015
(13,333)
(79,248)
(436)
(93,017)
In pursuing our business strategy, we have divested certain businesses and recorded activities of these businesses as
discontinued operations.
In June 2014, the Company divested the American Foodservice Company, (“AFS”) a manufacturer of custom design
and fabrication of counter systems and cabinets, in our Food Service Equipment segment. In connection with this
sale, the Company received proceeds of $3.1 million and recorded a net loss on disposal of $3.2 million.
On March 30, 2012, Air Distribution Products Group, (“ADP”) was sold to a private equity buyer for consideration
of $16.1 million consisting of $13.1 million in cash and a $3.0 million promissory note from the buyer. The note
was secured by a mortgage on the ADP real estate sold in the transaction in Detroit Lakes, MN, Medina, NY, and
Powder Springs, GA. During the first quarter 2016, the private equity buyer of ADP sold one of the facilities
securing the note. The Company released all mortgages on the properties and accepted an advanced payment of
$2.8 million during October 2015 in order to reduce repayment risk and settle all obligations under the note. The
Company recorded a $0.2 million loss in discontinued operations during the first quarter 2016 related to this
transaction.
The Company remained the obligor of ADP’s Philadelphia, PA facility and administrative offices. We have entered
into a renewable sublease agreement with a third party for this space. Our total obligation with respect to the lease
is $0.7 million, of which $0.3 million was recorded as a liability at June 30, 2016. We do not expect to record
additional charges related to these obligations.
During 2014, the Company received notice that its obligations under a guarantee provided to the buyers of ADP
were triggered as a result of its withdrawal from both of the multi-employer pension plans in which ADP previously
participated. The last of these obligations were settled in July of fiscal year 2016 by a $0.5 million payment to the
final multi-employer plan.
The following table summarizes the Company’s discontinued operations activity, by operation, for the years ended
June 30, (in thousands):
Sales:
American Foodservice Company
Air Distribution Products Group
Income (loss) before taxes:
American Foodservice Company (1)
Air Distribution Products Group
Other loss from discontinued operations
Year
Disposed
2014
2012
2014
2012
Income (loss) before taxes from discontinued operations
(Provision) benefit for tax
Net income (loss) from discontinued operations
2016
2015
2014
$
- $
- $
-
-
-
-
20,556
-
20,556
3
(225)
(7)
(229)
55
(174)
$
(492)
(137)
(130)
(759)
259
(500)
$
(8,339)
(1,849)
(387)
(10,575)
3,692
(6,883)
$
(1) American Foodservice Company incurred a pretax operational loss of $3.5 million and pretax loss on
sale of $4.8 million in 2014.
Assets and liabilities related to discontinued operations to be retained by the Company are recorded in the Consolidated
Balance Sheets at June 30 under the following captions (in thousands):
Current assets
Non-current assets
Current liabilities
$
2016
-
14
1,204
$
2015
23
3,014
1,383
65
Non-current liabilities
55
896
16. RESTRUCTURING
The Company has undertaken a number of initiatives that have resulted in severance, restructuring, and related
charges. A summary of charges by initiative is as follows (in thousands):
Year Ended June 30,
2016 Restructuring Initiatives
Prior Year Initiatives
Total expense
2015 Restructuring Initiatives
Prior Year Initiatives
Total expense
2014 Restructuring Initiatives
Prior Year Initiatives
Total expense
2016 Restructuring Initiatives
Involuntary Employee
Severance and
Benefit Costs
1,046
96
1,142
$
$
$
$
$
$
847
11
858
1,528
72
1,600
Other
893
2,197
3,090
2,319
266
2,585
8,477
-
8,477
$
$
$
$
$
$
Total
1,939
2,293
4,232
3,166
277
3,443
10,005
72
10,077
$
$
$
$
$
$
The Company continues to focus on our efforts to reduce cost and improve productivity across our businesses,
particularly through headcount reductions, facility closures, and consolidations. The Company’s 2016 initiatives to
date include the movement of manufacturing from a legacy Canadian facility into our newly acquired Northlake
facility and a reduction of personnel in those locations impacted by the slowdown in the oil and gas market.
Restructuring expenses during fiscal year 2016 were $4.2 million primarily related to a $1.7 million non-cash
charge from the sale of a vacant property and a $0.7 million non-cash charge to discontinue a product line at our
Refrigeration Solutions group. Restructuring activities related to 2016 initiatives are substantially complete.
The Company anticipates further restructuring charges in 2017 based upon market conditions and cost reduction
activities to improve our competitive advantage.
Activity in the reserves related to 2016 restructuring initiatives is as follows (in thousands):
Involuntary Employee
Severance and
Benefit Costs
Restructuring Liabilities at June 30, 2015
Additions
Payments
Restructuring Liabilities at June 30, 2016
$
$
-
991
(991)
-
$
$
Other
-
304
(272)
32
$
$
Total
-
1,295
(1,263)
32
Prior Year Initiatives
The Company previously announced the closure of our Food Service Equipment U.K. facility and entered into a
distribution agreement with a U.K. based partner in order to reduce channel costs and enhance profitability, expand
and strengthen our U.K. Food Service Equipment group’s presence for all of our brands.
Restructuring activities related to all prior year initiatives are substantially complete. The cumulative expense
related to all activities making up this initiative is expected to be $5.7 million.
Activity in the reserves related to prior year restructuring initiatives is as follows (in thousands):
66
Involuntary Employee
Severance and
Benefit Costs
Restructuring Liabilities at June 30, 2015
Additions
Payments
Restructuring Liabilities at June 30, 2016
The Company’s total restructuring expenses by segment are as follows (in thousands):
78
152
(193)
37
$
$
$
$
Other
306
344
(389)
261
Total
384
496
(582)
298
$
$
Involuntary Employee
Severance and
Benefit Costs
Other
Total
$ 138
160
92
624
128
$ 1,142
$ 2,841
-
-
217
32
$ 3,090
$ 2,979
160
92
841
160
$ 4,232
$ 215
75
220
348
$ 858
$ 2,363
-
-
222
$ 2,585
$ 2,578
75
220
570
$ 3,443
$ 746
667
187
$ 1,600
$ 8,408
21
48
$ 8,477
$ 9,154
688
235
$ 10,077
Year Ended June 30,
Fiscal Year 2016
Food Service Equipment
Engineering Technologies
Engraving
Electronics
Corporate and Other
Total expense
Fiscal Year 2015
Food Service Equipment
Engineering Technologies
Engraving
Electronics
Total expense
Fiscal Year 2014
Food Service Equipment
Engraving
Electronics
Total expense
17. EMPLOYEE BENEFIT PLANS
Retirement Plans
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. salaried employees was frozen as of December 31, 2007,
and participants in the plan ceased accruing future benefits. The Company’s pension plan for U.S. hourly
employees was frozen for substantially all participants as of July 31, 2013, and replaced with a defined contribution
benefit plan. During fiscal 2015, the Society of Actuaries released new mortality tables that reflect increased life
expectancy over the previous tables. The company incorporated these new tables into the 2015 measurement of its
U.S. pension obligations.
Net periodic benefit cost for U.S. and non-U.S. plans included the following components (in thousands):
Service Cost
Interest Cost
U.S. Plans
Year Ended June 30,
2015
$
211
10,476
$
2014
233
11,241
$
2016
70
11,489
Foreign Plans
Year Ended June 30,
2015
2016
$
34
$
44
$
1,428
1,618
2014
46
1,723
67
Expected return on plan assets
Recognized net actuarial loss
Amortization of prior service
cost (benefit)
(13,864)
(13,954)
3,979
3,945
(13,513)
3,941
(1,294)
(1,474)
835
750
(1,532)
819
Curtailment
Net periodic benefit cost (benefit) $
-
1,688
$
244
976
$
-
1,959
$
14
54
57
(49)
-
954
$
(53)
-
885
$
(60)
-
996
The following table sets forth the funded status and amounts recognized as of June 30, 2016 and 2015 for our U.S.
and foreign defined benefit pension plans (in thousands):
U.S. Plans
Year Ended June 30,
2016
2015
Foreign Plans
Year Ended June 30,
2016
2015
Change in benefit obligation
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial loss (gain)
Benefits paid
Foreign currency exchange rate
Projected benefit obligation at end of year
Change in plan assets
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contribution
Benefits paid
Foreign currency exchange rate
Fair value of plan assets at end of year
$
$
$
$
$
$
$
252,215
70
11,489
20,964
(15,576)
-
269,162
204,710
8,510
206
(15,576)
-
197,850
240,426
$
211
10,476
16,570
(15,468)
-
252,215
$
$
216,043
3,900
235
(15,468)
-
204,710
$
$
43,681
34
1,428
3,929
(1,686)
(5,566)
41,820
37,366
3,670
1,264
(1,686)
(5,607)
35,007
$
$
$
$
44,278
44
1,618
3,996
(1,455)
(4,800)
43,681
37,487
3,410
1,336
(1,455)
(3,412)
37,366
(71,312)
$
(47,505)
$
(6,813)
$
(6,315)
Funded Status
Amounts recognized in the consolidated balance sheets
consists of:
Prepaid Benefit Cost
Current liabilities
Non-current liabilities
Net amount recognized
$
$
$
-
(248)
(71,064)
(71,312)
Unrecognized net actuarial loss
Unrecognized prior service cost
Accumulated other comprehensive income, pre-tax
$
$
137,053
-
137,053
$
- $
(199)
(47,306)
(47,505)
114,715
14
114,729
$
$
$
$
$
$
422
(286)
(6,949)
(6,813)
10,122
(81)
10,041
$
$
$
$
107
(313)
(6,109)
(6,315)
10,655
(130)
10,525
The accumulated benefit obligation for all defined benefit pension plans was $310.4 million and $295.0 million at
June 30, 2016 and 2015, respectively.
The estimated actuarial net loss and prior service benefit for the defined benefit pension plans that will be amortized
from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $5.8
million and less than $0.1 million, respectively.
Plan Assets and Assumptions
The fair values of the Company’s pension plan assets at June 30, 2016 and 2015 by asset category, as classified in
the three levels of inputs described in Note 1 under the caption Fair Value of Financial Instruments, are as follows
(in thousands):
68
Cash and cash equivalents
Common and preferred stocks
U.S. Government securities
Corporate bonds and other fixed income securities
Other
June 30, 2016
Total
Level 1
Level 2
Level 3
$
$
6,924
91,536
15,032
107,520
11,845
232,857
$
511
17,227
$
-
6,328
-
$
24,066
$
6,413
74,309
15,032
101,192
11,845
208,791
$
$
-
-
-
-
-
-
Total
Level 1
Level 2
Level 3
June 30, 2015
Cash and cash equivalents
Common and preferred stocks
U.S. Government securities
Corporate bonds and other fixed income securities
Other
$
$
4,051
101,725
14,469
112,297
9,534
242,076
$
$
$
451
17,716
-
6,238
-
24,405
$
3,600
84,009
14,469
106,059
9,534
217,671
$
$
-
-
-
-
-
-
Asset allocation at June 30, 2016 and 2015 and target asset allocations for 2016 are as follows:
Asset Category
Equity securities
Debt securities
Global balanced securities
Other
Total
U.S. Plans
Foreign Plans
Year Ended June 30,
2015
2016
Year Ended June 30,
2015
2016
31%
34%
25%
10%
100%
33%
31%
26%
10%
100%
2016
26%
57%
13%
4%
100%
24%
75%
0%
1%
100%
Asset Category – Target
Equity securities
Debt and market neutral securities
Global balanced securities
Other
Total
U.S.
32%
33%
25%
10%
100%
U.K.
25%
60%
12%
3%
100%
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.
Certain managers within the plan use, or have authorization to use, derivative financial instruments for hedging
purposes, the creation of market exposures and management of country and asset allocation exposure. Currency
speculation derivatives are strictly prohibited.
Year Ended June 30
Plan assumptions - obligation
2016
2015
2014
69
Discount rate
Rate of compensation increase
1.50 - 4.00%
3.30%
2.30 - 4.70%
3.80%
2.90 - 4.50%
3.80%
Plan assumptions - cost
Discount rate
Expected return on assets
Rate of compensation increase
2.30 - 4.70%
3.90 - 7.10%
3.75%
2.90 - 4.50%
4.20 - 7.25%
3.80%
3.50 - 5.10%
4.60 - 7.25%
3.90%
Included in the above are the following assumptions relating to the obligations for defined benefit pension plans in
the United States at June 30, 2016; a discount rate of 4.0% and expected return on assets of 7.10%. 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 the next five years are as follows: 2017, $17.1 million; 2018, $17.1 million; 2019,
$17.2 million; 2020, $17.4 million; 2021, $17.2 million and thereafter, $89.1 million. The Company expects to
make $1.4 million of contributions to its pension plans in 2017.
The Company operates a defined benefit plan in Germany which is unfunded.
Multi-Employer Pension Plans
We contribute to a number of 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:
Assets contributed to the multiemployer plan by one employer may be used to provide benefits to
employees of other participating employers.
If a participating employer stops contributing to the multiemployer plan, the unfunded obligations of the
plan may be borne by the remaining participating employers.
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, 2016, 2015, and 2014, 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 2016 and 2015 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.
Pension Protection Act
Zone Status
Contributions
EIN/Plan
70
Expiration
Date of
Collective
Bargaining
Surcharge
Pension Fund
Number
2016
2015
FIP/RP
Status
2016
2015
2014
Imposed? Agreement
04-6372430-001
Red
Red
Yes/
Implemented
$
485
$
437
$
541
No
4/15/2018
New England Teamsters and
Trucking Industry Pension
Fund
IAM National Pension Fund,
575
1,060
$
633
1,070
$
659
1,200
$
10/04/2016
- 05/31/2018
No
National Pension Plan
51-6031295-002
Green
Green
No
Retirement Savings Plans
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 $4.0 million, $3.8 million, and $4.0 million for the years ended June 30, 2016, 2015,
and 2014, respectively. At June 30, 2016, the salaried plan holds approximately 84,000 shares of Company
common stock, representing approximately 7% of the holdings of the plan.
Postretirement Benefits Other Than Pensions
The Company sponsors an unfunded postretirement medical plan covering certain full-time employees who retire
and have attained the requisite age and years of service. Retired employees are required to contribute toward the
cost of coverage according to various established rules.
The accumulated benefit obligation of the post-retirement medical plan was less than $0.2 million at both June 30,
2016 and June 30, 2015. The plan holds no assets as the Company makes contributions as benefits are due.
Contributions for each of the last two fiscal years were less than $0.1 million. The net periodic benefit cost for each
of the last three fiscal years was less than $0.1 million. A 1% increase in the assumed health care cost trend rate
does not impact either the accumulated benefit obligation or the net postretirement cost, as the employer
contribution for each participant is a fixed amount.
18. INDUSTRY SEGMENT INFORMATION
The Company has determined that it has five reportable segments organized around the types of product sold:
•
•
•
•
•
Food Service Equipment – an aggregation of seven operating segments that manufacture and sell
commercial food service equipment;
Engraving – provides mold texturizing, slush molding and in-mold graining tools, project
management and design services, roll engraving, hygiene product tooling, low observation vents for
stealth aircraft, and process machinery for a number of industries;
Engineering Technologies – provides net and near net formed single-source customized solutions in
the manufacture of engineered components for the aviation, aerospace, defense, energy, industrial,
medical, marine, oil and gas, and manned and unmanned space markets.
Electronics – manufacturing and selling of electronic components for applications throughout the
end-user market spectrum, and
Hydraulics – manufacturing and selling of single and double-acting telescopic and piston rod
hydraulic cylinders.
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 has concluded that it would not 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
71
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, audit fees and pension expense. 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.
72
Industry Segments
(in thousands)
Food Service Equipment
Engraving
Engineering Technologies
Electronics
Hydraulics
Corporate and Other
Total
Food Service
Equipment
Engraving
Engineering
Technologies
Electronics
Hydraulics
Restructuring charge
Other operating income
(expense), net (1)
Corporate
Total
Interest expense
Other, net
Income from continuing
operations before
income taxes
$
$
$
$
$
2016
Net Sales
2015
$
$
381,867
124,120
82,235
118,319
45,045
-
751,586
408,706
110,781
97,018
114,196
41,441
-
772,142
$
$
Depreciation and Amortization
2014
377,848
109,271
79,642
114,881
34,538
-
716,180
2016
$
5,030
3,403
5,363
3,200
651
306
$ 17,953
$
$
2015
5,176
3,497
4,278
2,759
665
309
16,684
2014
4,485
3,342
3,063
2,807
625
269
14,591
$
$
Income (Loss) From Operations
Capital Expenditures(2)
2016
2015
$
$
40,142
29,579
8,258
21,104
7,947
(4,232)
(7,458)
(24,996)
70,344
(2,871)
1,052
37,456
24,250
13,097
20,884
7,013
(3,443)
438
(21,051)
78,644
(3,161)
634
$
$
2014
38,203
22,145
12,676
19,732
5,781
(10,077)
3,462
(26,054)
65,868
(2,249)
4,184
68,525
$
76,117
$
67,803
2016
$
$
4,560
4,031
6,562
2,796
988
-
$
2015
4,791
5,856
8,025
2,298
784
-
2014
3,740
4,648
7,686
1,631
684
-
-
96
$ 19,033
$
-
-
268
22,022
1,531
$ 19,920
(1) Other operating expense in 2016 consists primarily of a $7.3 million charge to adjust the Roll, Plate, and Machinery
business in the Engraving segment to its net realizable value. Amounts in 2015 and 2014 are gains on insurance
proceeds related to an event at an Engineering Technologies facility.
(2) Excludes capital expenditures from accounts payable.
Restructuring Expense
2016
2015
Food Service
Equipment
Engraving
Engineering
Technologies
Electronics
Hydraulics
Corporate and Other
Total expense
$
$
2,979
92
160
841
-
160
4,232
$
$
2,578
220
75
570
-
-
3,443
2014
9,154
$
688
-
235
-
-
10,077
$
73
Food Service Equipment
Engraving
Engineering Technologies
Electronics
Hydraulics
Corporate & Other
Total
$
$
Net sales (3)
United States
Asia Pacific
EMEA (4)
Other Americas
Total
Goodwill
2016
2015
$
$
56,804
19,935
44,321
33,235
3,059
-
157,354
56,812
20,248
46,000
28,614
3,058
-
154,732
$
$
Identifiable Assets
2016
206,875
116,790
144,362
109,653
26,282
86,495
690,457
$
$
2015
218,334
114,268
141,351
90,948
22,705
71,457
659,063
$
$
2016
548,058
70,269
107,765
25,494
751,586
$
$
2015
561,923
64,840
117,816
27,563
772,142
$
$
2014
505,853
53,551
130,602
26,174
716,180
(3) Net sales were identified based on geographic location where our products and services were initiated.
(4) EMEA consists primarily of Europe, Middle East and S. Africa.
Long-lived assets
United States
Asia Pacific
EMEA (4)
Other Americas
Total
2016
76,545
7,035
17,287
5,819
106,686
$
$
2015
76,274
7,047
18,604
6,611
108,536
$
$
2014
59,225
5,627
23,266
8,579
96,697
$
$
(4) EMEA consists primarily of Europe, Middle East and S. Africa.
19. INSURANCE PROCEEDS
The Company recorded $0.4 million and $3.5 million in 2015 and 2014 of net gains, as components of other
operating income net, from insurance proceeds we received related to a catastrophic failure of a large vertical
machining center located at our Engineering Technologies facility in Massachusetts. Insurance proceeds of $4.5
million in 2014 were partially offset by the write-off of the net book value of the machine of $1.0 million.
During 2014, the Company recorded $3.4 million gain, as a component of other non-operating income net, from
proceeds for a life insurance policy triggered by the death of a former executive. This life insurance policy relates to
an inactive program for key executives. There are six retired executives remaining in this program and current
management is ineligible to participate.
20. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The unaudited quarterly results of operations for the years ended June 30, 2016 and 2015 are as follows (in
thousands, except for per share data):
Net sales
Gross profit
Net income (loss)
$
First
198,398
68,552
15,981
$
Second
181,948
58,235
12,371
2016
$
Third
177,465
58,638
11,516
$
Fourth
193,775
66,828
12,188
74
EARNINGS PER SHARE (1)
Basic
Diluted
Net sales
Gross profit
Net income (loss)
EARNINGS PER SHARE (1)
Basic
Diluted
$
$
$
1.26
1.25
$
$
0.97
0.96
$
$
0.91
0.91
$
$
0.96
0.95
First
202,027
66,112
14,552
$
Second
189,337
58,800
11,184
2015
$
Third
180,999
57,258
12,626
$
Fourth
199,779
65,316
16,381
$
$
1.15
1.13
$
$
0.88
0.87
$
$
1.00
0.99
$
$
1.30
1.28
(1) Basic and diluted earnings per share are computed independently for each reporting period.
Accordingly, the sum of the quarterly earnings per share amounts may not agree to the year-to-date
amounts.
22. SUBSEQUENT EVENT
Subsequent to our fiscal 2016 year-end, the Company sold its U.S. Roll Plate and Machinery business as it was not
strategic and did not meet our growth and return expectations. This divestiture also allows the Company’s
management to focus on higher growth and better return businesses within the Engraving segment.
The Company entered into an agreement for this sale in June 2016 that closed in fiscal July 2017. During the fourth
quarter, the Company recorded a $7.3 million non-cash loss to adjust the net assets of the business to their net
realizable value of $2.4 million, which is recorded as an asset held for sale on the Consolidated Balance Sheets. The
expense is recorded as a component of Other Operating Income (Expense), net. The sale of the business does not
constitute a significant strategic shift that will have a major effect on the entity’s operations and financial results.
75
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Standex International Corporation
We have audited the accompanying consolidated balance sheets of Standex International Corporation (a Delaware
corporation) and subsidiaries (the “Company”) as of June 30, 2016 and 2015, and the related consolidated
statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the two years in
the period ended June 30, 2016. These financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Standex International Corporation and subsidiaries as of June 30, 2016 and 2015, and the
results of their operations and their cash flows for each of the two years in the period ended June 30, 2016 in
conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the Company’s internal control over financial reporting as of June 30, 2016, based on criteria established in
the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO), and our report dated August 25, 2016 expressed an unqualified opinion.
/s/ GRANT THORNTON LLP
Boston, Massachusetts
August 25, 2016
76
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Standex International Corporation
Salem, New Hampshire
We have audited the accompanying consolidated statements of operations, comprehensive (loss) income, equity and
cash flows of Standex International Corporation and subsidiaries (the “Company”) for the year ended June 30, 2014.
These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the results of the
operations and cash flows of the Company for the year ended June 30, 2014, in conformity with accounting
principles generally accepted in the United States of America.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
August 28, 2014
77
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
Not Applicable
Item 9A. Controls and Procedures
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, 2016, 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 Northlake Engineering, Inc., (“Northlake”) on October 1,
2015. Northlake represents less than 1.0% of the Company's consolidated revenue for the year ended June 30, 2016
and approximately 2.5% of the Company's consolidated assets at June 30, 2016. 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, 2016 excludes any evaluation of the internal control over financial reporting of Northlake.
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, 2016) that has
materially affected, or is reasonably likely to materially affect our internal control over financial reporting.
Management's Report on 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,
2016 to provide reasonable assurance of achieving its objectives. These results were reviewed with the Audit
Committee of the Board of Directors. Grant Thornton, 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.
Inherent Limitation on Effectiveness of Controls
78
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.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Standex International Corporation
We have audited the internal control over financial reporting of Standex International Corporation (a Delaware
corporation) and subsidiaries (the “Company”) as of June 30, 2016, based on criteria established in the 2013 Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). 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 (“Management’s Report”).
Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our
audit. Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the
internal control over financial reporting of Northlake Engineering, Inc., a wholly-owned subsidiary, whose financial
statements reflect total assets and revenues constituting 2.5 percent and 1 percent, respectively, of the related
consolidated financial statement amounts as of and for the year ended June 30, 2016. As indicated in Management’s
Report, Northlake Engineering, Inc. was acquired during fiscal 2016. Management’s assertion on the effectiveness
of the Company’s internal control over financial reporting excluded internal control over financial reporting of
Northlake Engineering, Inc.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). 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.
79
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.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting
as of June 30, 2016, based on criteria established in the 2013 Internal Control—Integrated Framework issued by
COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated financial statements of the Company as of and for the year ended June 30, 2016, and our
report dated August 25, 2016 expressed an unqualified opinion on those financial statements.
/s/ GRANT THORNTON LLP
Boston, Massachusetts
August 25, 2016
Item 9B. Other Information
None
PART III
Item 10. Directors, Executive Officers and Corporate Governance
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, 2016 (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 Committee, 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.
Item 11. Executive Compensation
80
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,” “2016 Summary Compensation Table,” “Other Information Concerning the Company, Board
of Directors and Its Committees,” and “Directors Compensation.”
81
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
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 Equity Compensation Plan table below represents information regarding the Company’s equity based
compensation plan at June 30, 2016.
(A)
Number of Securities To
Be Issued Upon Exercise
Of Outstanding Options,
Warrants And Rights
(B)
Weighted-Average
Exercise Price Of
Outstanding Options,
Warrants And Rights
(C)
Number of Securities Remaining
Available For Future Issuance Under
Equity Compensation Plans (Excluding
Securities reflected in Column (A))
Plan Category
Equity compensation plans
approved by stockholders
Equity compensation plans not
approved by stockholders
Total
189,859
$ 8.48
-
-
189,859
$ 8.48
319,211
-
319,211
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. This plan is further
described in the “Notes to Consolidated Financial Statements” under the heading “Stock-Based Compensation and
Purchase Plans.”
Item 13. Certain Relationships and Related Transactions and Director Independence
Information regarding certain relationships and related transactions is incorporated by reference in the Proxy
Statement under the caption and sub-caption “Certain Relationships and Related Transactions” And “Stock
Ownership by Directors, Nominees for Director and Executive Officers,” respectively.
Information regarding director independence is incorporated by reference in the Proxy Statement under the caption
“Election of Directors - Determination of Independence.”
Item 14. Principal Accountant Fees and Services
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.”
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) 1.
Financial Statements
Financial Statements covered by the Reports of Independent Registered Public Accounting Firm
(A) Consolidated Statements of Operations for the fiscal years ended June 30, 2016, 2015 and 2014
82
(B) Consolidated Balance Sheets as of June 30, 2016 and 2015
(C) Comprehensive Income for the fiscal years ended June 30, 2016, 2015 and 2014
(D) Consolidated Statements of Stockholders’ Equity for the fiscal years ended June 30, 2016, 2015
and 2014
(E) Consolidated Statements of Cash Flows for the fiscal years ended June 30, 2016, 2015 and 2014
(F) Notes to Consolidated Financial Statements
2.
Financial Statements Schedule
The following financial statement schedule is included as required by Item 8 to this report on Form 10-
K
Schedule II – Valuation and Qualifying Accounts is included in the Notes to Consolidated Financial
Statements
All other schedules are not required and have been omitted
3.
Exhibits
Exhibit
Filed
Number
Herewith
Exhibit Description
Form
Date
Incorporated
by Reference
(b) 3.
(i)
Restated Certificate of Incorporation of Standex,
dated October 27, 1998 filed as Exhibit 3(i).
10-Q
12/31/1998
10.
X
X
X
X
(ii)
By-Laws of Standex, as amended, and restated
effective January 30, 2015 filed as Item 5.03, Exhibit 3.1
8-K
2/4/2015
(a)
Employment Agreement dated
10-K
6/30/2016
January, 20, 2014 between the Company
and David Dunbar*
(b)
Amended and Restated Employment Agreement
dated August 25, 2010 between the Company
and Thomas D. DeByle*
10-K
6/30/2010
(c)
Employment Agreement dated
10-K
6/30/2016
April 4, 2016 between the Company
and Alan J. Glass*
(d)
Employment Agreement dated
10-K
6/30/2016
January 26, 2015 between the Company
and Anne De Greef-Safft*
(e)
Employment Agreement dated
10-K
6/30/2016
August 17, 2015 between the Company
and Ross McGovern*
(f)
Employment Agreement dated
10-K
6/30/2016
83
X
July 27, 2015 between the Company
and Paul Burns*
84
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o)
(p)
(q)
(r)
Standex International Corporation Amended and
And Restated 2008 Long Term Incentive Plan,
effective October 28, 2008. Filed as Exhibit 10.*
Standex International Corporation Executive
Security Program, as amended and restated on
January 31, 2001 filed as Exhibit 10(a).*
Standex International Corporation Executive Life
Insurance Plan effective April 27, 1994 and as
Amended and restated on April 25, 2001 filed
as Exhibit 10(k).*
Standex International Corporation Supplemental
Retirement Plan adopted April 26, 1995 and
Amended on July 26, 1995 filed as Exhibit 10(n).*
Form of Indemnification Agreement for directors
and executive officers of the Company filed as
Item 1.01, Exhibit 10.*
10-K
6/30/2012
10-Q
3/31/2001
10-K
6/30/2001
10-K
6/30/1995
8-K
5/5/2008
Executive Officer long-term performance share
Unit awards filed as Item 5.02.*
8-K
8/28/2008
Standex Deferred Compensation Plan for highly
compensated employees filed as Item 5.02.*
8-K
1/31/2008
Code of Ethics for Chief Executive Officer and
Senior Financial Officers is incorporated by
reference as Exhibit 14.
10-K
6/30/2005
Amended and Restated Credit Agreement
Dated December 19, 2014 by and among
Standex International Corporation, Citizens Bank, N.A.;
Bank of America, N.A.; TD Bank, N.A.;
JPMorgan Chase Bank, N.A.; Branch Banking
& Trust Company and Santander Bank, N.A.
Filed as Item 1.01, Exhibit 10
Stock Purchase Agreement by and among MPE
Aeroengines, Inc. the stockholders and optionholders
of MPE Aeroengines, Inc. Morgenthaler Management
Partners VIII, LLC, as Representative and Standex
International Corporation Dated August 14, 2014
filed as Item 1.01, Exhibit 10
8-K
12/19/2014
10Q/A
11/3/2014
Purchase and Sale Agreement dated July 1, 2014
Between Standex International Corporation and
AFS All American Millwork And Fabrication, LLC.
10-K
6/30/2015
Purchase and Sale Agreement dated February 22,
2012 among the Company, Standex Air Distribution,
Products, Inc., Snappy Air Distribution Products, Inc.
as Sellers and BW HVAC Operations, LLC and
BW HVAC Real Estate Holdings, LLC as Buyers
10-Q
3/31/2012
85
21.
23.1
23.2
24.
31.1
31.2
32.
Filed as Exhibit 10
Subsidiaries of Standex International Corporation
Consent of Independent Registered Public
Accounting Firm Grant Thornton LLP
Consent of Independent Registered Public
Accounting Firm Deloitte & Touche LLP
Powers of Attorney of Charles H. Cannon, Thomas E.
Chorman, Jeffrey S. Edwards, William R. Fenoglio,
Gerald H. Fickenscher, Roger L. Fix, Thomas J. Hansen,
Daniel B. Hogan, and H. Nicholas Muller, III, Ph. D.
Rule 13a-14(a) Certification of President and
Chief Executive Officer
Rule 13a-14(a) Certification of Vice President and
Chief Financial Officer
Section 1350 Certification
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
XBRL Instance Document
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
XBRL Taxonomy Extension Label Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document
* Management contract or compensatory plan or arrangement.
X
X
X
X
X
X
X
86
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Standex International
Corporation has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned,
thereunto duly authorized, on August 25, 2016.
STANDEX INTERNATIONAL CORPORATION
(Registrant)
/s/ DAVID DUNBAR
David Dunbar
President/Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of Standex International Corporation and in the capacities indicated on August 25,
2016:
Signature
Title
/s/ DAVID DUNBAR
David Dunbar
/s/ THOMAS D. DEBYLE
Thomas D. DeByle
/s/ SEAN VALASHINAS
Sean Valashinas
President/Chief Executive Officer
Vice President/Chief Financial Officer
Chief Accounting Officer / Assistant Treasurer
David Dunbar, pursuant to powers of attorney which are being filed with this Annual Report on Form 10-K, has
signed below on August 25, 2016 as attorney-in-fact for the following directors of the Registrant:
Charles H. Cannon
Thomas E. Chorman
Jeffrey S. Edwards
William R. Fenoglio
Gerald H. Fickenscher
Roger L. Fix
Thomas J. Hansen
Daniel B. Hogan,
H. Nicholas Muller, III, Ph.D.
/s/ DAVID DUNBAR
David Dunbar
Supplemental Information to be furnished with reports filed pursuant to Section 15(d) of the Act by Registrants
which have not registered securities pursuant to Section 12 of the Act.
87
The Company will furnish its 2016 Proxy Statement and proxy materials to security holders subsequent to the
filing of the annual report on this Form. Copies of such material shall be furnished to the Commission when they
are sent to security holders.
INDEX TO EXHIBITS
PAGE
10
Employment Agreements
21.
Subsidiaries of Standex
23.1 Consent of Independent Registered Public
Accounting Firm Grant Thornton LLP
23.2 Consent of Independent Registered Public
Accounting Firm Deloitte & Touche LLP
24.
31.1
31.2
Powers of Attorney of Charles H. Cannon, Thomas E.
Chorman, Jeffrey S. Edwards, William R. Fenoglio,
Gerald Fickenscher, Roger L. Fix, Thomas J. Hansen,
Daniel B. Hogan, and H. Nicholas Muller, III, Ph.D.
Rule 13a-14(a) Certification of President and Chief Executive
Officer
Rule 13a-14(a) Certification of Vice President and Chief
Financial Officer
32.
Section 1350 Certification
END OF FORM 10-K
SUPPLEMENTAL INFORMATION FOLLOWS
88
Board of Directors
Title
Roger L. Fix 4
Former President and Chief Executive Officer
Charles H. Cannon, Jr., 1, 2, 4
Retired Chairman and CEO, JBT Corporation
Thomas E. Chorman 1, 2, 3
CEO, Foam Partners LLC
David Dunbar 4
President and Chief Executive Officer
Jeffrey S. Edwards 2, 3
Chairman and Chief Executive Officer, Cooper Standard
Holdings, Inc.
William R. Fenoglio 1, 4
Former President/CEO, Augat, Inc.
Gerald H. Fickenscher 1, 3
Retired Vice President, Europe, Middle East,
and Africa, Crompton Corporation
Thomas J. Hansen 1, 4
Former Vice Chairman of Illinois Tool Works, Inc.
Daniel B. Hogan, Ph. D. 3
Executive Director, Passim Folk Music and Cultural Center
H. Nicholas Muller, III, Ph.D. 2, 3
________________________
1 Member of Audit Committee
Former President/CEO, Frank Lloyd Wright Foundation
2 Member of Compensation Committee
3 Member of Corporate Governance/Nominating Committee
4 Member of Executive Committee
Corporate Officers
David Dunbar
Thomas D. DeByle
Alan J. Glass
Stacey S. Constas
Sean Valashinas
President and Chief Executive Officer
Vice President, Chief Financial Officer and Treasurer
Vice President, Chief Legal Officer and Secretary
Corporate Governance Officer and Assistant Secretary
Chief Accounting Officer and Assistant Treasurer
Christopher J. Seiler
Tax Director
Ross McGovern
Paul C. Burns
Vice President, Human Resources
Vice President of Strategy and Business Development
89
90
Operating Management
FOOD SERVICE EQUIPMENT
Anne De Greef-Safft
ENGINEERING TECHNOLOGIES
Leonard Paolillo
ENGRAVING
Flavio Maschera
ELECTRONICS
John Meeks
HYDRAULICS
Richard Hiltunen
Shareholder Information
Corporate Headquarters
Segment President of Food Service Equipment
President
President
President
President
Standex International Corporation
11 Keewaydin Drive, Suite 300
Salem, NH 03079
(603) 893-9701
Facsimile: (603) 893-7324
www.standex.com
Common Stock
Listed on the New York Stock Exchange
(Ticker symbol: SXI)
Transfer Agent and Registrar
Independent Auditors
Shareholder Services
Stockholders’ Meeting
Computershare
250 Royall Street
Canton, MA 07021
(800) 368-5948
www.Computershare.com
Grant Thornton LLP
75 State Street, 13th Floor
Boston, MA 02109-1827
Stockholders should contact Standex’s Transfer Agent
(Computershare, 250 Royall Street, Canton, MA 02021)
regarding changes in name, address or ownership of stock;
lost certificates of dividends; and consolidation of accounts.
The Annual Meeting of Stockholders will be held at 11:00
a.m. on Thursday, October 27, 2016 at the Burlington
Marriott, One Burlington Mall Road, Burlington, MA 01803.
91
EMPLOYMENT AGREEMENT
Exhibit 10 (a)
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into
effective the 20th day of January, 2014 (the "Effective Date") by and between STANDEX
INTERNATIONAL CORPORATION, a Delaware corporation with its executive offices in
Salem, New Hampshire (hereinafter referred to as the "Employer"), and
(hereinafter referred to as the "Executive")
DAVID A. DUNBAR
WHEREAS, Employer is desirous of retaining the services of Executive and Executive
is desirous of providing services to the Employer in a senior executive capacity upon the terms
and conditions herein set forth;
NOW, THEREFORE in consideration of the mutual covenants and agreements of the
parties herein contained and for other good and valuable consideration, the receipt of which is
hereby acknowledged, it is agreed by and between the parties as follows:
1. Employment. Employer hereby agrees to employ Executive on a full-time basis
and Executive agrees to serve Employer on a full-time basis as President/Chief Executive
Officer, subject to the direction and control of the Board of Directors of Employer (the
"Board"), said employment being upon the terms and conditions herein set forth. Executive
shall be appointed to the Board upon becoming Chief Executive Officer and shall be nominated
for reelection to the Board at the end of each term thereafter so long as the Executive's
employment is not terminated.
2. Term. The initial term (the "Initial Term") of this Agreement shall commence on
the Effective Date of this Agreement and continue through midnight on December 31, 2016,
unless otherwise terminated in accordance with the provisions of Sections 6 or 15. Unless
terminated, this Agreement shall automatically renew for additional terms of three years (each
such term shall be referred to as a "Renewal Term"). In addition to the right to terminate set
forth in Sections 6 and 15, either the Employer or the Executive shall have the right to
terminate this Agreement at any time during or at the end of the Term or any Renewal Term
by giving the other party thirty (30) days' advance written notice (the "Notice Period") at any
time stating his/its intention to terminate the Agreement. Such termination will be effective at
the end of the Notice Period and, if notice is given by the Employer, shall be treated as a
termination without Cause.
3. Best Efforts. Executive agrees that during the Term he shall devote his best
efforts, time and attention to the business of Employer. Notwithstanding the foregoing, during
the Term the Executive may be involved in charitable and professional activities (including
serving on boards and committees), serve, with the prior written consent of the Board, on
other boards and manage his and his family's personal passive investments so long as they do
not interfere, in the sole opinion of the Board with the performance of the Executive's duties
hereunder.
92
4. Non-Compete. Except as set forth in the third paragraph of this Section 4 and in
Section 3, Executive shall not, as long as this Agreement is in effect, engage in, or be interested
in, in any active capacity, any business other than that of Employer or any affiliate, associate or
subsidiary corporation of Employer. It is the express intent of the Employer and the Executive
that: (i) the covenants and affirmative obligations in this Section be binding obligations to be
enforced to the fullest extent permitted by law; (ii) in the event of any determination of
unenforceability of the scope of any covenant or obligation, its limitation which a court of
competent jurisdiction deems fair and reasonable, shall be the sole basis for relief from the full
enforcement thereof; and (iii) in no event shall the covenants or obligations in this Section be
deemed wholly unenforceable.
In addition, except as set forth in the third paragraph of this Section 4, Executive shall
not for a period of two years after the termination of employment with Employer (whether such
termination is by reason of the expiration of this Agreement or for any other reason) compete
with or directly or indirectly own, control, manage, operate, join or participate in the ownership,
control, management or operation of any business which competes with any present or future
business of Employer at the time of such termination. In addition, the Executive covenants and
agrees that he will not, for a period of two years after termination of employment with the
Employer, directly or indirectly solicit for employment or retain or hire any employees of the
Employer.
No provision contained in this paragraph shall restrict Executive from making
investments in other ventures which are not competitive with Employer, or restrict Executive
from engaging, during non-business hours, in any other such non-competitive business or
restrict Executive from owning less than five per cent of the outstanding securities of companies
which compete with any present or future business of Employer and which are listed on a
national stock exchange or actively traded on the NASDAQ National Market System.
5. Compensation; Benefits.
(a) Base Compensation. Employer agrees to compensate Executive for his services
at a minimum annual base salary rate of $700,000. Such base salary shall be payable at least
monthly and shall be increased (but not decreased) as determined (in its sole discretion) by
Employer.
(b) Signing Bonus. On January 22, 2014, the Employer shall pay the Executive a
onetime cash signing bonus in the amount of $500,000 (the "Signing Bonus"). The Executive
covenants and agrees that in the event Executive terminates his employment in accordance with
the provisions of Section 2 (other than in accordance with Section 6(c)) or is terminated by the
Employer in accordance with the provisions of Section 6(c) of this Agreement within 12
months of the Effective Date, the Executive shall be required to promptly, but in no event less
than forty-five (45) days after termination, reimburse the Employer for the full amount of the
Signing Bonus.
(c) Buy-Out Grant. On the Effective Date of this Agreement, the Executive shall
receive a restricted stock grant equal to 175% of the Executive's initial base compensation in the
amount of $1,225,000 (the "Buy-Out Grant"). The Buy-Out Grant shall consist of restricted
stock of Standex International Corporation valued based on the closing price of the stock on the
Effective Date. Vesting of this Buy-Out Grant will occur in two equal installments on October 1,
93
2014 and October 1, 2015, respectively, provided that corporate performance criteria as set out
in the Buy-Out Grant Agreement are satisfied, and further provided that if the Executive
terminates his employment in accordance with the provisions of Section 2 (other than in
accordance with Section 6(c)) or is terminated by the Employer in accordance with the
provisions of Section 6(c) of this Agreement within 12 months of the Effective Date, the
Executive shall be required to transfer back to the Employer, within forty five (45) days after
such termination, any shares of stock which have been delivered to him, or repay the Employer
the value received upon the sale of any such shares, if they have been sold,
(d) Inducement Grant. As an inducement, on the Effective Date, the Employer will
grant an award for fiscal 2014 under its Long Term Incentive Plan having a value equal to
175% of the Executive's initial annualized base salary of $700,000. The award and payouts
made under it will be governed by the terms established for all such awards granted by the
Compensation Committee of the Board of Directors on August 29, 2013.
(e) Annual Cash Bonus. Employer agrees to provide Executive an annual incentive
bonus opportunity, payable each September after the close of the fiscal year, at a target of 85%
of base compensation and variable from 0% to 200% of target based on the achievement of
certain financial metrics set by the Compensation Committee of the Board of Directors. The
target for the bonus may increase from year to year as determined by the Compensation
Committee of the Board of Directors of the Employer. For fiscal year 2014 only, Employer
agrees to pay no less than Executive's target bonus pro-rated from his start date.
(f) Long Term Incentive Plan. Executive will participate in the Standex Long Term
Incentive Plan at an initial target of 175% of base compensation which may be adjusted upward
from time to time by the Compensation Committee of the Board of Directors of the Employer.
(g) Legal Expenses. Employer also agrees to pay Executive's legal fees directly related
to the revision and modification of this Agreement; provided, however, that in no event shall the
Employer pay more than $[15,000] for such legal fees and related expenses. All such legal fees
payable by the Employer shall be fully and completely documented, identifying each service
provided and with a breakdown of the time and dates on which such services are performed.
(g) Other Benefit Plans and Programs. Executive shall also be entitled to participate
in the Standex Long Term Incentive Program, the Standex Annual Incentive Program, the
Standex Retirement Savings Plan, the Standex Deferred Compensation Plan, and in such other
benefit plans and programs as are made available from time to time to senior executives of the
Employer. Executive shall be entitled to use of an automobile furnished at the expense of
Employer in accordance with Employer's policy on this subject, as such policy shall be revised
from time to time.
(h) Relocation Expenses. Employer will pay for all reasonable and customary
relocation expenses incurred in calendar year 2014 associated with the Executive's move from
Switzerland to the Salem, New Hampshire or surrounding area. The total relocation expenses,
including related tax assistance to be paid by the Employer shall not exceed $125,000. In
addition, the Employer will pay for all reasonable and customary expenses related to the sale of
the Executive's home in Pennsylvania including the broker's fee and the cost of moving
personal items and household possessions from Pennsylvania to the Salem, New Hampshire or
surrounding area. [Tax gross up.] The Executive covenants and agrees that in the event
94
Executive terminates his employment in accordance with the provisions of Section 2 (other
than in accordance with Section 6(c)) or is terminated in accordance with the provisions of
Section 6(c) of this Agreement within 12 months of the Effective Date, the Executive shall be
required to promptly, but in no event more than forty five (45) days after the date of
termination, reimburse the Employer for the full amount of the relocation expenses paid by the
Employer.
6. Termination.
(a) Death. Executive's employment shall terminate forthwith upon his death and all
liability of Employer under this Agreement or otherwise shall thereupon cease except for any
compensation for past services remaining unpaid (including any bonus due for any previously
completed year, paid when it would otherwise have been paid), for benefits due to Executive's
estate or to others under the terms of any benefit plan or agreement then in effect, as provided
herein or with regard to indemnification and directors and officers liability insurance coverage
("Accruals"). In addition, Executive shall fully vest in the Buy-Out Grant.
(b) Disability. In the event that Executive becomes disabled during the term of this
Agreement for a period of at least six (6) consecutive months, as the term "disabled" is defined
in any applicable long-term disability plan or arrangement sponsored by the Employer and
covering the Employee, then Employer, at its option, may terminate Executive's employment
and this Agreement upon at least six (6) additional months advance written notification to
Executive. Until such termination option is exercised and the six month period has been
satisfied, or as otherwise mutually agreed in writing, Executive will continue to receive his full
salary and fringe benefits during any period of illness or other disability, regardless of duration.
Upon such termination Executive shall receive his Accruals and fully vest in the Buy-Out
Grant.
(c) Material Breach. In the event of a material breach of the terms of this Agreement
by Executive or Employer, the non-breaching party may cause this Agreement to be terminated
on 10 days written notice, provided, however, that termination by Employer for material breach
following a change of control, as defined in Section 15, shall be effective only upon twelve (12)
months prior written notice. Employer may remove Executive from all duties and authority
commencing on the first day of any such notice period, however, payment of compensation and
participation in all benefits shall continue through the last day of such notice period. For
purposes of this Agreement material breach by the Executive shall be defined as:
(i) an act or acts of dishonesty on the Executive's part which are intended to result in
his substantial personal enrichment at the expense of the Employer; or
(ii)
the Executive willfully, deliberately and continuously fails to materially and
substantially perform his duties hereunder and which result in material injury to
the Employer (other than such failure resulting from the Executive's incapacity
due to physical or mental disability) after demand for substantial performance is
given by the Employer to the Executive specifically identifying the manner in
which the Employer believes the Executive has not materially and substantially
performed his duties hereunder.
95
No action, or failure to act, shall be considered "willful" if it is done by the Executive in good
faith and with reasonable belief that his action or omission was in the best interest of the
Employer.
7.
Severance. In the event that Executive's employment is terminated by the
Employer pursuant to Section 2 or Section 6(b) of this Agreement (exclusive of a termination
after a change in control where severance is governed by the provisions contained in Section 15
herein and exclusive of termination pursuant to Section 6(a) or 6(c)), the Executive shall receive
severance pay in an amount equal to twice the Executive's then current annual base
compensation plus Accruals and full vesting of the Buy-Out Grant. Such severance amount shall
be paid as follows: (i) an amount equal to twice the limit on annual compensation that may be
taken into account for qualified plan purposes under Section 401(a)17 of the Code for the
calendar year immediately preceding the year in which the termination occurs (the "Limitation
Amount") shall be paid to the Executive, in equal installments, made in accordance with the
payroll practices of the Employer, commencing as of the date on which the Executive's
termination occurs, and continuing until the second anniversary date thereafter; and (ii) a lump
sum payment, to be made within five (5) business days after the date of termination of
employment, equal to twice the Executive's then current base compensation less the Limitation
Amount. The Executive shall also receive monthly during the first year after termination an
amount equal to the COBRA premium for medical and dental coverage as is then being offered
to salaried employees at the Employer's corporate home office. Notwithstanding the foregoing
such amount for medical and dental coverage shall cease upon the Executive commencing other
medical and dental insurance coverage through a new employer during the one year period.
8. Notices. Any notice to be given pursuant to this Agreement shall be sent by
certified mail, postage prepaid, by a recognized courier service or electronically (with a copy
mailed via first class mail, postage pre-paid) or delivered in person to the parties at their
respective business or residential addresses as the parties may from time to time designate in
writing.
9.
Invention and Trade Secret Agreement. Executive agrees that the Invention and
Trade Secret Agreement by and between Executive and Standex International Corporation and
signed by Executive on the Effective Date shall remain in full force and effect while this
Agreement is in effect and, as provided in the Invention and Trade Secret Agreement, after
termination hereof. In the event of any conflict between the terms of the Invention and Trade
Secret Agreement and the terms of this Agreement, the terms of this Agreement shall be
controlling.
10. Specific Performance. It is acknowledged by both parties that damages will be an
inadequate remedy to Employer in the event that Executive breaches or threatens to breach his
commitments under Section 4 or under the Invention and Trade Secret Agreement. Therefore, it
is agreed that Employer, may institute and maintain an action or proceeding to compel the
specific performance of the promises of Executive contained herein and therein. Such remedy
shall, however, be cumulative, and not exclusive, to any other remedy that Employer may have.
11. Survival. The obligations contained in Sections 4 and 9 shall survive the
termination of this Agreement. In addition, the termination of this Agreement shall not affect
96
any of the rights or obligations of either party arising prior to or at the time of the termination of
this Agreement or which may arise by any event causing the termination of this Agreement.
12. Covenants Severable. In the event that any covenant of this Agreement shall be
determined invalid or unenforceable and the remaining provisions can be given effect, then such
remaining provisions shall remain in full force and effect.
13. Entire Agreement; Amendment. This Agreement supersedes any employment
understanding or agreement (except the Invention and Trade Secret Agreement) that may have
been previously made by Employer or its respective subsidiaries or affiliates with Executive.
This Agreement, together with the Invention and Trade Secret Agreement, represents all the
terms and conditions and the entire agreement between the parties hereto with respect to the
employment of Executive by Employer. This Agreement may be modified or amended only by
written agreement signed by Employer and Executive.
14. Assignment. This Agreement is personal between Employer and Executive and
may not be assigned; provided, however, that Employer shall have the absolute right at any
time, or from time to time, to sell or otherwise dispose of its assets or any part thereof or to
reconstitute the same into one or more subsidiary corporations or divisions or to merge,
consolidate or enter into similar transactions. In the event of any such transaction, the term
"Employer" as used herein shall mean and include such successor corporation. The term
"Employer" shall specifically include any corporation which becomes the parent corporation of
Standex after the date of this Agreement, and any entity which acquires control of the Employer
as a result of a "Change in Control," as defined in Section 15(c).
15. Change of Control.
(a)
In the event of a "Change in Control" of Employer that is a change covered by
Trea. Reg. 1-409A-3(i)(5):
(i) Employer may
terminate Executive's employment without paying
the
compensation and benefits described in Section 15(b) below only upon conclusive
evidence of substantial and indisputable intentional personal malfeasance in office
such as a conviction for embezzlement of Employer's funds; and
(ii) Executive may terminate his employment at any time within two years after the date
of the change in control and receive the compensation and benefits described in
Section 15(b) below if any of the following events occur: (i) the assignment to the
Executive of any position in which he is not serving as Chief Executive Officer and
President of the Employer, with responsibility and authority for all of the operations
of the Employer, (ii) any change in the Executive's reporting relationship, such that
he is no longer reporting solely to the Board of Directors of the Employer, (iii) any
reduction in the budget of the Employer over which the Executive has ultimate
authority which results in his having control over less than one hundred percent
(100%) of the Employer's budget, (iv) any material diminution of the Executive's
base compensation or his incentive compensation opportunity, (v) any change in
the Executive's place of employment to a geographic location more than ten miles
from his present place of employment, and (vi) any other action or inaction of the
Employer that constitutes a material breach of this Agreement.
97
(b) Following a change of control of Employer, any termination of Executive's
employment within two (2) years thereafter either by Executive pursuant to Section 15(a)(ii) or
by Employer under any circumstances other than involving conclusive evidence of substantial
and indisputable intentional personal malfeasance in office, as defined in Section 15(a)(i) then:
(i) Executive shall be paid within five (5) business days of the date of termination, a
lump sum payment equal to three times his then current annual base salary plus
three times the higher of the most recent annual bonus paid to him under the
Annual Incentive Program or his target bonus amount under the Annual Incentive
Program as in effect on the date immediately prior to the change in control (which
shall include any amounts used to purchase shares of common stock of the
Employer under the Management Stock Purchase Program ("MSPP"));
(ii) Executive shall become 100% vested in all benefit plans in which awards have
been made to him which have not vested as of the date of termination, including
but not limited to the Standex Retirement Savings Plan, MSPP portion of the
Standex Annual Incentive Program and all restricted stock grants and performance
share units granted under the Standex Long Term Incentive Plan and any other
stock option or equity compensation plans of the Employer; and
(iii) The Executive and his dependents shall continue for the three (3) year period
commencing on the date of termination of employment to be entitled to life
insurance and medical benefits under plans, programs or arrangements of the
Employer which offer substantially similar coverage as were offered under the
plans, programs and arrangements of the Employer as in effect immediately prior
to the termination of the Executive's employment, at a cost to the Executive which
is no higher (except for any percentage increase in the premium cost of providing
such benefits, as long as the Executive continues to pay not more than the same
percentage of any premium as he was paying immediately prior to the date of the
Executive's termination of employment) than the cost of such plans, programs and
arrangements in effect immediately prior to the termination of the Executive's
employment, provided that with regard to medical benefits the Executive shall be
required to pay the full cost therefor (which shall be equal to the COBRA cost) and
the Employer shall monthly reimburse the Executive for an amount equal to the
excess of the COBRA amount over the premium percentage he was paying
immediately prior to termination.
(iv) In the event that any payment or distribution of any type to or for the benefit of the
Executive made by the Employer, by any of its affiliates, by any person or entity
which acquires ownership or effective control or ownership of a substantial portion
of the Employer's assets within the meaning of Section 280G of the Code, and
all related regulations or any similar federal tax that may hereinafter be
imposed, whether paid or payable or distributed or distributable pursuant to
this Agreement or otherwise (collectively called the "Total Payments"), would
be subject to the excise tax imposed by Section 4999 of the Code, and all
related regulations or any similar federal tax that may hereinafter be imposed
or any interest or penalties with respect to such excise tax (such excise tax,
together with any such interest or penalties are hereinafter collectively
98
referred to as the "Excise Tax"), then the amount paid to the Executive shall
be reduced, in such manner as is determined by the Compensation Committee
of the Board of Directors of the Employer, to the maximum amount that can
be paid to the Executive without requiring the payment of an excise tax, as
described in Section 4999 of the Code on "excess parachute payments," as
defined therein, if and to the extent necessary for the Executive to receive a
greater after-tax benefit than if the amounts otherwise received by the
Executive would require payment of the excise tax described in Section 4999
of the Code.
(c)
"Change in Control" means any event or series of events by which:
(i)
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, but excluding any employee benefit plan
of such person or its subsidiaries, and any person or entity acting in its capacity
as trustee, agent or other fiduciary or administrator of any such plan) becomes
the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, except that a person or group has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time (such right, an "option right")), directly or indirectly, of at least a
majority of the equity securities of the Employer entitled to vote for members
of the Board of Directors of the Employer (and taking into account all such
securities that such "person" or "group" has the right to acquire pursuant to any
option right) (the "Voting Securities"); or
(ii)
the Employer is party to a merger or consolidation, or series of related
transactions, which results in the Voting Securities outstanding immediately
prior thereto failing to continue to represent (either by remaining outstanding or
by being converted into voting securities of the surviving or another entity) at
least a majority of the combined voting power of the Voting Securities or the
voting securities of such surviving or other entity outstanding immediately after
such merger or consolidation; or
(iii) the sale or disposition of all or substantially all of the Employer's assets (or
consummation of any transaction, or series of related transactions, having similar
effect); or
(iv) during any period of 12 consecutive months, 75% of the members of the Board of
Directors cease to be comprised of individuals (i) who were members of the Board
of Directors on the first day of such period, (ii) whose election or nomination to
the Board of Directors was approved by individuals referred to in clause (i) above
constituting at the time of such election or nomination at least a majority of the
Board of Directors, or (iii) whose election or nomination to the Board of Directors
was approved by individuals referred to in clauses (i) and (ii) above constituting at
the time of such election or nomination at least a majority of the Board of
99
Directors (excluding, in the case of both clause (ii) and clause (iii), any individual
whose initial nomination for, or assumption of office as, a member of the Board of
Directors, occurs as a result of an actual or threatened solicitation of proxies or
consents for the election of removal of one or more directors by any person or
group other than a solicitation for the election of one or more directors by or on
behalf of the Board of Directors); or
16. Governing Law; Binding Nature of Agreement. This Agreement shall be
construed in accordance with the laws of the State of New Hampshire and shall be binding upon
and inure to the benefit of the parties hereto, their respective heirs, executors, administrator s,
successors and assigns.
17. Compliance. Code Section 409A. Anything in this Agreement to the contrary
notwithstanding:
(a)
It is intended that any amounts payable under this Agreement shall either be exempt
from or comply with Code Section 409A of the Code and all regulations, guidance and other
interpretive authority issued thereunder so as not to subject you to payment of any additional tax,
penalty or interest imposed under Code Section 409A, and this Agreement shall be interpreted on a
basis consistent with such intent.
(b) To the extent that the reimbursement of any expenses or the provision of any in -
kind benefits under this Agreement is subject to Code Section 409A, (i) the amount of such
expenses eligible for reimbursement, or in-kind benefits to be provided, during any one calendar
year shall not affect the amount of such expenses eligible for reimbursement, or in-kind benefits
to be provided, in any other calendar year (provided, that, this clause (i) shall not be violated with
regard to expenses reimbursed under any arrangement covered by Code Section 105(b) solely
because such expenses are subject to a limit related to the period the arrangement is in effect);
(ii) reimbursement of any such expense shall be made by no later than December 31 of the year
following the calendar year in which such expense is incurred; and (iii) Executive's right to
receive such reimbursements or in-kind benefits shall not be subject to liquidation or exchange
for another benefit. Anything in this Agreement to the contrary notwithstanding, any tax gross-up
payment (within the meaning of Treas. Reg. Section 1.409A-3(i)(1)(v)) provided for in this
Agreement shall be made to Executive no later than the end of your taxable year next following
your taxable year in which Executive remits the related taxes.
(c)
If Executive is a "specified employee" within the meaning of Treasury Regulation
Section 1.409A-1(i) as of the date of his separation from service (within the meaning of Treas.
Reg. Section 1.409A-1(h)), then any payment or benefit pursuant to this Agreement on account of
his separation from service, to the extent such payment constitutes non-qualified deferred
compensation subject to Code Section 409A and required to be delayed pursuant to Section
409A(a)(2)(B)(i) of the Code (after taking into account any exclusions applicable to such payment
under Code Section 409A), shall not be made until the first business day after (i) the expiration of
six (6) months from the date of his separation from service, or (ii) if earlier, the date of his death
(the "Delay Period"). Upon the expiration of the Delay Period, all payments and benefits delayed
pursuant to this Section 20(c) (whether they would have otherwise been payable in a single sum
or in installments in the absence of such delay) shall be paid or reimbursed to him in a lump sum
and any remaining payments and benefits due under this Agreement shall be paid or provided in
100
accordance with the normal payment dates specified for them herein. Notwithstanding any
provision of this Agreement to the contrary, for purposes of any provision of this Agreement
providing for the payment of any amounts or benefits upon or following a termination of
employment that are considered deferred compensation under Section 409A, references to
Executive's "termination of employment" (and corollary terms) with the Employer shall be
construed to refer to his "separation from service" (within the meaning of Treas. Reg. Section
1.409A-1(h)) with the Employer.
(d) Whenever payments under this Agreement are to be made in installments, each
such installment shall be deemed to be a separate payment for purposes of Section 409A.
Whenever a payment under this Agreement specifies a payment period with reference to a
number of days (e.g., "payment shall be made within thirty (30) days following the date of
termination"), the actual date of payment within the specified period shall be within the sole
discretion of the Employer.
IN WITNESS WHEREOF, Employer has caused this Agreement to be executed on its
behalf by its officers thereunto duly authorized and its corporate seal to be hereto affixed, and
Executive has executed the within instrument as a sealed document, all as of the day and year
first above written.
STANDEX INTERNATIONAL CORPORATION
/s/ Charles H. Cannon, Jr.
By: _____________________________________
Charles H. Cannon, Jr., Chairman of the
Compensation Committee of the
Board of Directors
ATTEST:
/s/ Deborah A. Rosen
_________________________________
Deborah A. Rosen, Secretary
/s/ David Dunbar
_____________________________________
David A. Dunbar
101
EMPLOYMENT AGREEMENT
Exhibit 10 (c)
THIS IS AN AGREEMENT made and entered into as of the 4th day of April, 2016 (the
"Effective Date") by and between Standex International Corporation, a Delaware corporation with
executive offices located at 11 Keewaydin Drive, Suite 300, Salem, New Hampshire 03079 (the
"Employer") and Alan Glass, an individual residing at 118 Allerton Road Newton, MA 02461 (the
"Employee").
1. Employment; Term.
(a) Employer hereby agrees to employ Employee, and Employee hereby agrees to serve
Employer on a full-time basis as Vice President, Chief Legal Officer of the Employer, subject to the
direction and control of the Chief Executive Officer of the Employer, through June 30, 2016 (the
"Initial Term"). Thereafter the Agreement shall automatically renew for successive one (1) year terms
commencing on July 1st of each year and end on June 30th of the next succeeding year (the "Renewal
Term") unless otherwise terminated pursuant to Section 1(b) of this Agreement.
(b) Subject to the provisions for termination otherwise included in Section 5 herein, either
the Employer or the Employee shall have the right to terminate this Agreement by giving the other
party thirty (30) days advanced, written notice (the "Notice Period"), at any time during the Initial
Term or any Renewal Term, stating his/its intention to terminate the Agreement. Such termination
will be effective at the end of the Notice Period. In the event of notice of termination by the
Employer, the provisions of Section 6 shall apply.
2.
Best Efforts. Employee agrees, as long as this Agreement is in effect, to continue to
devote his best efforts and time and attention to the business of Employer and to the performance of
his executive, managerial and supervisory duties.
3. Non-Compete. Except as set forth in the third paragraph of this Section 3, Employee
shall not, while this Agreement is in effect, engage in, or be interested in, in an active capacity, any
business other than that of the Employer or any affiliate, associate or subsidiary corporation of
Employer. It is the express intent of the Employer and Employee that: (i) the covenants and
affirmative obligations of this Section be binding obligations to be enforced to the fullest extent
permitted by law; (ii) in the event of any determination of unenforceability of the scope of any
covenant or obligation, its limitation which a court of competent jurisdiction deems fair and
reasonable, shall be the sole basis for relief from the full enforcement thereof; and (iii) in no event
shall the covenants or obligations in this Section be deemed wholly unenforceable.
In addition, except as set forth in the third paragraph of this Section 3, Employee shall not,
for a period of one (1) year after termination of employment (whether such termination is by reason
of the expiration of this Agreement or for any other reason), within the United States, directly or
indirectly, control, manage, operate, joint or participate in the control, management or operation of
any business which directly or indirectly competes with any business of the Employer at the time of
such termination. The Employee shall not during the term of this non-competition provision contact
any employees of the Employer for the purpose of inducing or otherwise encouraging said employees
to leave their employment with the Employer.
No provision contained in this Section shall restrict Employee from making investments in
other ventures which are not competitive with Employer, or restrict Employee from engaging, during
non-business hours, in any other such non-competitive business or restrict Employee from owning
102
less than five (5) percent of the outstanding securities of companies which compete with any present
or future business of Employer and which are listed on a national stock exchange or actively traded
on the NASDAQ National Market System.
4. Compensation; Fringe Benefits.
(a) Base Compensation. Employer agrees to compensate the Employee for his services
during the period of his employment hereunder at a minimum base salary of Three Hundred Twenty-
Five Thousand Dollars ($325,000) per annum, payable semi-monthly. Employee shall be entitled to
receive such increases in this minimum base salary, as the Compensation Committee of the Board of
Directors of Employer shall, in their sole discretion determine.
(b) Signing Bonus. Within thirty (30) days of the Effective Date, Employee will receive a
one-time cash payment of Twenty Thousand Dollars ($20,000) (the "Signing Bonus") which shall be
subject to payroll taxes and withholding. If Employee voluntarily terminates his employment or is
terminated for cause in accordance with Section 5(c) with the Employer prior to his twelve-month
anniversary of the Effective Date, the Employee agrees to repay the Signing Bonus in full to the
Employer.
(c) Annual Incentive Compensation. Employee shall receive an annual incentive bonus
opportunity payable each September after the close of the fiscal year, at a target of 50% of base
compensation and variable from 0% to 200% of target based on a combination of the achievement of
certain financial metrics and individual performance against individual strategic goals set by the
Compensation Committee of the Board of Directors of the Employer. For fiscal year 2016, (July 1,
2015 through June 30, 2016) the Employee shall receive an annual incentive of no less than the pro-
rated 100% target, based on results achieved, which will be pro-rated to the Effective Date.
(d) Sign on Equity. Employee will be eligible for a one-time equity grant equal to
$75,000. This grant will consist of restricted stock units with three year cliff vesting. The grant
will be based on the closing share price of the common stock of the Employer as reported by the
New York Stock Exchange on the Effective Date and be subject to the plan rules established by the
Compensation Committee of the Board of Directors of the Employer.
(e) Long Term Incentive Compensation. Employee shall receive a long term incentive
opportunity pursuant to the terms of the Long Term Incentive Plan of the Employer at a target of 75%
of base compensation consisting of grants of time based restricted stock units and performance based
restricted stock units. Actual stock earned is variable from 0% to 200% of target based on achievement
of certain metrics established by the Compensation Committee of the Board of Directors of the
Employer.
(f) Other Benefit Plans and Programs. Employee shall also be entitled to participate in the
Standex Management Stock Purchase Program, the Standex Retirement Savings Plan and such other
incentive, welfare and defined contribution retirement benefit plans as are made available, from time
to time to senior divisional management employees of the Employer.
5.
Termination. In addition to the provisions concerning notice of termination in the
second paragraph of Section 1, this Agreement shall terminate upon the following events:
(a) Death: Employee's employment shall terminate upon his death, and all liability of
Employer shall thereupon cease except for compensation for past services remaining
103
unpaid and for any benefits due to Employee's estate or others under the terms of any
benefit plan of Employer then in effect in which Employee participated.
(b) Disability: In the event that Employee becomes substantially disabled during the term
of this Agreement for a period of six consecutive months so that he is unable to
perform the services as contemplated herein, then Employer, at its option, may
terminate Employee's employment upon written notification to Employee. Until such
termination option is exercised, Employee will continue to receive his full salary and
fringe benefits during any period of illness or other disability, regardless of duration.
(c) Material Breach: In the event of the commission of any material breach of the terms of
this Agreement by the Employee or Employer, the non-breaching party may cause this
Agreement to be terminated on ten (10) days written notice. Employer may remove
Employee from all duties and authority commencing on the first day of any such notice
period, however, payment of compensation and participation in all benefits shall
continue through the last day of such notice period. For purposes of this Agreement,
material breach by Employee shall be defined as:
(i) An act or acts of dishonesty on the Employee's part which are intended to result
in his substantial personal enrichment at the expense of the Employer;
(ii)
the Employee willfully, deliberately and continuously fails to materially and
substantially perform his duties hereunder and which result in material injury to
the Employer (other than such failure resulting from the Employee's incapacity
due to physical or mental disability) after demand for substantial performance is
given by the Employer to the Employee specifically identifying the manner in
which the Employer believes Employee has not materially and substantially
performed his duties hereunder; or
(iii)
the Employee willfully and deliberately fails to comply with the Employer's code
of conduct, financial corporate policies or other significant, written corporate
policies of the Employer.
No action, or failure to act, shall be considered "willful" if it is done by the Employee in good faith
and with reasonable belief that his action or omission was in the best interest of the Employer.
Termination pursuant to Section 5(c) above, where material breach is committed by the Employee,
shall not qualify for any severance under Section 6 below.
6.
Severance. In the event that Employee's employment is terminated pursuant to
Section 1 of this Agreement (exclusive of a termination after a change in control where severance is
governed by the provisions contained in Section 13 herein and exclusive of termination pursuant to
Section 5, where material breach is committed by the Employee), the Employee shall receive severance
pay for a period of one (1) year following termination of employment. Severance will be paid in
accordance with normal and customary payroll practices of the Employer. The aggregate severance
will be equal to the Employee's then current, annual base compensation.
7.
Invention and Trade Secret Agreement. Employee agrees that the Invention and
Trade Secret Agreement signed by the Employee and effective April 4, 2016, is in full force and
effect, provided, however, that the non-compete clause of the Invention and Trade Secret Agreement
shall be superseded by the non-compete provisions of Section 3 of this Agreement.
104
8.
Specific Performance. It is acknowledged by both parties that damages will be an
inadequate remedy to Employer in the event that Employee breaches or threatens to breach his
commitments under Section 3 or under the Invention and Trade Secret Agreement. Therefore, it is
agreed that Employer may institute and maintain an action or proceeding to compel the specific
performance of the promises of Employee contained herein and therein. Such remedy shall, however,
be cumulative, and not exclusive, to any other remedy, which Employer may have.
9. Entire Agreement; Amendment. This Agreement supersedes any employment
understanding or agreement (except the Invention and Trade Secret Agreement) which may have
been previously made by Employer or its respective subsidiaries or affiliates with Employee, and
this Agreement, together with the Invention and Trade Secret Agreement, represents all the terms
and conditions and the entire agreement between the parties hereto with respect to such
employment. This Agreement may be modified or amended only by a written document signed by
Employer and Employee.
10. Assignment. This Agreement is personal between Employer and Employee and may
not be assigned; provided, however, that Employer shall have the absolute right at any time, or from
time to time, to sell or otherwise dispose of its assets or any part thereof, to reconstitute the same
into one or more subsidiary corporations or divisions or to merge, consolidate or enter into similar
transactions. In the event of any such assignment, the term "Employer" as used herein shall mean
and include such successor corporation.
11. Governing Law; Binding Nature of Agreement. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New Hampshire, excluding its choice of
law provisions. This Agreement shall be binding upon, and enure to the benefit of, the parties hereto
and their respective heirs, executors, administrators, successors and assigns.
12. Survival. The obligations contained in Sections 3, 5 6, 7 and 13 herein shall survive the
termination of this Agreement. In addition, the termination of this Agreement shall not affect any of
the rights or obligations of either party arising prior to or at the time of the termination of this
Agreement or which may arise by any event causing the termination of this Agreement.
13. Change of Control.
(a)
In the event of a change in control of Employer required to be reported under Item 6(e)
of Schedule 14A of Regulation 14A of the Securities Exchange Act of 1934:
(i) Employer may terminate Employee's employment only upon conclusive
evidence of substantial and indisputable intentional personal malfeasance in
office such as a conviction for embezzlement of Employer's funds; and
(ii) Employee may terminate his employment at any time if there is a change in his
general area of responsibility, title or place of employment, or if his salary or
benefits are lessened or diminished.
(b) Following a change of control of Employer, any termination of Employee's
employment either by Employee pursuant to Section 13(a)(ii) or by Employer under
any circumstances other than involving conclusive evidence of substantial and
indisputable intentional personal malfeasance in office, then:
(i) Employee shall be promptly paid a lump sum payment equal to one times his
current annual base salary plus one times the higher of the Employee's then
current target bonus or most recent actual bonus amount under the Annual
105
Incentive Program as in effect on the date immediately prior to the changes in
control;
(ii) Employee shall become 100% vested in all benefit plans in which he participates
including but not limited to the Management Savings Program portion of the
Standex Annual Incentive Program and all restricted stock grants and
performance share units granted under the Standex Long Term Incentive
Program, or any successor plan of the Employer, and any other stock based plans
of the Employer; and
(iii) All life insurance and medical plan benefits covering the Employee and his
dependents shall be continued at the expense of Employer for the one-year
period following such termination as if the Employee were still an employee of
the Employer.
14. Notices. Any notice to be given pursuant to this Agreement shall be sent by certified
mail, postage prepaid, or by facsimile (with a copy mailed via first class mail, postage pre-paid) or
delivery in person to the parties at the addresses set forth in the preamble to this Agreement or at
such other address as either party may from time to time designate in writing.
15. Covenants Several. In the event that any covenant of this Agreement shall be
determined invalid or unenforceable and the remaining provisions can be given effect, then such
remaining provisions shall remain in full force and effect.
16. Compliance with Section 409A of the Code. To the extent applicable, it is intended
that this Agreement comply with the provisions of Section 409A of the Code. This Agreement shall
be administered in a manner consistent with this intent, and any provision that would cause the
Agreement to fail to satisfy Section 409A of the Code shall have no force and effect until amended to
comply with Section 409A of the Code (which amendment may be retroactive to the extent permitted
by Section 409A of the code and may be made by the Employer at any time and without the consent
of the Employee). In the event that any payment of benefits hereunder may, in the determination of
the Employer, be subject to section 409A(a)(1) of the Code, the payment of such benefits shall be
delayed to the minimum extent necessary so that such benefits are not subject to the provisions of
Section 409A(a)(1) of the Code. The Employer may attach such conditions to or adjust the amounts
paid hereunder to preserve, as closely as possible, the economic consequences that would otherwise
have applied to the payment; provided however, that no such condition or adjustment shall result in
the payments being subject to Section 409A(a)(1) of the Code. The Employer further reserves the
right to make such amendments to this Agreement as are necessary to conform the Agreement to the
requirements of Section 409A, and the Employee agrees to execute any such amendments.
IN WITNESS WHEREOF, Employer has caused this Agreement to be executed on its
behalf by its authorized officers and Employee has executed this Agreement as of the day and year
first above written.
STANDEX INTERNATIONAL CORPORATION
/s/ David Dunbar
By: ______________________________________
David Dunbar
Its: President
/s/ Alan Glass
____________________________
Alan Glass
106
EMPLOYMENT AGREEMENT
Exhibit 10 (d)
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and effective as of the
26th day of January, 2015 (the "Effective Date") by and between Standex International
Corporation, a Delaware corporation with executive offices located at 11 Keewaydin Drive,
Salem, New Hampshire 03079 (the "Employer") and, Anne De Greef-Safft, an individual
residing at 488 Bushy Hill Road, Simsbury Connecticut 06070, (the "Employee").
1. Employment; Term.
(a) Employer hereby agrees to employ Employee, and Employee hereby agrees to serve
Employer on a full-time basis as President, Food Service Equipment Group (or such
other designated title as may be assigned from time to time by the Employer) of the
Standex Food Service Group, a group of subsidiaries and unincorporated divisions of
Employer, subject to the direction and control of the President/Chief Executive Officer
of the Employer, through June 30, 2015 (the "Term"). Thereafter the Agreement shall
automatically renew for successive one (1) year terms commencing on July 1st of each
year and ending on June 30th of the next succeeding year (the "Renewal Term") unless
otherwise terminated pursuant to Section 1(b) of this Agreement.
(b) Subject to the provisions for termination otherwise included in Section 5 herein,
either the Employer or the Employee shall have the right to terminate this
Agreement by giving the other party thirty (30) days advance written notice (the
"Notice Period"), at any time during the Term or any Renewal Term, stating her/its
intention to terminate the Agreement. Such termination will be effective at the end
of the Notice Period. In the event of notice of termination by the Employer, the
provisions of Section 6 shall apply.
2. Best Efforts. Employee agrees, as long as this Agreement is in effect, to devote her
best efforts, time and attention to the business of Employer, and to the performance of such
executive, managerial and supervisory duties as may be required of her during the term of this
Agreement.
3. Non-Compete. Except as set forth in the third paragraph of this Section 3, Employee
shall not, while this Agreement is in effect, engage in, or be interested in, in an active capacity, any
business other than that of the Employer or any affiliate, associate or subsidiary corporation of
Employer. It is the express intent of the Employer and Employee that: (i) the covenants and
affirmative obligations of this Section be binding obligations to be enforced to the fullest extent
permitted by law; (ii) in the event of any determination of unenforceability of the scope of any
covenant or obligation, its limitation which a court of competent jurisdiction deems fair and
reasonable, shall be the sole basis for relief from the full enforcement thereof; and (iii) in no event
shall the covenants or obligations in this Section be deemed wholly unenforceable.
In addition, except as set forth in the third paragraph of this Section 3, Employee shall not,
for a period of one (1) year after termination of employment (whether such termination is by
107
reason of the expiration of this Agreement or for any other reason), on a worldwide basis, directly
or indirectly, control, manage, operate, join or participate in the control, management or operation
of any business which directly or indirectly competes with any business of the Standex Food
Service Group of divisions, subsidiaries or affiliates of the Employer (the "Food Service Group")
at the time of such termination. The Employee shall not during the term of this non-competition
provision (i) contact any employee of the Food Service Group for the purpose of inducing or
otherwise encouraging said employee to leave their employment with the Employer or (ii) contact
any customers or former customers of the Food Service Group, in any manner, for the purpose of
soliciting or accepting any competing business or request, induce or advise any customers of the
Food Service Equipment Group to withdraw, curtail or cancel their respective business with the
Food Service Equipment Group.
No provision contained in this section shall restrict Employee from making investments in
other ventures which are not competitive with Employer, or restrict Employee from engaging, during
non-business hours, in any other such non-competitive business or restrict Employee from owning
less than five (5) percent of the outstanding securities of companies which compete with any present
or future business of Employer and which are listed on a national stock exchange or actively traded
on the NASDAQ National Market System.
4. Compensation; Fringe Benefits.
(a) Base Compensation. Employer agrees to compensate the Employee for her services
during the period of her employment hereunder at a minimum base salary of Three
Hundred Seventy-Five Thousand Dollars ($375,000) per annum, payable semi-
monthly. Employee shall be entitled to receive such increases in this minimum base
salary, as the Compensation Committee of the Board of Directors of Employer shall,
in their sole discretion determine.
(b)
Initial Stock Grant. On the Effective Date, the Employer will grant Employee a
stock award under its Long Term Incentive Plan having a value equal to 100% of
the Employee's initial annualized base salary of $375,000. The value of the stock
granted will be the closing price of the Common Stock of Standex International
Corporation on the Effective Date and will vest in three equal installments on
January 26, 2016, January 26, 2017 and January 26, 2018. The award and payouts
made will be governed by the terms of the Long Term Incentive Plan of the
Employer.
(c) Annual Incentive. Employee shall receive an annual incentive bonus opportunity
payable each September after the close of the fiscal year, at a target of 55% of base
compensation and variable from 0% to 200% of target based on the achievement of
certain financial metrics set by the Compensation Committee of the Board of
Directors of the Employer. For fiscal year 2015 only, Employer agrees to pay no less
than the Employee's target bonus pro-rated from her start date.
(d) Other Benefit Plans and Programs. Employee shall also be entitled to participate in the
Standex Long Term Incentive Program, the Standex Management Stock Purchase
Program, and such other incentive, welfare and defined contribution retirement benefit
108
plans as are made available, from time to time to senior divisional management
employees of the Employer. Employee shall be entitled to use of an automobile
furnished at the expense of Employer in accordance with Employer's policy on this
subject, as such policy shall be revised from time to time.
(e) Relocation. During the period commencing on the Effective Date and continuing
for three years up to and through January 26, 2018, the Employer will not require
the Employee to relocate her residence.
5. Termination. In addition to the provisions concerning notice of termination in the
second paragraph of Section 1, this Agreement shall terminate upon the following events:
(a) Death: Employee's employment shall terminate upon her death, and all liability of
Employer shall thereupon cease except for compensation for past services
remaining unpaid and for any benefits due to Employee's estate or others under the
terms of any benefit plan of Employer then in effect in which Employee
participated.
(b) Disability: In the event that Employee becomes substantially disabled during the
term of this Agreement for a period of six consecutive months so that she is unable to
perform the services as contemplated herein, then Employer, at its option, may
terminate Employee's employment upon written notification to Employee. Until such
termination option is exercised, Employee will continue to receive her full salary and
fringe benefits during any period of illness or other disability, regardless of duration.
(c) Material Breach: The commission of any material breach of the terms of this
Agreement by the Employee or Employer, the non-breaching party may cause this
Agreement to be terminated on 10 days written notice. Employer may remove
Employee from all duties and authority commencing on the first day of any such
notice period, however, payment of compensation and participation in all benefits shall
continue through the last day of such notice period. For purposes of this Agreement,
material breach shall be defined as:
(i)
an act or acts of dishonesty on the Employee's part which are intended to result
in her substantial personal enrichment at the expense of the Employer; or
(ii)
the Employee willfully, deliberately and continuously fails to materially and
substantially perform her duties hereunder and which result in material injury to
the Employer (other than such failure resulting from the Employee's incapacity
due to physical or mental disability) after demand for substantial performance is
given by the Employer to the Employee specifically identifying the manner in
which the Employer believes the Employee has not materially and substantially
performed her duties hereunder; or
(iii) the Employee willfully and deliberately fails to comply with the Employer's
code of conduct, financial corporate policies or other significant, written
corporate policies of the Employer.
109
No action, or failure to act, shall be considered "willful" if it is done by the Employee in good
faith and with reasonable belief that her action or omission was in the best interest of the
Employer. Termination pursuant to Section 5(c) above shall not qualify for any severance under
Section 6 below.
6.
Severance. In the event that Employee's employment is terminated by Employer
pursuant to Section 1 of this Agreement (exclusive of a termination after a change in control
where severance is governed by the provisions contained in Section 14 herein and exclusive of
termination pursuant to Section 5), the Employee shall receive one (1) year of severance pay
following termination of employment. Severance will be paid in accordance with normal and
customary payroll practices of the Employer. The aggregate severance will be equal to the
Employee's then current, annual base compensation.
7.
Invention and Trade Secret Agreement. Employee agrees that the Invention and
Trade Secret Agreement executed by the Employee and effective January 26, 2015, shall be in
full force and effect, provided, however, that the non-compete clause of the Invention and Trade
Secret Agreement, where inconsistent, shall be superseded by the non-compete provisions of
Section 3 of this Agreement.
8.
Specific Performance. It is acknowledged by both parties that damages will be an
inadequate remedy to Employer in the event that Employee breaches or threatens to breach her
commitments under Section 3 or under the Invention and Trade Secret Agreement. Therefore, it is
agreed that Employer may institute and maintain an action or proceeding to compel the specific
performance of the promises of Employee contained herein and therein. Such remedy shall, however,
be cumulative, and not exclusive, to any other remedy, which Employer may have.
9. Third Party Restrictive Covenants. If at any time during the Term or any Renewal
Term of this Agreement the Employer is made aware that the Employee remains obligated under any
alleged non-compete restriction from her former employer, and in the event that the Employer
receives notice of the threat of the commencement of litigation to enforce such non-compete covenant,
then at Employer's sole discretion, Employee may be placed on administrative leave of absence
without pay pending her release from her non-compete obligations or receives a final judgment, for
which the time period to appeal has expired and no appeal has been taken, in her favor with respect to
those restrictive covenants. In the event that Employer or any of its subsidiaries, affiliates or divisions
is named as a party to any such litigation, the Employee agrees to indemnify, defend and hold
Employer harmless from claims and demands for damages, indemnity, costs, attorneys' fees, interest,
loss or injury of every nature and kind whatsoever arising under any federal, state, or local law, or
the common law directly or indirectly arising out of or in connection with any alleged claim by a
former employer of a violation of any non-competition restriction. In the event that Employee
cannot promptly obtain a release from such restrictive covenants, Employer shall have the right
to terminate this Agreement pursuant to Section 5(c) above.
10. Entire Agreement; Amendment. This Agreement supersedes any employment
understanding or agreement (except the Invention and Trade Secret Agreement) which may have
been previously made by Employer or its respective subsidiaries or affiliates with Employee, and
this Agreement, together with the Invention and Trade Secret Agreement, represents all the terms
and conditions and the entire agreement between the parties hereto with respect to such
110
employment. This Agreement may be modified or amended only by a written document signed by
Employer and Employee.
11. Assignment. This Agreement is personal between Employer and Employee and may
not be assigned; provided, however, that Employer shall have the absolute right at any time, or from
time to time, to sell or otherwise dispose of its assets or any part thereof, to reconstitute the same
into one or more subsidiary corporations or divisions or to merge, consolidate or enter into similar
transactions. In the event of any such assignment, the term "Employer" as used herein shall mean
and include such successor corporation.
12. Governing Law; Binding Nature of Agreement. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New Hampshire,
excluding its choice of law provisions. This Agreement shall be binding upon, and enure to the
benefit of, the parties hereto and their respective heirs, executors, administrators, successors and
assigns.
13. Survival. The obligations contained in Sections 3, 6, 7 and 14 herein shall survive the
termination of this Agreement. In addition, the termination of this Agreement shall not affect any of
the rights or obligations of either party arising prior to or at the time of the termination of this
Agreement or which may arise by any event causing the termination of this Agreement.
14. Change of Control.
(a)
In the event of a change in control of Employer required to be reported under Item
6(e) of Schedule 14A of Regulation 14A of the Securities Exchange Act of 1934:
(i) Employer may terminate Employee's employment only upon conclusive
evidence of substantial and indisputable intentional personal malfeasance in
office such as a conviction for embezzlement of Employer's funds; and
(ii) Employee may terminate her employment at any time if there is a change in
her general area of responsibility, title or place of employment, or if her salary
or benefits are lessened or diminished.
(b) Following a change of control of Employer, any termination of Employee's
employment either by Employee pursuant to Section 13(a)(ii) or by Employer under
any circumstances other than involving conclusive evidence of substantial and
indisputable intentional personal malfeasance in office, then:
(i) Employee shall be promptly paid a lump sum payment equal to one times
her current annual base salary plus one times the higher of the most recent
annual bonus paid to her under the Annual Incentive Program or her target
bonus amount as of the date immediately prior to the change in control under
the Annual Incentive Program;
(ii) Employee shall become 100% vested in all benefit plans in which she
participates including but not limited to the Standex Retirement Savings Plan,
the Management Savings Program portion of the Standex Annual Incentive
111
Program and all restricted stock options and performance share units granted
under the Standex Long Term Incentive Program and any other stock option
plans of the Employer; and
(iii)All life insurance and medical plan benefits covering the Employee and
her dependents shall be continued at the expense of Employer for the one-year
period following such termination as if the Employee were still an employee
of the Employer.
15. Notices. Any notice to be given pursuant to this Agreement shall be sent by
certified mail, postage prepaid, by facsimile (with a copy mailed via first class mail, postage pre-
paid), delivery in person to the parties at the addresses set forth in the preamble to this
Agreement, by email to such email address as designated in writing from time to time by either
Employer or Employee, or at such other address as either party may from time to time designate
in writing.
16. Covenants Several. In the event that any covenant of this Agreement shall be
determined invalid or unenforceable and the remaining provisions can be given effect, then such
remaining provisions shall remain in full force and effect.
17. Compliance with Section 409A of the Code. Notwithstanding any other provisions of
this Agreement herein to the contrary and to the extent applicable, the Agreement shall be interpreted,
construed and administered so as to comply with the provisions of Section 409A of the Code and any
related Internal Revenue Service guidance promulgated thereunder. Employee and Employer
acknowledge that it may be necessary to amend the Agreement, within the time period permitted by
the applicable Treasury Regulations, to make changes so as to cause payments and benefits under this
Agreement not to be considered "deferred compensation" for purposes of Section 409A of the Code,
to cause the provisions of the Agreement to comply with the requirements of Section 409A of the
Code, or a combination thereof, so as to avoid the imposition of taxes and penalties on Employee
pursuant to Section 409A of the Code. Employee hereby agrees that the Company may, without any
further consent from Employee, make any and all such changes to the Agreement as may be necessary
or appropriate to avoid the imposition of penalties on Employee pursuant to Section 409A of the
Code, while not substantially reducing the aggregate value to Employee of the payments and
benefits to, or otherwise adversely affecting the rights of, Employee under the Agreement.
112
IN WITNESS WHEREOF, Employer has caused this Agreement to be executed on its
behalf by its authorized officers and Employee has executed this Agreement as of the day and
year first above written.
STANDEX INTERNATIONAL CORPORATION
/s/ David Dunbar
By: __________________________________
David Dunbar
Its: President/CEO
/s/ Anne De Greef-Safft
_______________________________
Anne De Greef-Safft
Dec. 31, 2014
113
EMPLOYMENT AGREEMENT
Exhibit 10 (e)
THIS IS AN AGREEMENT made and entered into as of the 17th day of August, 2015
(the "Effective Date") by and between Standex International Corporation, a Delaware
corporation with executive offices located at 11 Keewaydin Drive, Suite 300, Salem, New
Hampshire 03079 (the "Employer") and Ross McGovern, an individual residing at 1 Chase
Path, Acton, Massachusetts 01720 (the "Employee").
1. Employment; Term.
(a) Employer hereby agrees to employ Employee, and Employee hereby agrees to serve
Employer on a full-time basis as Vice President, Human Resources of the Employer, subject to
the direction and control of the Chief Executive Officer of the Employer, through June 30, 2016
(the "Initial Term"). Thereafter the Agreement shall automatically renew for successive one (1)
year terms commencing on July 1St of each year and end on June 30th of the next succeeding year
(the "Renewal Term") unless otherwise terminated pursuant to Section 1(b) of this Agreement.
(b) Subject to the provisions for termination otherwise included in Section 5 herein,
either the Employer or the Employee shall have the right to terminate this Agreement by
giving the other party thirty (30) days advanced, written notice (the "Notice Period"), at any
time during the Initial Term or any Renewal Term, stating his/its intention to terminate the
Agreement. Such termination will be effective at the end of the Notice Period. In the event
of notice of termination by the Employer, the provisions of Section 6 shall apply.
2. Best Efforts. Employee agrees, as long as this Agreement is in effect, to
continue to devote his same best efforts and the same time and attention to the business of
Employer that he is presently devoting to said business of Employer, and to the performance
of such executive, managerial and supervisory duties of a similar nature to those performed
for Employer during the period of service preceding this Agreement.
3. Non-Compete. Except as set forth in the third paragraph of this Section 3,
Employee shall not, while this Agreement is in effect, engage in, or be interested in, in an active
capacity, any business other than that of the Employer or any affiliate, associate or subsidiary
corporation of Employer. It is the express intent of the Employer and Employee that: (i) the
covenants and affirmative obligations of this Section be binding obligations to be enforced to the
fullest extent permitted by law; (ii) in the event of any determination of unenforceability of the
scope of any covenant or obligation, its limitation which a court of competent jurisdiction deems
fair and reasonable, shall be the sole basis for relief from the full enforcement thereof; and (iii) in
no event shall the covenants or obligations in this Section be deemed wholly unenforceable.
In addition, except as set forth in the third paragraph of this Section 3, Employee shall
not, for a period of one (1) year after termination of employment (whether such termination
is by reason of the expiration of this Agreement or for any other reason), within the United
States, directly or indirectly, control, manage, operate, joint or participate in the control,
management or operation of any business which directly or indirectly competes with any
business of the Employer at the time of such termination. The Employee shall not during the
term of this non-competition provision contact any employees of the Employer for the
114
purpose of inducing or otherwise encouraging said employees to leave their employment
with the Employer.
No provision contained in this Section shall restrict Employee from making investments
in other ventures which are not competitive with Employer, or restrict Employee from engaging,
during non-business hours, in any other such non-competitive business or restrict Employee
from owning less than five (5) percent of the outstanding securities of companies which
compete with any present or future business of Employer and which are listed on a national
stock exchange or actively traded on the NASDAQ National Market System.
4. Compensation; Fringe Benefits.
(a) Base Compensation. Employer agrees to compensate the Employee for his
services during the period of his employment hereunder at a minimum base salary
of Two Hundred Forty Thousand Dollars ($240,000) per annum, payable semi-
monthly. Employee shall be entitled to receive such increases in this minimum
base salary, as the Compensation Committee of the Board of Directors of
Employer shall, in their sole discretion determine.
(b) Signing Bonus. Within thirty (30) days of the Effective Date, Employee will
receive a one-time cash payment of Fifty Thousand Dollars ($50,000) (the
"Signing Bonus") which shall be subject to payroll taxes and withholding. If
Employee voluntarily terminates his employment or is terminated for cause in
accordance with Section 5(c) with the Employer prior to his nine-month
anniversary of the Effective Date, the Employee agrees to repay the Signing Bonus
in full to the Employer.
(c) Annual Incentive Compensation. Employee shall receive an annual incentive
bonus opportunity payable each September after the close of the fiscal year, at a
target of 40% of base compensation and variable from 0% to 200% of target
based on a combination of the achievement of certain financial metrics and
individual performance against
the
Compensation Committee of the Board of Directors of the Employer. For fiscal
year 2016, (July 1, 2015 through June 30, 2016) the Employee shall receive an
annual incentive of no less than the pro-rated 100% target, based on results
achieved, which will be pro-rated to the Effective Date.
individual strategic goals set by
(d) Long Term Incentive Compensation. Employee shall receive a long term
incentive opportunity pursuant to the terms of the Long Term Incentive Plan of
the Employer at a target of 40% of base compensation consisting of grants of
time based restricted stock units and performance based restricted stock units.
Actual stock earned is variable from 0% to 200% of target based on
achievement of certain metrics established by the Compensation Committee of
the Board of Directors of the Employer. For fiscal year 2016, subject to
approval by the Compensation Committee, Employee will be awarded a long
term incentive stock grant equal to One Hundred Thousand Dollars ($100,000).
The number of shares subject to this grant shall be based on the closing price of
the Common Stock of Standex International Corporation on the date approved
by the Compensation Committee.
115
(e) Other Benefit Plans and Programs. Employee shall also be entitled to participate in
the Standex Management Stock Purchase Program, the Standex Retirement
Savings Plan and such other incentive, welfare and defined contribution retirement
benefit plans as are made available, from time to time to senior divisional
management employees of the Employer.
5. Termination. In addition to the provisions concerning notice of termination in
the second paragraph of Section 1, this Agreement shall terminate upon the following
events:
(a) Death: Employee's employment shall terminate upon his death, and all liability
of Employer shall thereupon cease except for compensation for past services
remaining unpaid and for any benefits due to Employee's estate or others under
the terms of any benefit plan of Employer then in effect in which Employee
participated.
(b) Disability: In the event that Employee becomes substantially disabled during
the term of this Agreement for a period of six consecutive months so that he is
unable to perform the services as contemplated herein, then Employer, at its
option, may terminate Employee's employment upon written notification to
Employee. Until such termination option is exercised, Employee will continue
to receive his full salary and fringe benefits during any period of illness or other
disability, regardless of duration.
(c) Material Breach: In the event of the commission of any material breach of the
terms of this Agreement by the Employee or Employer, the non-breaching party
may cause this Agreement to be terminated on ten (10) days written notice.
Employer may remove Employee from all duties and authority commencing on
the first day of any such notice period, however, payment of compensation and
participation in all benefits shall continue through the last day of such notice
period. For purposes of this Agreement, material breach by Employee shall be
defined as:
(i) An act or acts of dishonesty on the Employee's part which are intended to
result in his substantial personal enrichment at the expense of the Employer;
(ii)
the Employee willfully, deliberately and continuously fails to materially
and substantially perform his duties hereunder and which result in material
injury to the Employer (other than such failure resulting from the
Employee's incapacity due to physical or mental disability) after demand
for substantial performance is given by the Employer to the Employee
specifically identifying the manner in which the Employer believes
Employee has not materially and substantially performed his duties
hereunder; or
(iii) the Employee willfully and deliberately fails to comply with the Employer's
code of conduct, financial corporate policies or other significant, written
corporate policies of the Employer.
No action, or failure to act, shall be considered "willful" if it is done by the Employee in good
faith and with reasonable belief that his action or omission was in the best interest of the
116
Employer. Termination pursuant to Section 5(c) above, where material breach is committed by
the Employee, shall not qualify for any severance under Section 6 below.
6.
Severance. In the event that Employee's employment is terminated pursuant to
Section 1 of this Agreement (exclusive of a termination after a change in control where
severance is governed by the provisions contained in Section 13 herein and exclusive of
termination pursuant to Section 5, where material breach is committed by the Employee), the
Employee shall receive severance pay for a period of one (1) year following termination of
employment. Severance will be paid in accordance with normal and customary payroll
practices of the Employer. The aggregate severance will be equal to the Employee's then
current, annual base compensation.
7.
Invention and Trade Secret Agreement. Employee agrees that the Invention and
Trade Secret Agreement signed by the Employee and effective August 17, 2015, is in full force
and effect, provided, however, that the non-compete clause of the Invention and Trade Secret
Agreement shall be superseded by the non-compete provisions of Section 3 of this Agreement.
8.
Specific Performance. It is acknowledged by both parties that damages will be
an inadequate remedy to Employer in the event that Employee breaches or threatens to
breach his commitments under Section 3 or under the Invention and Trade Secret
Agreement. Therefore, it is agreed that Employer may institute and maintain an action or
proceeding to compel the specific performance of the promises of Employee contained
herein and therein. Such remedy shall, however, be cumulative, and not exclusive, to any
other remedy, which Employer may have.
9. Entire Agreement; Amendment. This Agreement supersedes any employment
understanding or agreement (except the Invention and Trade Secret Agreement) which may
have been previously made by Employer or its respective subsidiaries or affiliates with
Employee, and this Agreement, together with the Invention and Trade Secret Agreement,
represents all the terms and conditions and the entire agreement between the parties hereto with
respect to such employment. This Agreement may be modified or amended only by a written
document signed by Employer and Employee.
10. Assignment. This Agreement is personal between Employer and Employee and
may not be assigned; provided, however, that Employer shall have the absolute right at any
time, or from time to time, to sell or otherwise dispose of its assets or any part thereof, to
reconstitute the same into one or more subsidiary corporations or divisions or to merge,
consolidate or enter into similar transactions. In the event of any such assignment, the term
"Employer" as used herein shall mean and include such successor corporation.
11. Governing Law; Binding Nature of Agreement. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New Hampshire,
excluding its choice of law provisions. This Agreement shall be binding upon, and enure to
the benefit of, the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
12. Survival. The obligations contained in Sections 3, 5 6, 7 and 13 herein shall
survive the termination of this Agreement. In addition, the termination of this Agreement
shall not affect any of the rights or obligations of either party arising prior to or at the time
117
of the termination of this Agreement or which may arise by any event causing the
termination of this Agreement.
13. Change of Control.
(a) In the event of a change in control of Employer required to be reported under
Item 6(e) of Schedule 14A of Regulation 14A of the Securities Exchange
Act of 1934:
(i) Employer may terminate Employee's employment only upon conclusive
evidence of substantial and indisputable intentional personal malfeasance in
office such as a conviction for embezzlement of Employer's funds; and
(ii) Employee may terminate his employment at any time if there is a change in
his general area of responsibility, title or place of employment, or if his salary
or benefits are lessened or diminished.
(b) Following a change of control of Employer, any termination of Employee's
employment either by Employee pursuant to Section 13(a)(ii) or by Employer
under any circumstances other than involving conclusive evidence of substantial
and indisputable intentional personal malfeasance in office, then:
(i) Employee shall be promptly paid a lump sum payment equal to one times his
current annual base salary plus one times the higher of the Employee's then
current target bonus or most recent actual bonus amount under the Annual
Incentive Program as in effect on the date immediately prior to the changes in
control;
(ii) Employee shall become 100% vested in all benefit plans in which he
participates including but not limited to the Management Savings Program
portion of the Standex Annual Incentive Program and all restricted stock
grants and performance share units granted under the Standex Long Term
Incentive Program, or any successor plan of the Employer, and any other
stock based plans of the Employer; and
(iii) All life insurance and medical plan benefits covering the Employee and his
dependents shall be continued at the expense of Employer for the one-year
period following such termination as if the Employee were still an employee
of the Employer.
14. Notices. Any notice to be given pursuant to this Agreement shall be sent by
certified mail, postage prepaid, or by facsimile (with a copy mailed via first class mail,
postage pre-paid) or delivery in person to the parties at the addresses set forth in the
preamble to this Agreement or at such other address as either party may from time to time
designate in writing.
15. Covenants Several. In the event that any covenant of this Agreement shall be
determined invalid or unenforceable and the remaining provisions can be given effect, then such
remaining provisions shall remain in full force and effect.
16. Compliance with Section 409A of the Code. To the extent applicable, it is
intended that this Agreement comply with the provisions of Section 409A of the Code.
This Agreement shall be administered in a manner consistent with this intent, and any
118
provision that would cause the Agreement to fail to satisfy Section 409A of the Code shall
have no force and effect until amended to comply with Section 409A of the Code (which
amendment may be retroactive to the extent permitted by Section 409A of the code and may
be made by the Employer at any time and without the consent of the Employee). In the event
that any payment of benefits hereunder may, in the determination of the Employer, be subject
to section 409A(a)(l) of the Code, the payment of such benefits shall be delayed to the
minimum extent necessary so that such benefits are not subject to the provisions of Section
409A(a)(l) of the Code. The Employer may attach such conditions to or adjust the amounts
paid hereunder to preserve, as closely as possible, the economic consequences that would
otherwise have applied to the payment; provided however, that no such condition or
adjustment shall result in the payments being subject to Section 409A(a)(1) of the Code. The
Employer further reserves the right to make such amendments to this Agreement as are
necessary to conform the Agreement to the requirements of Section 409A, and the Employee
agrees to execute any such amendments.
IN WITNESS WHEREOF, Employer has caused this Agreement to be executed on its
behalf by its authorized officers and Employee has executed this Agreement as of the day and
year first above written.
STANDEX INTERNATIONAL CORPORATION
/s/ David Dunbar
By: ___________________________________
David Dunbar
Its: President/CEO
/s/ Ross McGovern
___________________________
Ross McGovern
119
EMPLOYMENT AGREEMENT
Exhibit 10 (f)
THIS IS AN AGREEMENT made and entered into as of the 27th day of July, 2015 (the
"Effective Date") by and between Standex International Corporation, a Delaware corporation
with executive offices located at 11 Keewaydin Drive, Suite 300, Salem, New Hampshire 03079
(the "Employer") and Paul C. Burns, an individual residing at 1040 Harvard Rd., Grosse Pointe,
Michigan 48230 (the "Employee").
1.
Employment; Term.
(a) Employer hereby agrees to employ Employee, and Employee hereby agrees to
serve Employer on a full-time basis as Vice President, Strategy and Business Development
of the Employer, subject to the direction and control of the Chief Executive Officer of the
Employer, through June 30, 2016 (the "Initial Term"). Thereafter the Agreement shall
automatically renew for successive one (1) year terms commencing on July 1 st of each year
and end on June 30th of the next succeeding year (the "Renewal Term") unless otherwise
terminated pursuant to Section 1(b) of this Agreement.
(b) Subject to the provisions for termination otherwise included in Section 5 herein,
either the Employer or the Employee shall have the right to terminate this Agreement by giving
the other party thirty (30) days advanced, written notice (the "Notice Period"), at any time during
the Initial Term or any Renewal Term, stating his/its intention to terminate the Agreement. Such
termination will be effective at the end of the Notice Period. In the event of notice of termination
by the Employer, the provisions of Section 6 shall apply.
2. Best Efforts. Employee agrees, as long as this Agreement is in effect, to continue
to devote his same best efforts and the same time and attention to the business of Employer
that he is presently devoting to said business of Employer, and to the performance of such
executive, managerial and supervisory duties of a similar nature to those performed for
Employer during the period of service preceding this Agreement.
3. Non-Compete. Except as set forth in the third paragraph of this Section 3,
Employee shall not, while this Agreement is in effect, engage in, or be interested in, in an active
capacity, any business other than that of the Employer or any affiliate, associate or subsidiary
corporation of Employer. It is the express intent of the Employer and Employee that: (i) the
covenants and affirmative obligations of this Section be binding obligations to be enforced to the
fullest extent permitted by law; (ii) in the event of any determination of unenforceability of the
scope of any covenant or obligation, its limitation which a court of competent jurisdiction deems
fair and reasonable, shall be the sole basis for relief from the full enforcement thereof; and (iii) in
no event shall the covenants or obligations in this Section be deemed wholly unenforceable.
In addition, except as set forth in the third paragraph of this Section 3, Employee
shall not, for a period of one (1) year after termination of employment (whether such
termination is by reason of the expiration of this Agreement or for any other reason), within
the United States, directly or indirectly, control, manage, operate, joint or participate in the
control, management or operation of any business which directly or indirectly competes with
120
any business of the Employer at the time of such termination. The Employee shall not
during the term of this non-competition provision contact any employees of the Employer for
the purpose of inducing or otherwise encouraging said employees to leave their employment
with the Employer.
No provision contained in this Section shall restrict Employee from making investments
in other ventures which are not competitive with Employer, or restrict Employee from engaging,
during non-business hours, in any other such non-competitive business or restrict Employee
from owning less than five (5) percent of the outstanding securities of companies which
compete with any present or future business of Employer and which are listed on a national
stock exchange or actively traded on the NASDAQ National Market System.
4. Compensation; Fringe Benefits.
(a) Base Compensation. Employer agrees to compensate the Employee for his
services during the period of his employment hereunder at a minimum base
salary of Three Hundred Thousand Dollars ($300,000) per annum, payable
semimonthly. Employee shall be entitled to receive such increases in this
minimum base salary, as the Compensation Committee of the Board of
Directors of Employer shall, in their sole discretion determine.
(b) Signing Bonus. Within thirty (30) of the Effective Date, Employee will receive
a one-time cash payment of One Hundred Thousand Dollars ($100,000) (the
"Signing Bonus") which shall be subject to payroll taxes and withholding. If
Employee voluntarily terminates his employment or is terminated for cause in
accordance with Section 5(c) with the Employer prior to his nine-month
anniversary of the Effective Date, the Employee agrees to repay the Signing
Bonus in full to the Employer.
(c)
Initial Stock Grant. On the Effective Date, the Employer will grant Employee a
stock award under its Long Term Incentive Plan for 6,021 shares of Common
Stock of Standex International Corporation (closing share price of Standex
Common Stock on the Effective Date being $74.74) which will vest in four
installments of stock in accordance with the following vesting schedule: 2,007
shares on the first anniversary date of the Effective Date; 2,007 shares on the
second anniversary date of the Effective Date; 1,338 shares on the third
anniversary date of the Effective Date; and 669 shares on the fourth anniversary
date of the Effective Date, provided Employee remains employed at the time of
each respective vesting. The award and payouts made will be governed by the
terms of the Long Term Incentive Plan of the Employer.
(d) Annual Incentive Compensation. Employee shall receive an annual incentive
bonus opportunity payable each September after the close of the fiscal year, at a
target of 55% of base compensation and variable from 0% to 200% of target
based on a combination of the achievement of certain financial metrics and
individual performance against
the
Compensation Committee of the Board of Directors of the Employer. For fiscal
year 2016, Employer agrees that the Employee's annual incentive paid, based
on results achieved, will not be pro-rated to the Effective Date.
individual strategic goals set by
121
(e)
(f)
Long Term Incentive Compensation. Employee shall receive a long term
incentive opportunity pursuant to the terms of the Long Term Incentive Plan of
the Employer at a target of 55% of base compensation consisting of grants of
time based restricted stock units and performance based restricted stock units.
Actual stock earned is variable from 0% to 200% of target based on achievement
of certain metrics established by the Compensation Committee of the Board of
Directors of the Employer.
Other Benefit Plans and Programs. Employee shall also be entitled to
participate in the Standex Long Term Incentive Program, the Standex
Management Stock Purchase Program, the Standex Retirement Savings Plan
and such other incentive, welfare and defined contribution retirement benefit
plans as are made available, from time to time to senior divisional
management employees of the Employer. Employee shall be entitled to use of
an automobile furnished at the expense of Employer in accordance with
Employer's policy on this subject, as such policy shall be revised from time to
time.
5. Termination. In addition to the provisions concerning notice of termination in the
second paragraph of Section 1, this Agreement shall terminate upon the following events:
(a) Death: Employee's employment shall terminate upon his death, and all liability
of Employer shall thereupon cease except for compensation for past services
remaining unpaid and for any benefits due to Employee's estate or others under
the terms of any benefit plan of Employer then in effect in which Employee
participated.
(b) Disability: In the event that Employee becomes substantially disabled during
the term of this Agreement for a period of six consecutive months so that he is
unable to perform the services as contemplated herein, then Employer, at its
option, may terminate Employee's employment upon written notification to
Employee. Until such termination option is exercised, Employee will continue
to receive his full salary and fringe benefits during any period of illness or other
disability, regardless of duration.
(c) Material Breach: In the event of the commission of any material breach of the
terms of this Agreement by the Employee or Employer, the non-breaching party
may cause this Agreement to be terminated on ten (10) days written notice.
Employer may remove Employee from all duties and authority commencing on
the first day of any such notice period, however, payment of compensation and
participation in all benefits shall continue through the last day of such notice
period. For purposes of this Agreement, material breach by Employee shall be
defined as:
(i) An act or acts of dishonesty on the Employee's part which are intended to
result in his substantial personal enrichment at the expense of the
Employer;
(ii)
the Employee willfully, deliberately and continuously fails to materially
and substantially perform his duties hereunder and which result in material
122
injury to the Employer (other than such failure resulting from the
Employee's incapacity due to physical or mental disability) after demand
for substantial performance is given by the Employer to the Employee
specifically identifying the manner in which the Employer believes
Employee has not materially and substantially performed his duties
hereunder; or
(iii) the Employee willfully and deliberately fails to comply with the Employer's
code of conduct, financial corporate policies or other significant, written
corporate policies of the Employer.
No action, or failure to act, shall be considered "willful" if it is done by the Employee in good
faith and with reasonable belief that his action or omission was in the best interest of the
Employer. Termination pursuant to Section 5(c) above, where material breach is committed by
the Employee, shall not qualify for any severance under Section 6 below.
6.
Severance. In the event that Employee's employment is terminated pursuant to
Section 1 of this Agreement (exclusive of a termination after a change in contr ol where
severance is governed by the provisions contained in Section 13 herein and exclusive of
termination pursuant to Section 5, where material breach is committed by the Employee), the
Employee shall receive severance pay for a period of one (1) year following termination of
employment. Severance will be paid in accordance with normal and customary payroll
practices of the Employer. The aggregate severance will be equal to the Employee's then
current, annual base compensation.
7.
Invention and Trade Secret Agreement. Employee agrees that the Invention and
Trade Secret Agreement signed by the Employee and effective July 27, 2015, is in full force and
effect, provided, however, that the non-compete clause of the Invention and Trade Secret
Agreement shall be superseded by the non-compete provisions of Section 3 of this Agreement.
8.
Specific Performance. It is acknowledged by both parties that damages will
be an inadequate remedy to Employer in the event that Employee breaches or threatens to
breach his commitments under Section 3 or under the Invention and Trade Secret
Agreement. Therefore, it is agreed that Employer may institute and maintain an action or
proceeding to compel the specific performance of the promises of Employee contained
herein and therein. Such remedy shall, however, be cumulative, and not exclusive, to any
other remedy, which Employer may have.
9. Entire Agreement; Amendment. This Agreement supersedes any employment
understanding or agreement (except the Invention and Trade Secret Agreement) which may have
been previously made by Employer or its respective subsidiaries or affiliates with Employee, and
this Agreement, together with the Invention and Trade Secret Agreement, represents all the terms
and conditions and the entire agreement between the parties hereto with respect to such
employment. This Agreement may be modified or amended only by a written document signed
by Employer and Employee.
10. Assignment. This Agreement is personal between Employer and Employee and
may not be assigned; provided, however, that Employer shall have the absolute right at any
time, or from time to time, to sell or otherwise dispose of its assets or any part thereof, to
123
reconstitute the same into one or more subsidiary corporations or divisions or to merge,
consolidate or enter into similar transactions. In the event of any such assignment, the term
"Employer" as used herein shall mean and include such successor corporation.
11. Governing Law; Binding Nature of Agreement. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New Hampshire,
excluding its choice of law provisions. This Agreement shall be binding upon, and enure to
the benefit of, the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
12. Survival. The obligations contained in Sections 3, 5, 6, 7 and 13 herein shall
survive the termination of this Agreement. In addition, the termination of this Agreement
shall not affect any of the rights or obligations of either party arising prior to or at the time of
the termination of this Agreement or which may arise by any event causing the termination of
this Agreement.
13. Change of Control.
(a)
In the event of a change in control of Employer required to be reported under
Item 6(e) of Schedule 14A of Regulation 14A of the Securities Exchange Act of
1934:
(i) Employer may terminate Employee's employment only upon conclusive
evidence of substantial and indisputable intentional personal malfeasance in
office such as a conviction for embezzlement of Employer's funds; and
(ii) Employee may terminate his employment at any time if there is a change in
his general area of responsibility, title or place of employment, or if his salary
or benefits are lessened or diminished.
(b) Following a change of control of Employer, any termination of Employee's
employment either by Employee pursuant to Section 13(a)(ii) or by Employer
under any circumstances other than involving conclusive evidence of substantial
and indisputable intentional personal malfeasance in office, then:
(i) Employee shall be promptly paid a lump sum payment equal to one times his
current annual base salary plus one times the higher of the Employee's then
current target bonus or most recent actual bonus amount under the Annual
Incentive Program as in effect on the date immediately prior to the changes in
control;
(ii) Employee shall become 100% vested in all benefit plans in which he
participates including but not limited to the Management Savings Program
portion of the Standex Annual Incentive Program and all restricted stock
grants and performance share units granted under the Standex Long Term
Incentive Program, or any successor plan of the Employer, and any other
stock based plans of the Employer; and
(iii) All life insurance and medical plan benefits covering the Employee and
his dependents shall be continued at the expense of Employer for the one-
year period following such termination as if the Employee were still an
employee of the Employer.
124
14. Notices. Any notice to be given pursuant to this Agreement shall be sent by
certified mail, postage prepaid, or by facsimile (with a copy mailed via first class mail,
postage pre-paid) or delivery in person to the parties at the addresses set forth in the preamble
to this Agreement or at such other address as either party may from time to time designate in
writing.
15. Covenants Several. In the event that any covenant of this Agreement shall be
determined invalid or unenforceable and the remaining provisions can be given effect, then such
remaining provisions shall remain in full force and effect.
16. Compliance with Section 409A of the Code. To the extent applicable, it is
intended that this Agreement comply with the provisions of Section 409A of the Code. This
Agreement shall be administered in a manner consistent with this intent, and any provision
that would cause the Agreement to fail to satisfy Section 409A of the Code shall have no
force and effect until amended to comply with Section 409A of the Code (which amendment
may be retroactive to the extent permitted by Section 409A of the code and may be made by
the Employer at any time and without the consent of the Employee). In the event that any
payment of benefits hereunder may, in the determination of the Employer, be subject to
section 409A(a)(1) of the Code, the payment of such benefits shall be delayed to the minimum
extent necessary so that such benefits are not subject to the provisions of Section 409A(a)(1)
of the Code. The Employer may attach such conditions to or adjust the amounts paid
hereunder to preserve, as closely as possible, the economic consequences that would
otherwise have applied to the payment; provided however, that no such condition or
adjustment shall result in the payments being subject to Section 409A(a)(1) of the Code. The
Employer further reserves the right to make such amendments to this Agreement as are
necessary to conform the Agreement to the requirements of Section 409A, and the Employee
agrees to execute any such amendments.
IN WITNESS WHEREOF, Employer has caused this Agreement to be executed on its
behalf by its authorized officers and Employee has executed this Agreement as of the day and
year first above written.
STANDEX INTERNATIONAL CORPORATION
/s/ David Dunbar
By: ____________________________________
David Dunbar
Its: President/CEO
/s/ Paul C. Burns
___________________________
Paul C. Burns
125
STANDEX INTERNATIONAL CORPORATION AND SUBSIDIARIES
SUBSIDIARIES OF REGISTRANT
Information is set forth below concerning all operating subsidiaries of the Company as of June 30, 2015 (except
subsidiaries which, considered in the aggregate do not constitute a significant subsidiary).
Exhibit 21
Name of Subsidiary
Associated American Industries, Inc.
Custom Hoists, Inc.
Dornbusch & Cia Industria E. Comercio Ltda.
Mold-Tech Singapore Pte. Ltd.
Nor-Lake, Incorporated
Northlake Engineering, Inc.
Jurisdiction of
Incorporation
Texas
Ohio
Brazil
Singapore
Wisconsin
Wisconsin
Precision Engineering International Limited
United Kingdom
S. I. de Mexico S.A. de C.V.
Standex de Mexico S.A. de C.V.
Standex Electronics, Inc.
Standex Electronics (U.K.) Limited
Standex Engraving L.L.C.
Standex Europe B.V.
Standex Holdings Limited
Standex International GmbH
Standex International Limited
Standex International S.r.l.
Standex (Ireland) Limited
SXI Limited
Ultrafryer Systems, Inc.
Mexico
Mexico
Delaware
United Kingdom
Virginia
The Netherlands
United Kingdom
Germany
United Kingdom
Italy
Ireland
Canada
Georgia
126
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our reports dated August 25, 2016, with respect to the consolidated financial statements,
and internal control over financial reporting included in the Annual Report of Standex International
Corporation on Form 10-K for the year ended June 30, 2016. We consent to the incorporation by
reference of said reports in the Registration Statements of Standex International Corporation on Form S-
3/A (File No. 333-207143) and on Forms S-8 (File No. 333-179513 and File No. 333-147190).
/s/ GRANT THORNTON LLP
Boston, Massachusetts
August 25, 2016
127
EXHIBIT 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-147190 and 333-179513
on Form S-8, and Registration Statement No. 333-207143 on Form S-3, of our report dated August 28,
2014, relating to the consolidated financial statements of Standex International Corporation, appearing in
this Annual Report on Form 10-K of Standex International Corporation for the year ended June 30, 2016.
/s/ Deloitte & Touche LLP
August 25, 2016
Boston, Massachusetts
128
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, being a director of Standex International Corporation
(“Standex”), hereby constitutes David A. Dunbar and Alan J. Glass, and each of
them singly, my true and lawful attorney with full power to them, and each of them
singly, to sign for me and in my name in my capacity as a director of Standex, the
Annual Report of Standex on Form 10-K for the fiscal year ended June 30, 2016,
and any and all amendments thereto and generally to do such things in my name
and behalf to enable Standex to comply with the requirements of the Securities and
Exchange Commission relating to Form 10-K.
Witness my signature as of the 22nd day of August, 2016.
/s/ Charles H. Cannon, Jr.
_______________________________
Charles H. Cannon, Jr.
129
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, being a director of Standex International Corporation
(“Standex”), hereby constitutes David A. Dunbar and Alan J. Glass, and each of
them singly, my true and lawful attorney with full power to them, and each of them
singly, to sign for me and in my name in my capacity as a director of Standex, the
Annual Report of Standex on Form 10-K for the fiscal year ended June 30, 2016,
and any and all amendments thereto and generally to do such things in my name
and behalf to enable Standex to comply with the requirements of the Securities and
Exchange Commission relating to Form 10-K.
Witness my signature as of the 22nd day of August, 2016.
/s/ Thomas E. Chorman
_______________________________
Thomas E. Chorman
130
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, being a director of Standex International Corporation
(“Standex”), hereby constitutes David A. Dunbar and Alan J. Glass, and each of
them singly, my true and lawful attorney with full power to them, and each of them
singly, to sign for me and in my name in my capacity as a director of Standex, the
Annual Report of Standex on Form 10-K for the fiscal year ended June 30, 2016,
and any and all amendments thereto and generally to do such things in my name
and behalf to enable Standex to comply with the requirements of the Securities and
Exchange Commission relating to Form 10-K.
Witness my signature as of the 22nd day of August, 2016.
/s/ Jeffrey S. Edwards
_______________________________
Jeffrey S. Edwards
131
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, being a director of Standex International Corporation
(“Standex”), hereby constitutes David A. Dunbar and Alan J. Glass, and each of
them singly, my true and lawful attorney with full power to them, and each of them
singly, to sign for me and in my name in my capacity as a director of Standex, the
Annual Report of Standex on Form 10-K for the fiscal year ended June 30, 2016,
and any and all amendments thereto and generally to do such things in my name
and behalf to enable Standex to comply with the requirements of the Securities and
Exchange Commission relating to Form 10-K.
Witness my signature as of the 22nd day of August, 2016.
William R. Fenoglio
_______________________________
William R. Fenoglio
132
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, being a director of Standex International Corporation
(“Standex”), hereby constitutes David A. Dunbar and Alan J. Glass, and each of
them singly, my true and lawful attorney with full power to them, and each of them
singly, to sign for me and in my name in my capacity as a director of Standex, the
Annual Report of Standex on Form 10-K for the fiscal year ended June 30, 2016,
and any and all amendments thereto and generally to do such things in my name
and behalf to enable Standex to comply with the requirements of the Securities and
Exchange Commission relating to Form 10-K.
Witness my signature as of the 22nd day of August, 2016.
/s/ Gerald H. Fickenscher
_______________________________
Gerald H. Fickenscher
133
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, being a director of Standex International Corporation
(“Standex”), hereby constitutes David A. Dunbar and Alan J. Glass, and each of
them singly, my true and lawful attorney with full power to them, and each of them
singly, to sign for me and in my name in my capacity as a director of Standex, the
Annual Report of Standex on Form 10-K for the fiscal year ended June 30, 2016,
and any and all amendments thereto and generally to do such things in my name
and behalf to enable Standex to comply with the requirements of the Securities and
Exchange Commission relating to Form 10-K.
Witness my signature as of the 22nd day of August, 2016
.
/s/ Roger L. Fix
_______________________________
Roger L. Fix
134
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, being a director of Standex International Corporation
(“Standex”), hereby constitutes David A. Dunbar and Alan J. Glass, and each of
them singly, my true and lawful attorney with full power to them, and each of them
singly, to sign for me and in my name in my capacity as a director of Standex, the
Annual Report of Standex on Form 10-K for the fiscal year ended June 30, 2016,
and any and all amendments thereto and generally to do such things in my name
and behalf to enable Standex to comply with the requirements of the Securities and
Exchange Commission relating to Form 10-K.
Witness my signature as of the 22nd day of August, 2016.
/s/ Thomas J. Hansen
_______________________________
Thomas J. Hansen
135
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, being a director of Standex International Corporation
(“Standex”), hereby constitutes David A. Dunbar and Alan J. Glass, and each of
them singly, my true and lawful attorney with full power to them, and each of them
singly, to sign for me and in my name in my capacity as a director of Standex, the
Annual Report of Standex on Form 10-K for the fiscal year ended June 30, 2016,
and any and all amendments thereto and generally to do such things in my name
and behalf to enable Standex to comply with the requirements of the Securities and
Exchange Commission relating to Form 10-K.
Witness my signature as of the 22nd day of August, 2016.
/s/ Daniel B. Hogan
_______________________________
Daniel B. Hogan
136
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, being a director of Standex International Corporation
(“Standex”), hereby constitutes David A. Dunbar and Alan J. Glass, and each of
them singly, my true and lawful attorney with full power to them, and each of them
singly, to sign for me and in my name in my capacity as a director of Standex, the
Annual Report of Standex on Form 10-K for the fiscal year ended June 30, 2016,
and any and all amendments thereto and generally to do such things in my name
and behalf to enable Standex to comply with the requirements of the Securities and
Exchange Commission relating to Form 10-K.
Witness my signature as of the 22nd day of August, 2016.
/s/ H. Nicholas Muller, III
_______________________________
H. Nicholas Muller, III
137
1.
2.
3.
4.
EXHIBIT 31.1
RULE 13a-14(a) CERTIFICATION
I, David Dunbar, certify that:
I have reviewed this Annual Report on Form 10-K of Standex International Corporation
for the period ending June 30, 2016;
Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-
15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which
this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, 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;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has materially
138
affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors and the
audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely
affect the registrant’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant’s internal control over financial
reporting.
Date: August 25, 2016
/s/ David Dunbar
______________________________
David Dunbar
President/Chief Executive Officer
139
1.
2.
3.
4.
EXHIBIT 31.2
RULE 13a-14(a) CERTIFICATION
I, Thomas D. DeByle, certify that:
I have reviewed this Annual Report on Form 10-K of Standex International Corporation
for the period ending June 30, 2016;
Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-
15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which
this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, 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;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
140
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors and the
audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely
affect the registrant’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant’s internal control over financial
reporting.
Date: August 25, 2016
/s/ Thomas D. DeByle
______________________________
Thomas D. DeByle
Vice President/Chief Financial Officer
141
EXHIBIT 32
SECTION 1350 CERTIFICATION
The following statement is being made to the Securities and Exchange Commission solely for
purposes of Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350), which carries with
it certain criminal penalties in the event of a knowing or willful misrepresentation.
Each of the undersigned hereby certifies that the Annual Report on Form 10-K for the period
ended June 30, 2016 fully complies with the requirements of Section 13(a) or Section 15(d), as
applicable, of the Securities Exchange Act of 1934, as amended, and that the information
contained in such report fairly presents, in all material respects, the financial condition and
results of operations of the registrant.
Dated: August 25, 2016
Dated: August 25, 2016
/s/ David Dunbar
_______________________________
David Dunbar
President/Chief Executive Officer
/s/ Thomas D. DeByle
_______________________________
Thomas D. DeByle
Vice President/Chief Financial Officer
142