Standex International
Annual Report 2018

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KSTANDEX INTERNATIONAL CORP/DE/ - SXIFiled: August 28, 2018 (period: June 30, 2018)Annual report with a comprehensive overview of the companyThe information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The userassumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot belimited or excluded by applicable law. Past financial performance is no guarantee of future results. 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, 2018Commission File Number 1-7233 STANDEX INTERNATIONAL CORPORATION(Exact name of registrant as specified in its Charter) DELAWARE31-0596149(State of incorporation)(I.R.S. Employer Identification No.) 11 KEEWAYDIN DRIVE, SALEM, NEW HAMPSHIRE03079(Address of principal executive offices)(Zip Code) (603) 893-9701(Registrant’s telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THESECURITIES EXCHANGE ACT OF 1934: Title of Each Class Name of Each Exchange on Which RegisteredCommon Stock, Par Value $1.50 Per Share New York Stock Exchange 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 Actof 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has beensubject 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 DataFile required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (orfor 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 becontained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form10-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 reportingcompany. 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 __ The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant at the close of business onDecember 29, 2017 was approximately $1,288,543,257. Registrant’s closing price as reported on the New York Stock Exchange forDecember 29, 2017 was $101.85 per share.The number of shares of Registrant's Common Stock outstanding on August 22, 2018 was 12,826,411 .DOCUMENTS INCORPORATED BY REFERENCEPortions of the Proxy Statement for the Registrant’s 2018 Annual Meeting of Stockholders (the “Proxy Statement”) are incorporated byreference into Part III of this report.1Indicate 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).YES [ ] NO [X]Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.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,” “intend,” “continue,” or similarterms or variations of those terms or the negative of those terms. There are many factors that affect theCompany’s business and the results of its operations and that may cause the actual results of operations infuture periods to differ materially from those currently expected or anticipated. These factors include, butare not limited to: materially adverse or unanticipated legal judgments, fines, penalties or settlements;conditions in the financial and banking markets, including fluctuations in exchange rates and the inabilityto repatriate foreign cash; domestic and international economic conditions, including the impact, lengthand degree of economic downturns on the customers and markets we serve and more specificallyconditions in the food service equipment, automotive, construction, aerospace, energy, oil and gas,transportation, consumer appliance and general industrial markets; lower-cost competition; the relativemix of products which impact margins and operating efficiencies in certain of our businesses; the impact ofhigher raw material and component costs, particularly steel, petroleum based products and refrigerationcomponents; an inability to realize the expected cost savings from restructuring activities includingeffective completion of plant consolidations, cost reduction efforts including procurement savings andproductivity enhancements, capital management improvements, strategic capital expenditures, and theimplementation of lean enterprise manufacturing techniques; the inability to achieve the savings expectedfrom global sourcing of raw materials and diversification efforts in emerging markets; the impact on coststructure and on economic conditions as a result of actual and threatened increases in trade tariffs; theinability to attain expected benefits from strategic alliances or acquisitions and the inability to effectivelyconsummate and integrate such acquisitions and achieve synergies envisioned by the Company; marketacceptance of our products; our ability to design, introduce and sell new products and related productcomponents; the ability to redesign certain of our products to continue meeting evolving regulatoryrequirements; the impact of delays initiated by our customers; and our ability to increase manufacturingproduction to meet demand; and potential changes to future pension funding requirements. In addition,any forward-looking statements represent management's estimates only as of the day made and should notbe relied upon as representing management's estimates as of any subsequent date. While the Companymay elect to update forward-looking statements at some point in the future, the Company and managementspecifically 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 usedin this report, the terms “we,” “us,” “our,” the “Company” and “Standex” mean Standex International Corporation and itssubsidiaries. 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 have12 operating business units, aggregated and organized for reporting purposes into five segments: Food Service Equipment,Engraving, Engineering Technologies, Electronics and Hydraulics. Overall management, strategic development and financialcontrol are led by the executive staff at our corporate headquarters in Salem, New Hampshire. Our long-term strategy is to enhance shareholder value by building larger, more profitable industrial platforms through avalue creation system that assists management in meeting specific corporate and business unit financial and strategicperformance goals in order to create, improve, and enhance shareholder value. The Standex Value Creation System is astandard methodology which provides consistent tools used throughout the company in order to achieve our organization’sgoals. The Standex Value Creation System employs four components: Balanced Performance Plan, Standex GrowthDisciplines, Standex Operational Excellence, and Standex Talent Management. The Balanced Performance Plan processaligns annual goals throughout the business and provides a standard reporting, management and review process. It is focusedon setting and2Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.meeting annual and quarterly targets that support our short and long-term goals. The Standex Growth Disciplines use a set oftools and processes including market maps, growth laneways, and market tests to identify opportunities to expand thebusiness 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 StandexTalent Management process is an organizational development process that provides training, development, and successionplanning for our employees throughout our worldwide organization. The Standex Value Creation System ties all disciplinesin the organization together under a common umbrella by providing standard tools and processes to deliver our businessobjectives. It is our objective to grow larger and more profitable business units through both organic initiatives and acquisitions. We seek to identify and implement organic growth initiatives such as new product development, geographicexpansion, introduction of products and technologies into new markets and applications, key accounts and strategicsales channel partners. Also, we have a long-term objective to create sizable business platforms by addingstrategically aligned or “bolt on” acquisitions to strengthen the individual businesses, create both sales and costsynergies with our core business platforms, and accelerate their growth and margin improvement. We look to drivecontinuous improvement within our core business platforms, accelerate growth and improve margins. We have aparticular focus on identifying and investing in opportunities that complement our products and will increase theglobal presence and capabilities of our businesses. From time to time, we have divested, and likely will continue todivest, 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 todevelop and deliver custom solutions or engineered components that solve problems for our customers or otherwisemeet their needs. This relationship generally provides us with the ability to identify new sales opportunities with ourcustomers, increase profit over time and provide operating margins that enhance shareholder returns. Further, wehave 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 recognizethat our businesses are competing in a global economy that requires us to improve our competitive position. Wehave deployed a number of management competencies to drive improvements in cost structure of our business unitsincluding operational excellence through lean enterprise, the use of low cost manufacturing facilities in countriessuch as Mexico and China, the consolidation of manufacturing facilities to achieve economies of scale andleveraging of fixed infrastructure costs, alternate sourcing to achieve procurement cost reductions, and capitalimprovements to increase productivity in both the shop floor and back-office. The Company’s strong historical cash flow has been a cornerstone for funding our capital allocation strategy. We usecash flow generated from operations to fund the strategic growth programs described above, including acquisitionsand investments for organic growth, maintenance of our capital assets and to return cash to our shareholders throughthe 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 informationon 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 Food Service Equipment is a provider of refrigeration, cooking, display merchandising and component pumps for theCommercial Food Service and Life Sciences markets. Our products are used throughout the entire commercial food service process – from storage, to preparation, to cooking and todisplay. We focus on the challenges of enabling retail and food service establishments to provide food and beverages that arefresh and appealing while at the same time providing for food safety, and energy efficiency. In the scientific markets, ourproduct portfolio is used to control the temperatures of critical health care products, medicines and laboratory samples. In recent years, much of this segment has experienced head winds and operational challenges—especially with regard tostandard products. We have invested in order to improve margin performance in these standard products businesses. At thesame time, we plan to invest in further growing our differentiated products businesses through new product development,geographic expansion and selective acquisitions.3Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Food Service Locations Food Service Equipment and Scientific products are manufactured in Hudson, WI; New Albany, MS; Summerville, SC;Nogales, Mexico; Simpsonville, SC; San Antonio, TX; Belleville, WI; and Mountmellick, Ireland. In addition, we have ourculinary demonstration center in Allen, TX where we work with customers on design and use of select products. Markets and Applications The commercial food service equipment that we design and manufacture is utilized in restaurants, convenience stores, quick-service restaurants, supermarkets, drug stores and institutions such as hotels, hospitals, and school cafeterias. The life scienceequipment that we design and manufacture is used in hospitals, pharmacies, clinical laboratories, reference laboratories,physicians’ offices and other clinical testing facilities. Brands NorLake®, Master-Bilt®, Lab Research products (LRP), American BioTech Supply (ABS), Cryosafe, CryoGuard,NorLake Scientific®, APW Wyott®, Bakers Pride®, Tri-Star, BKI®, Barbecue King, Ultrafryer®, Federal and Procon®. Products refrigerated reach-in and under counter refrigerated cabinets, cases, display units, walk-in coolers and freezers; cold storage equipment for use in the life sciences commercial ovens, char broilers, ranges, griddles, toasters, warmers, roller grills and countertop merchandisers used incooking, toasting, warming and merchandising food; commercial cook and hold units, rotisseries, pressure fryers, ovens and baking equipment; commercial deep fryers for restaurant and commercial installations; merchandizing display cases for bakery, deli and confectionary products; and pump systems used in beverage and industrial fluid handling applications. Customers Food Service Equipment products are sold to end-users, dealers, buying groups, consultants, government agencies andmanufacturers. Engraving Standex Engraving Mold-Tech creates textures and surface finishes on tooling to enhance the beauty and function of a widerange of consumer goods and automotive products. Standex Engraving Mold-Tech focuses on continuing to meet the needsof a changing marketplace by offering experienced craftsmanship while investing in the latest technology. Our growthstrategy is to continue to expand our capacity to service our customers both organically and inorganically across our globalmarket and to innovate new technologies to enhance the functionalization of surface textures. We are one company operatingin 27 countries using the same approach to service of our customers to guarantee harmony on global programs. Markets and Applications Standex Engraving Mold-Tech has become the global leader by offering a full range of services to Original EquipmentManufacturers (OEM) markets. From start to finish, these services include the design of bespoke textures, the verification ofthe texture on a prototype, engraving the mold, enhancing and polishing it, and then offering on-site try-out support withongoing tool maintenance and texture repair capabilities. Specialized Standex Engraving Mold-Tech companies and brands also include: Piazza Rosa and World Client Services which offer laser engraving and tool finishing in Europe and Mexico. Innovent, located in North America and Europe, is a specialized supplier of tools and machines used to producediapers and products that contain absorbent materials between layers of non-woven fabric. This engineering andmanufacturing company provides innovative solutions to hygiene, aerospace and various industrial clients aroundthe world. 4Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Products and Services Laser Engraving offers superior features previously unavailable on products, such as multiple gloss levels, the elimination ofpaint and optimized scratch performance, including the ability to create nano-finishes to enhance function. Chemical Engraving produces carefully designed textures and finishes without seams or distortion. Exclusive to StandexEngraving Mold-Tech, Digital Transfer Technology guarantees consistency, pattern integrity and texture harmony around theworld. Architexture Design Studio uses proprietary technology with proven expertise to create and test custom textures. An originaltexture is designed to offer beauty and function, then a graphic hybrid of the texture is wrapped on digital 3D forms using Fit-to-Form technology. The texture is printed out using Rapid Texture Prototype technology to create a large-format skin thatcan be wrapped on a model for testing. This verification process is called Model-Tech® which is exclusive to StandexEngraving Mold-Tech. Tool Enhancement services increase the wear resistance of the mold. Processes include Primeform anti-scratch, laserhardening in localized areas, Tribocoat® and Release Coat. Tool Finishing and ongoing support allows customers to achieve outstanding quality while saving valuable time. Theseservices include laser micro-welding, polishing and lapping, laser cladding to accommodate engineering changes, moldassembly, tool management, maintenance, texture repair and on-site support. Zero Parting Line is an exclusive StandexEngraving Mold-Tech process that eliminates the appearance of matched-insert parting lines. Nickel Shell Molds are specifically designed to withstand extreme production conditions and extend the life of the mold.Slush molds, IMG molds, IMGL molds and IMC molds are also produced. Standex Engraving Mold-Tech is the only nickelshell supplier in three global locations: Portugal, USA and China. Customers This division has become the global leader by offering a full range of services to Original Equipment Manufacturers (OEM),product designers, Tier One Suppliers and Toolmakers all around the world. Engineering Technologies The Engineering Technologies Group, “ETG”, is a provider of innovative, turnkey metal-formed solutions for OEM and Tier-1 manufacturers on their advanced engineering designs.ETG solutions seek to reduce input weight and material cost, lower part count, and reduce complexity for unique customerdesign challenges often involving exotic materials, large dimensions, large thicknesses or thin-wall construction, complexshapes and contours, and/or single-piece construction requirements. We devise and manufacture these cost-effectivecomponents and assemblies by combining a portfolio of best-in-class forming technologies, vertically integratedmanufacturing processes, proven forming technical experience, and on-site technical and design assistance.We plan to grow Engineering Technologies Group by identifying new cutting-edge solutions for our metal-formingcapabilities in existing and adjacent markets via customer and research collaborations, as well as by increasing market sharewithin strategic relationships in priority market segments through customer intimacy and technical education initiatives.Our segment is comprised of two businesses including Spincraft, with locations in North Billerica, MA, New Berlin, WI, andNewcastle upon Tyne in the U.K, as well as Enginetics, located in Huber Heights, OH.Markets and ApplicationsEngineering Technologies Group products serve applications within the space, aviation, defense, energy, medical, andgeneral industrial markets.The space market we serve is comprised of components for space launch systems, Our aviation market includes a large portfolio of components and assemblies for OEM turbine engines, The defense market we serve covers a wide spectrum of metal applications, The energy market includes components and assemblies for new and MRO gas turbines, as well as solutions for oil &gas exploration operations. 5----Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.BrandsThis business unit’s names are Spincraft and Enginetics.Productsfuel tanks, tank domes, combustion liners, nozzles, and crew vehicle structures seals, heat shields, and combustor elements, as well as aerostructures, including air intake lipskins missile nose cones and fabrications, large dimension exhaust systems, navy-nuclear propulsion, and others components and assemblies for new and MRO gas turbines, as well as solutions for oil & gas exploration operations MRI scanner vessel ends, shields, and centrifuge bowls CustomersEngineering Technologies components are sold directly to large space, aviation, defense, energy and medical companies, orsuppliers to those companies.Electronics Electronics is a global component and value-added solutions provider of custom magnetic sensing and power conversioncomponents and assemblies. We are focused on designing, engineering, and manufacturing innovative electro-magneticsolutions, components and assemblies to solve our customers’ application needs with an absolute commitment to a customerfirst attitude through the Partner/Solve/Deliver® approach. We continue to expand this business through organic growth with current customers, new customers, developing newproducts and technologies, geographic expansion, and inorganic growth through strategic acquisitions.Components are manufactured in plants located in the USA, Mexico, the U.K., Germany, Japan and China.Markets and ApplicationsThe diverse products and vertically integrated manufacturing capabilities offered for engineered solutions are vital to an arrayof markets for providing safe and efficient power transformation, current monitoring, isolation, as well as sensors to monitorsystems for function and safety. The end-user is typically an OEM industrial equipment manufacturer. End-user marketsinclude, 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.BrandsBusiness unit names are Standex Electronics, Standex-Meder Electronics, Northlake Engineering, Standex Electronics Japan,and world renown reed switch product brands of MEDER, KENT, and KOFU switches. ProductsThe magnetic sensing products employ technologies such as reed switch, Hall Effect, inductive, conductive and othertechnologies. Sensing based solutions include a complete portfolio of reed relays, fluid level, proximity, motion, flow, HVACcondensate, hydraulic pressure differential as well as custom electronics sensors containing these technologies. The magneticsor power conversion products include custom wound transformers and inductors for low and high frequency applications,current sense technology, advanced planar transformer technology, value added assemblies, and mechanical packaging.CustomersThe business sells to a wide variety of automotive, industrial, medical, power and consumer goods customers globally througha direct sales force, regional sales managers, and field applications engineers, commissioned agents, representative groups,and distribution channels. Hydraulics The Hydraulics segment is a leading global manufacturer of mobile hydraulic cylinders and complete hydraulic systems forthe heavy off-road construction and refuse markets.6-----Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.We are focused on custom designs and manufacturing of products that meet customer specific requirements or applications.Our in house custom design abilities and responsiveness to our customers’ needs drive our continuous top line growthopportunities. We leverage our full line of products for the dump truck and trailer market and deep expertise in theirapplication to expand into new markets, targeting the most challenging custom applications. Our flexible design capability,global supply chain and speed to market enable us to be successful in our expansion efforts. Our team is dedicated to superiorcustomer service through our technical engineering support and on-time delivery. We plan to grow Hydraulics by expanding our cylinder offering, completing the hydraulics system with wet kits and sensors. We manufacture our cylinders in Hayesville, OH and Tianjin, China. Markets and Applications Industries that use our products are construction equipment, refuse, airline support, mining, oil and gas, and other materialhandling applications. Our products are utilized by OEMs on vehicles such as dump trucks, dump trailers, bottom dumps,garbage trucks (both recycling and rear loader), container roll off vehicles, hook lift trucks, liquid waste handlers, vacuumtrucks, compactors, balers, airport catering vehicles, container handling equipment for airlines, lift trucks, yard tractors, andunderground mining vehicles. Brands Our products are marketed through the Custom Hoists® brand. Products Products include single and double acting telescopic and piston rod hydraulic cylinders. Additionally, we manufacturespecialty pneumatic cylinders and promote complete wet line kits, which are complete hydraulic systems that include a pump,valves, hoses and fittings. CustomersOur products are sold directly to OEMs, as well as distributors, dealers, and aftermarket repair outlets primarily in NorthAmerica with some sales in South America and Asia. Working Capital Our primary source of working capital is the cash generated from continuing operations. No segments require any specialworking capital needs outside of the normal course of 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 includedomestic and foreign producers of the same and similar products. The principal methods of competition are productperformance 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, inEurope, Canada, China, Japan, India, Southeast Asia, Korea, Australia, Mexico, Brazil, and South Africa. See the Notes toConsolidated Financial Statements for international operations financial data. Our net sales from international operationsincreased from 31% in 2017 to 32% in 2018. International operations are subject to certain inherent risks in connection withthe conduct of business in foreign countries including, exchange controls, price controls, limitations on participation in localenterprises, nationalizations, expropriation and other governmental action, restrictions of repatriation of earnings, andchanges in currency exchange rates. Research and Development Developing new and improved products, broadening the application of established products, continuing efforts to improveour methods, processes, and equipment continues to drive our success. However, due to the nature of our manufacturingoperations and the types of products manufactured, expenditures for research and development are not significant to any7Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.individual segment or in the aggregate. Research and development costs are quantified in the Notes to ConsolidatedFinancial Statements. We develop and design new products to meet customer needs in order to offer enhanced products or toprovide customized solutions for customers. Environmental Matters Based on our knowledge and current known facts, we believe that we are presently in substantial compliance with all existingapplicable environmental laws and regulations and do not anticipate (i) any instances of non-compliance that will have amaterial effect on our future capital expenditures, earnings or competitive position or (ii) any material capital expenditures forenvironmental control facilities. Financial Information about Geographic Areas Information regarding revenues from external customers attributed to the United States, all foreign countries and anyindividual foreign country, if material, is contained in the Notes to Consolidated Financial Statements for “Industry SegmentInformation.” Number of Employees As of June 30, 2018, we employed approximately 5,600 employees of which approximately 2,100 were in the United States. About 270 of our U.S. employees were represented by unions. Approximately 42% of our production workforce is situated inlow-cost manufacturing regions such as Mexico and Asia. Executive Officers of Standex The executive officers of the Company as of June 30, 2018 were as follows: NameAgePrincipal Occupation During the Past Five YearsDavid Dunbar56President and Chief Executive Officer of the Company since January 2014. President of theValves and Controls global business unit of Pentair Ltd from 2009 through 2013.Thomas D. DeByle58Vice President and Chief Financial Officer of the Company since March 2008.Alan J. Glass54Vice President, Chief Legal Officer and Secretary of the Company since April 2016. VicePresident, General Counsel and Secretary of CIRCOR International, Inc. from 2000 through2016.Ross McGovern40Vice President, Chief Human Resources Officer of the Company since August 2015. Director ofHuman Resources of Keurig Green Mountain 2015, Vice President of Human Resources ofDatacolor from 2012 through 2015, and Global Human Resources Manager of R&D GEHealthcare, Medical Diagnostics, a subsidiary of General Electric from 2009 through 2011.Sean Valashinas47Chief Accounting Officer and Assistant Treasurer of the Company since October 2007. Paul Burns45Vice President of Strategy and Business Development since July 2015, Director of CorporateDevelopment 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 ofstockholders, to serve for one-year terms of office. There are no family relationships among any of the directors or executiveofficers 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 number at thatlocation is (603) 893-9701.8Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The U.S. Securities and Exchange Commission (the “SEC”) maintains an internet website at www.sec.gov that contains ourannual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy statements, and allamendments thereto. All reports that we file with the SEC may be read and copied at the SEC’s Public Reference Room at 100F Street, N.E., Washington, DC 20549. Information about the operation of the Public Reference Room can be obtained bycalling 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, areavailable free of charge on our website as soon as reasonably practicable after such reports are electronically filed with orfurnished to the SEC. In addition, our code of business conduct, our code of ethics for senior financial management, ourcorporate governance guidelines, and the charters of each of the committees of our Board of Directors (which are not deemedfiled 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, NewHampshire, 03079.” The certifications of Standex’s Chief Executive Officer and Chief Financial Officer, as required by the rules adopted pursuantto 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 involves various risks, including those mentioned below and those that are discussed fromtime to time in our other periodic filings with the Securities and Exchange Commission. Investors should carefully considerthese risks, along with the other information filed in this report, before making an investment decision regarding theCompany. Any of these risks could have a material adverse effect on our financial condition, results of operations and/orvalue of an investment in the Company. A deterioration in the domestic and international economic environment could adversely affect our operating results,cashflow and financial condition. Recessionary economic conditions, with or without a tightening of credit, could adversely impact major markets served byour businesses, including cyclical markets such as automotive, aviation, energy and power, heavy construction vehicle,general industrial, consumer appliances and food service. An economic recession could adversely affect our business by: reducing demand for our products and services, particularly in markets where demand for our products andservices 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 and spending power 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, in part along with operating cash flow, to provide us with sufficient capital to operateour businesses. The availability of borrowings under our revolving credit facility is dependent upon our compliance with thecovenants set forth in the facility, including the maintenance of certain financial ratios. Our ability to comply with thesecovenants is dependent upon our future performance, which is subject to economic conditions in our markets along withfactors that are beyond our control. Violation of those covenants could result in our lenders restricting or terminating ourborrowing ability under our credit facility, cause us to be liable for covenant waiver fees or other obligations, or trigger anevent of default under the terms of our credit facility, which could result in acceleration of the debt under the facility andrequire prepayment of the debt before its due date. Even if new financing is available in the event of a default under ourcurrent credit facility, the interest rate charged on any new borrowing could be substantially higher than under the currentcredit facility, thus adversely affecting our overall financial condition. If our lenders reduce or terminate our access toamounts under our credit facility, we may not have sufficient capital to fund our working capital needs or we may need tosecure additional capital or financing to fund our working capital requirements or to repay outstanding debt under our creditfacility.9•••••••••Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.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, including acquisitions; create liens; pay cash dividends to shareholders unless we are compliant with the financial covenants set forth in the creditfacility; and sell material assets. Our global operations subject us to international business risks. We operate in 60 locations outside of the United States in Europe, Canada, China, Japan, India, Singapore, Korea, Australia,Mexico, Brazil, Turkey, Malaysia, and South Africa. If we are unable to successfully manage the risks inherent to theoperation and expansion of our global businesses, those risks could have a material adverse effect on our results of operations,cashflow or financial condition. These 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; unexpected changes in zoning or other land-use requirements; 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, improvingworking capital management, developing new and enhanced products, consolidating factories where appropriate, automatingmanufacturing processes, diversification efforts and completing acquisitions which deliver synergies to stimulate sales andgrowth. If we are unable to successfully execute these programs, such failure could adversely affect our operating profits andcash flows. In addition, actions we may take to consolidate manufacturing operations to achieve cost savings or adjust tomarket 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 protectionfrom reckless or criminal acts of our employees, business partners or agents that might violate United States or internationallaws relating to anti-bribery or similar topics. A violation of these laws could subject us to civil or criminal investigationsthat 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 netsales, profits and cash flows could decline. Our businesses operate in highly competitive markets. To compete effectively, we must retain long standing relationshipswith significant customers, offer attractive pricing, maintain product quality, develop enhancements to products that offerperformance features that are superior to our competitors and which maintain our brand recognition, continue to automate ourmanufacturing capabilities, continue to grow our business by establishing relationships with new customers, diversify intoemerging markets and penetrate new markets. If we are unable to compete effectively, our net sales, profitability and cashflows 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 affectour competitive position and often requires significant investment of resources. Difficulties or delays in research,development10•••••••••••••••Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.or production of new products and services or failure to gain market acceptance of new products and technologies maysignificantly 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, aluminum, refrigeration components, freight services, foam insulation and other metalcommodities for the manufacture of our products. Historically, prices for commodities have fluctuated, and we are unable toenter 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 theprice increases by successfully sourcing lower cost commodities or by passing the increased costs on to customers. Shortagesor other disruptions in the supply of these commodities could delay sales or increase costs. Current and threatened tariffs on components and finished goods from China and other countries could result in lower netsales, profits and cash flows and could impair the value of our investments in our Chinese operations. As part of our low-cost country sourcing strategy, we (i) maintain manufacturing facilities in China and (ii) import certaincomponents and finished goods from our own facilities and third-party suppliers in China. Many of the components andfinished goods we import from China are subject to tariffs recently enacted by the United States government as well asadditional proposed tariffs. While we attempt to pass on these additional costs to our customers, competitive factors(including competitors who import from other countries not subject to such tariffs) may limit our ability to sustain priceincreases and, as a result, may adversely impact our net sales, profits and cash flows. In addition, the maintenance of suchtariffs over the long-term could impair the value of our investments in our Chinese operations. 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 ourbusinesses and enable us to leverage our competitive strengths. While we continue to evaluate potential acquisitions, we maynot be able to identify and successfully negotiate suitable acquisitions, obtain financing for future acquisitions onsatisfactory terms, obtain regulatory approval for certain acquisitions or otherwise complete acquisitions in the future. Aninability to identify or complete future acquisitions could limit our future growth. We may experience difficulties in integrating acquisitions. Integration of acquired companies involves several 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 due toacquisitions. Additionally, our level of indebtedness may increase in the future if we finance acquisitions with debt, which would cause usto incur additional interest expense and could increase our vulnerability to general adverse economic and industry conditionsand limit our ability to service our debt or obtain additional financing. We cannot assure that future acquisitions will nothave 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 aninterim basis if a potential impairment factor arises that indicates the fair value of the reporting unit may fall below itscarrying value. Various uncertainties, including continued adverse conditions in the capital markets or changes in generaleconomic conditions, could impact the future operating performance at one or more of our businesses which couldsignificantly affect our valuations and could result in additional future impairments. The recognition of an impairment of asignificant portion of goodwill would negatively affect our results of operations. 11•••••Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Materially adverse or unforeseen legal judgments, fines, penalties or settlements could have an adverse impact on ourprofits and cash flows. We are and may, from time to time, become a party to legal proceedings incidental to our businesses, including, but notlimited to, alleged claims relating to product liability, environmental compliance, patent infringement, commercial disputesand employment and regulatory matters. In accordance with United States generally accepted accounting principles, weestablish reserves based on our assessment of contingent liabilities. Subsequent developments in legal proceedings mayaffect our assessment and estimates of loss contingencies, recorded as reserves, which could require us to record additionalreserves or make material payments which could adversely affect our profits and cash flows. Even the successful defense oflegal proceedings may cause us to incur substantial legal costs and may divert management's time and resources away fromour businesses. The costs of complying with existing or future environmental regulations, and of correcting any violations of theseregulations, could impact our profitability. We are subject to a variety of environmental laws relating to the storage, discharge, handling, emission, generation, use anddisposal of chemicals, hazardous waste and other toxic and hazardous materials used to manufacture, or resulting from theprocess of manufacturing, our products. We cannot predict the nature, scope or effect of regulatory requirements to which ouroperations might be subject or the manner in which existing or future laws will be administered or interpreted. We are alsoexposed to potential legacy environmental risks relating to businesses we no longer own or operate. Future regulations couldbe applied to materials, products or activities that have not been subject to regulation previously. The costs of complyingwith new or more stringent regulations, or with more vigorous enforcement of these or existing regulations, could besignificant. In addition, properly permitted waste disposal facilities used by us as a legal and legitimate repository for hazardous wastemay in the future become mismanaged or abandoned without our knowledge or involvement. In such event, legacy landfillliability 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 tomaintain and update training programs and safety data regarding materials used in our processes. Violations of theserequirements could result in financial penalties and other enforcement actions. We could be required to halt one or moreportions of our operations until a violation is cured. Although we attempt to operate in compliance with these environmentallaws, we may not succeed in this effort at all times. The costs of curing violations or resolving enforcement actions that mightbe initiated by government authorities could be substantial. The costs of complying with existing or future regulations applicable to our products, and of correcting any violations ofsuch regulations, could impact our profitability. Certain of our products are subject to regulations promulgated by administrative agencies such as the Department of Energy,Occupational Health and Safety Administration and the Food and Drug Administration. Such regulations, among othermatters, specify requirements regarding energy efficiency and product safety. Regulatory violations could result in financialpenalties and other enforcement actions. We could be required to halt production of one or more products until a violation iscured. Although we attempt to produce our products in compliance with these requirements, the costs of curing violations orresolving enforcement actions that might be initiated by administrative agencies could be substantial. Strategic divestitures and contingent liabilities from businesses that we sell could adversely affect our results of operationsand financial condition. From time to time, we have sold and may continue to sell business that we consider to be either underperforming or no longerpart of our strategic vision. The sale of any such business could result in a financial loss and/or write-down of goodwill whichcould have a material adverse effect on our results for the financial reporting period during which such sale occurs. Inaddition, in connection with such divestitures, we have retained, and may in the future retain responsibility for some of theknown and unknown contingent liabilities related to certain divestitures such as lawsuits, tax liabilities, product liabilityclaims, and environmental matters. The trading price of our common stock has been volatile, and investors in our common stock may experience substantiallosses. The trading price of our common stock has been volatile and may become volatile again in the future. The trading price ofour common stock could decline or fluctuate in response to a variety of factors, including:12Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.our failure to meet the performance estimates of securities analysts; changes in financial estimates of our net sales and operating results or buy/sell recommendations by securitiesanalysts; 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 an increase in future pension contributions to ourpension plans which could limit our flexibility in managing our Company. The discount rate and the expected rate of return on plan assets represent key assumptions inherent in our actuariallycalculated pension plan obligations and pension plan expense. If discount rates and actual rates of return on invested planassets were to decrease significantly, our pension plan obligations could increase materially. Although our pension planshave been frozen, the size of future required pension contributions could require us to dedicate a greater portion of our cashflow 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, andother security threats or disruptions. Our information technology networks and related systems are critical to the operation of our business and essential to ourability to successfully perform day-to-day operations. Cybersecurity threats are persistent, evolve quickly, and include, butare not limited to, computer viruses, ransomware, attempts to access information, denial of service and other electronicsecurity breaches. These events could disrupt our operations or customers and other third-party IT systems in which we areinvolved and could negatively impact our reputation among our customers and the public which could have a negativeimpact on our financial conditions, results of operations, or liquidity. We are subject to increasing regulation associated with data privacy and processing, the violation of which could result insignificant penalties and harm our reputation. Regulatory scrutiny of privacy, data protection, collection, use and sharing of data is increasing on a global basis. Like allglobal companies, we are subject to a number of laws, rules and directives (“privacy laws”) relating to the collection, use,retention, security, processing and transfer (“processing”) of personally identifiable information about our employees,customers and suppliers (“personal data”) in the countries where we operate. The most notable of these privacy laws is theEU’s General Data Protection Regulation (“GDPR”), which came into effect in 2018. GDPR extends the scope of the EU dataprotection law to all foreign companies processing data of EU residents and imposes a strict data protection complianceregime with severe penalties for non-compliance of up to the greater of 4% of worldwide turnover and €20 million. While wecontinue to strengthen our data privacy and protection policies and to train our personnel accordingly, a determination thatthere have been violations of GDPR or other privacy or data protection laws could expose us to significant damage awards,fines and other penalties that could, individually or in the aggregate, materially harm our results of operations and reputation. Various restrictions in our charter documents, Delaware law and our credit agreement could prevent or delay a change incontrol that is not supported by our board of directors. We are subject to several provisions in our charter documents, Delaware law and our credit facility that may discourage, delayor prevent a merger, acquisition or change of control that a stockholder may consider favorable. These anti-takeoverprovisions include: maintaining a classified board and imposing advance notice procedures for nominations of candidates forelection 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 outstandingshares of our common stock to adopt any agreement of merger, the sale of substantially all of the assets of theCompany to a third party or the issuance or transfer by the Company of voting securities having a fair marketvalue of $1 million or more to a third party, if in any such case such third party is the beneficial owner of 10% ormore of the outstanding shares of our common stock, unless the transaction has been approved prior to itsconsummation by all of our directors; requiring the affirmative vote of the holders of at least 80% of the outstanding shares of our common stock forstockholders to amend our amended and restated by-laws; covenants in our credit facility restricting mergers, asset sales and similar transactions; and 13•••••••••••Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.the Delaware anti-takeover statute contained in Section 203 of the Delaware General Corporation Law. Section 203 of the Delaware General Corporation Law prohibits a merger, consolidation, asset sale or other similar businesscombination between the Company and any stockholder of 15% or more of our voting stock for a period of three years afterthe stockholder acquires 15% or more of our voting stock, unless (1) the transaction is approved by our board of directorsbefore the stockholder acquires 15% or more of our voting stock, (2) upon completing the transaction the stockholder owns atleast 85% of our voting stock outstanding at the commencement of the transaction, or (3) the transaction is approved by ourboard of directors and the holders of 66 2/3% of our voting stock, excluding shares of our voting stock owned by thestockholder. Item 1B. Unresolved Staff Comments None. Item 2. Properties We have a total of 107 facilities, of which we operate 89 manufacturing plants and warehouses located throughout the UnitedStates, Europe, Canada, Australia, Southeast Asia, Korea, Japan, China, India, Brazil, South Africa, and Mexico. The Companyowns 21 of the facilities and the balance are leased. For the year ended June 30, 2018 the approximate building space utilizedby each segment is as follows: Area in Square Feet (in thousands)Segment locationNumber of FacilitiesLeasedOwnedTotalEMEA(1)113-13Other Americas1-127127United States164417901,231Food Service Equipment184549171,371Asia Pacific16279-279EMEA(1)2136335398Other Americas689-89United States67699175Engraving49807134941EMEA(1)380-80United States6243171414Engineering Technologies9323171494Asia Pacific117729106EMEA(1)588896Other Americas255661United States4613091Electronics22151203354Asia Pacific276-76Other Americas11-1United States515101116Hydraulics892101193United States112-12Corporate & Other112-12Total1071,8391,5263,365 (1) EMEA consists 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 andcurrent 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 theConsolidated Financial Statements.14•Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Item 4. Mine Safety Disclosures Not Applicable 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 tickersymbol “SXI”. The high and low sales prices for the Common Stock on the New York Stock Exchange and the dividends paidper Common Share for each quarter in the last two fiscal years are as follows: Common Stock Price Range Dividends Per Share 2018 2017 Year Ended June 30HighLow HighLow 20182017First quarter$ 109.30$ 89.70 $ 93.29$ 80.90 $ 0.16$ 0.14Second quarter110.00 98.38 97.55 74.35 0.180.16Third quarter106.9093.15 101.24 85.80 0.180.16Fourth quarter106.4089.40 100.30 84.30 0.180.16 The approximate number of stockholders of record on July 31, 2018 was 1,630. Additional information regarding our equity compensation plans is presented in the Notes to Consolidated FinancialStatements under the caption “Stock-Based Compensation and Purchase Plans” and Item 12 “Security Ownership of CertainBeneficial Owners and Management and Related Stockholder Matters.” Issuer Purchases of Equity Securities (1) Quarter Ended June 30, 2018 Period (a) TotalNumber ofShares (orunits)Purchased (b) Average PricePaid per Share (orunit) (c) Total Number of Shares(or units) Purchased as Partof Publicly AnnouncedPlans or Programs(d) Maximum Number (orAppropriate Dollar Value) ofShares (or units) that May Yet BePurchased Under the Plans orProgramsApril 1 - April 30, 2018 - $ - - $ 87,718,229May 1 - May 31, 2018 5,290 99.27 5,290 87,193,091June 1 - June 30, 2018 1,136 105.20 1,136 87,073,584 TOTAL 6,426 $ 100.32 6,426 $ 87,073,584 (1) The Company has a Stock Buyback Program (the “Program”) which was originally announced on January 30, 1985 and most recentlyamended on April 26, 2016. Under the Program, the Company is 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 privatelynegotiated transactions, block transactions, or other techniques in accordance with prevailing market conditions and the requirements of theSecurities and Exchange Commission. The Board’s authorization is open-ended and does not establish a timeframe for the purchases. TheCompany is not obligated to acquire a particular number of shares, and the program may be discontinued at any time at the Company’sdiscretion.15Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The following graph compares the cumulative total stockholder return on the Company’s Common Stock as of the end of eachof the last five fiscal years, with the cumulative total stockholder return on the Standard & Poor’s Small Cap 600 (IndustrialSegment) Index and on the Russell 2000 Index, assuming an investment of $100 in each at their closing prices onJune 30, 2013 and the reinvestment of all dividends. 16Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.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. 2018 2017 2016 2015 2014SUMMARY OF OPERATIONS (in thousands) Net sales Food Service Equipment$396,866 $ 380,970 $ 381,867 $ 408,706 $ 377,848 Engraving 136,275 105,943 124,120 110,781 109,271 Engineering Technologies 90,781 90,506 82,235 97,018 79,642 Electronics 196,291 136,689 118,319 114,196 114,881 Hydraulics 48,169 41,150 45,045 41,441 34,538 Total$868,382 $ 755,258 $ 751,586 $ 772,142 $ 716,180Gross profit 301,801 $ 252,754 $ 252,253 $ 247,486 $ 238,269Operating income (loss) Food Service Equipment$34,853 $ 33,436 $ 40,142 $ 37,456 $ 38,203 Engraving 28,966 25,584 29,579 24,250 22,145 Engineering Technologies 6,449 9,662 8,258 13,097 12,676 Electronics 45,310 27,663 21,104 20,884 19,732 Hydraulics 7,316 6,712 7,947 7,013 5,781 Restructuring (1) (7,594) (5,825) (4,232) (3,443) (10,077) Gain on sale of real estate - 652 - - - Acquisition related expenses (3,749) (7,843) - - - Other operating income(expense), net - - (7,458) 438 3,462 Corporate and Other (27,512) (25,015) (24,996) (21,051) (26,054) Total 84,039 65,026 $ 70,344 $ 78,644 $ 65,868Interest expense (8,030) (4,043) (2,871) (3,161) (2,249)Other non-operating (loss) income 1,243 949 1,052 634 4,184Provision for income taxes (40,620) (15,355) (16,295) (20,874) (18,054)Income from continuing operations 36,632 46,577 52,230 55,243 49,749Income/(loss) from discontinuedoperations (28) (32) (174) (500) (6,883)Net income $ 36,604 $ 46,545 $ 52,056 $ 54,743 $ 42,866 (1) See discussion of restructuring activities in Note 15 of the consolidated financial statements. 2018 2017 2016 2015 2014PER SHARE DATA Basic Income from continuing operations $ 2.88 $ 3.68 $ 4.12 $ 4.37 $ 3.94Income/(loss) from discontinued operations- - (0.01) (0.04) (0.55) Total $ 2.88 $ 3.68 $ 4.11 $ 4.33 $ 3.39 Diluted Income from continuing operations $ 2.86 $ 3.65 $ 4.09 $ 4.31 $ 3.89Income/(loss) from discontinued operations- - (0.01) (0.04) (0.54) Total $ 2.86 $ 3.65 $ 4.08 $ 4.27 $ 3.35 Dividends declared $ 0.70 $ 0.62 $ 0.54 $ 0.46 $ 0.3817Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 2018 2017 2016 2015 2014BALANCE SHEET (in thousands) Total assets $ 916,937 $ 867,676 $ 690,457 $ 659,063 $ 577,785 Accounts receivable 134,228 127,060 103,974 110,478 107,674Inventories 127,223 119,401 105,402 108,305 97,065Accounts payable 89,707 96,487 77,099 80,764 85,206Goodwill 251,762 242,690 157,354 154,732 125,965 Long-term debt $ 193,772 $ 191,976 $ 92,114 $ 101,753 $ 44,681Total debt 193,772 191,976 92,114 101,753 44,681Less cash 109,602 88,566 121,988 96,128 74,260Net debt (cash) $ 84,170 $ 103,410 $ (29,874) $ 5,625 $ (29,579) Stockholders' equity $ 450,795 $ 408,664 $ 369,959 $ 348,570 $ 340,726 KEY STATISTICS 2018 2017 2016 2015 2014Gross profit margin 34.8% 33.5% 33.6% 32.1% 33.3%Operating income margin 9.7% 8.6% 9.4% 10.2% 9.2% 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 havetwelve operating business units, aggregated and organized for reporting purposes into five reportable segments: Food ServiceEquipment, Engraving, Engineering Technologies, Electronics and Hydraulics. Overall management, strategic developmentand financial control are led by the executive staff at our corporate headquarters located in Salem, New Hampshire. Our long-term strategy is to build larger industrial platforms through a value creation system that assists management inmeeting specific corporate and business unit financial and strategic performance goals in order to create, improve, andenhance shareholder value. The Standex Value Creation System is a standard methodology which provides consistent toolsused throughout the company in order to achieve our organization’s goal of transforming from its historic roots as a holdingcompany to an efficient operating company. The Standex Value Creation System employs four components: BalancedPerformance Plan, Standex Growth Disciplines, Standex Operational Excellence, and Standex Talent Management. TheBalanced 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 andlong term goals. The Standex Growth Disciplines use a set of tools and processes including market maps, growth laneways,and market tests to identify opportunities to expand the business organically and through acquisitions. Standex OperationalExcellence employs a standard playbook and processes, including LEAN, to eliminate waste and improve profitability, cashflow and customer satisfaction. Finally, the Standex Talent Management process is an organizational development processthat provides training, development, and succession planning for our employees throughout our worldwide organization. TheStandex Value Creation System ties all disciplines in the organization together under a common umbrella by providingstandard tools and processes to deliver our business objectives. Through the use of our Standex Value Creation System, wehave developed a balanced approach to value creation. While we intend to continue investing acquisition capital in highmargin and growth segments such as Electronics and Engraving, we will continue to support all of our businesses as theyenhance value through deployment of our GDP+ and OpEx playbooks. It is our objective to grow larger and more profitable business units through both organic initiatives and acquisitions. We seek to identify and implement organic growth initiatives such as new product development, geographicexpansion, introduction of products and technologies into new markets and applications, key accounts andstrategic sales channel partners. Also, we have a long-term objective to create sizable business platforms by addingstrategically aligned or “bolt on” acquisitions to strengthen the individual businesses, create both sales and costsynergies with our core business platforms, and accelerate their growth and margin improvement. We look tocreate both sales and cost synergies within our core business platforms, accelerate growth and improve margins. We have a particular focus on identifying and investing in opportunities that complement our products and will 18Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.increase the global presence and capabilities of our businesses. From time to time, we have divested, and likelywill continue to divest, businesses that we feel are not strategic or do not meet our growth and return expectations. As part of our ongoing strategy, we acquired Italy-based Piazza Rosa Group (“Piazza Rosa”) in July 2017.The privately held company is a leading provider of mold, tool treatment and finishing services for theautomotive and consumer products markets. The combination of these competencies with StandexEngraving’s worldwide presence and texturizing capabilities creates a global tool finishing service leader.The acquisition also opens additional opportunities in the broader surface engineering market. The PiazzaRosa Group’s results are reported within our Engraving segment. As part of our ongoing strategy, we acquired all of the outstanding shares of Oki Sensor Device Corporation fromOKI Electric Industry Co., Ltd. during the third quarter of fiscal year 2017. Located in Kofu City, Japan, OKISensor Device Corporation is the world’s leading designer and supplier of magnetic reed switches. Now namedStandex Electronics Japan Corporation, (“Standex Electronics Japan”) the acquisition enhances the Company’saccess to important Asian markets and enables the Company to offer a world class suite of reed switches and relatedmagnetic sensors while continuing to serve Standex Electronics Japan’s diverse distribution channels. StandexElectronics Japan’s results are reported within our Electronics segment. During our second quarter of 2017, we acquired Horizon Scientific, Inc., (“Horizon Scientific”) a South Carolina-based supplier of laboratory refrigerators and freezers, as well as cryogenic equipment for the scientific, bio-medicaland pharmaceutical markets. We have included the operating results of Horizon Scientific in our Food ServiceEquipment segment in our Condensed Consolidated Financial Statements. Horizon Scientific expands our accessto higher-margin refrigeration markets in the growing scientific sector that provides solutions for exactingtemperature storage requirements. Horizon Scientific’s products complement the scientific offerings in our Nor-Lake division. During the first quarter of fiscal year 2017, we sold our U.S. Roll Plate and Machinery (“RPM”) business, as it wasnot strategic, and did not meet our growth and return expectations. This divestiture also allows our Engravingmanagement to focus on higher growth and better return businesses within the segment. We develop “Customer Intimacy” by utilizing the Standex Growth Disciplines to partner with our customers inorder to develop and deliver custom solutions or engineered components. By partnering with our customersduring long-term product development cycles, we become an extension of their development teams. Throughthis Partner, Solve, Deliver® methodology, we are able to secure our position as a preferred long-term solutionprovider for our products and components. This strategy results in increased sales and operating margins thatenhance shareholder returns. Standex Operational Excellence drives continuous improvement in the efficiency of our businesses, both on theshop floor and in the office environment. We recognize that our businesses are competing in a global economythat requires us to improve our competitive position. We have deployed a number of management competenciesto drive improvements in the cost structure of our business units including operational excellence through leanenterprise, the use of low cost manufacturing facilities, the consolidation of manufacturing facilities to achieveeconomies of scale and leveraging of fixed infrastructure costs, alternate sourcing to achieve procurement costreductions, and capital improvements to increase productivity. The Company’s strong historical cash flow has been a cornerstone for funding our capital allocation strategy. Weuse cash flow generated from operations to fund the strategic growth programs described above, includingacquisitions and investments for organic growth, investments in capital assets to improve productivity and lowercosts and to return cash to our shareholders through payment of dividends and stock buybacks. Restructuring expenses reflect costs associated with the Company’s efforts of continuously improving operational efficiencyand expanding globally in order to remain competitive in the end-user markets we serve. We incur costs for actions to sizeour businesses to a level appropriate for current economic conditions, improve our cost structure, enhance our competitiveposition and increase operating margins. Such expenses include costs for moving facilities to locations that allow for lowerfixed and variable costs, external consultants who provide additional expertise, starting up plants after relocation,downsizing operations because of changing economic conditions, and other costs resulting from asset redeploymentdecisions. Shutdown costs include severance, benefits, stay bonuses, lease and contract terminations, asset write-downs,costs of moving fixed assets, and moving and relocation costs. Vacant facility costs include maintenance, utilities, propertytaxes and other costs.19oSource: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Because of the diversity of the Company’s businesses, end user markets and geographic locations, management does not usespecific external indices to predict the future performance of the Company, other than general information about broadmacroeconomic trends. Each of our individual business units serves niche markets and attempts to identify trends other thangeneral business and economic conditions which are specific to its business and which could impact their performance. Thoseunits report pertinent information to senior management, which uses it to the extent relevant to assess the future performanceof the Company. A description of any such material trends is described below in the applicable segment analysis.We monitor a number of key performance indicators (“KPIs”) including net sales, income from operations, backlog, effectiveincome tax rate, gross profit margin, and operating cash flow. A discussion of these KPIs is included below. We may alsosupplement the discussion of these KPIs by identifying the impact of foreign exchange rates, acquisitions, and othersignificant items when they have a material impact on a specific KPI. We believe the discussion of these items provides enhanced information to investors by disclosing their impact on the overalltrend which provides a clearer comparative view of the KPI, as applicable. For discussion of the impact of foreign exchangerates on KPIs, the Company calculates the impact as the difference between the current period KPI calculated at the currentperiod exchange rate as compared to the KPI calculated at the historical exchange rate for the prior period. For discussion ofthe impact of acquisitions, we isolate the effect on the KPI amount that would have existed regardless of our acquisition. Sales resulting from synergies between the acquisition and existing operations of the Company are considered organicgrowth for the purposes of our discussion. Unless otherwise noted, references to years are to fiscal years. Consolidated Results from Continuing Operations (in thousands): 2018 2017 2016Net sales$868,382$755,258$ 751,586Gross profit margin 34.8% 33.5% 33.6%Restructuring costs 7,594 5,825 4,232Other income/(expense) operating (3,749) (7,843) (7,458)Income from operations 84,039 65,026 70,344 Backlog (realizable within 1 year)$213,477 $ 193,539$162,895 2018 2017 2016Net sales$868,382$755,258$ 751,586 Components of change in sales: Effect of acquisitions 59,855 38,498 11,672 Effect of exchange rates 14,394 (6,195) (15,011) Effect of business divestitures - (17,446) 2,791 Organic sales growth 38,875 (11,185) (20,008) Net sales for the fiscal year 2018 increased by $113.1 million, or 15.0%, when compared to the prior year. Incremental salesincreases from our recent acquisitions accounted for $59.9 million or 7.9%, while increased organic sales accounted for $38.9million or 5.1%. We also recognized sales growth of $14.4 million or 1.9% related to favorable foreign exchange impacts.The organic sales increases occurred in all of our segments except Engineering Technologies. Net sales for the fiscal year 2017 increased by $3.7 million, or 0.5%, when compared to the prior year. Incremental salesincreases of $38.5 million from acquisitions were partially offset by organic sales declines of $11.2 million, or 1.5%, theimpact of $17.4 million, or 2.3%, from the divestiture of the RPM business, and an unfavorable impact of $6.2 million, or0.8%, due to the effect of exchanges rates. The organic sales decrease was primarily driven by lower sales in the Refrigerationand Cooking Solutions business units within the Food Service Equipment segment. Gross Profit Margin During 2018, gross margin increased to 34.8% as compared to 33.5% in 2017. Gross margin increases during fiscal year 2018were primarily driven by the leverage on our 5.1% organic sales increase. The effects of purchase accounting reduced ourgross margins by 40 basis points in the prior year.20Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.During 2017, gross margin remained essentially flat at 33.5% as compared to 33.6% in 2016. Excluding the effects ofpurchase accounting in both years, our gross margins increased 29 basis points compared to prior year. During fiscal year2017, we incurred $3.1 million of purchase accounting charges related to the Standex Electronics Japan and HorizonScientific acquisitions as compared to charges of $0.4 million in the prior year for the Northlake acquisition. Restructuring Charges and Acquisition Related Expenses During fiscal year 2018, we incurred restructuring expenses of $7.6 million primarily related to restructuring efforts that areintended to improve profitability, streamline production and enhance capacity to support future growth. These efforts include(i) approximately $4.1 million related to headcount reduction and plant realignment regarding the standard productsbusinesses within Food Service Equipment; (ii) approximately $1.2 million in relation to the exit of an unprofitableEngraving business in Brazil; and (iii) approximately $1.1 million due to footprint optimization in the EngineeringTechnologies segment. Acquisition related expenses in fiscal year 2018 were $3.8 million. These expenses were comprised primarily of $2.8 millionfor deferred compensation earned by the Horizon Scientific seller during the year. Since these payments are contingent on theseller remaining an employee of the Company, they are treated as compensation expense. Other acquisition related expensesrelated to Standex Electronics Japan and Piazza Rosa. Acquisition related expenses were approximately $4.0 million more infiscal year 2017 due to the timing of the Standex Electronics Japan acquisition. Selling, General, and Administrative Expenses Selling, general, and administrative expenses, (“SG&A”) for the fiscal year 2018 were $206.4 million, or 23.8% of salescompared to $174.1 million, or 23.0% of sales during the prior year. SG&A expenses were impacted by: (i) on-going SG&Aexpenses related to our recent acquisitions of $7.8 million, (ii) an increase in distribution and selling expenses of $9.4million, (iii) an increase in administrative expenses related to investments to support our recent acquisitions and growthlaneways and (iv) a $3.1 million increase in administrative compensation costs due to improved performance. Selling, general, and administrative expenses, (“SG&A”) for the fiscal year 2017 were $174.1 million, or 23.0%, of salescompared to $170.2 million, or 22.6%, of sales during the prior year. The increase in SG&A was primarily due to $5.6million and $2.6 million related to the Horizon Scientific and Standex Electronics Japan businesses, respectively, whichwere not in prior year. These increases were partially offset by declines of $2.5 million from the divestiture of the RPMbusiness, lower administrative compensation costs of $2.0 million, and lower variable expenses including commission anddistribution costs. Income from Operations Income from operations for the fiscal year 2018 was $84.0 million, compared to $65.0 million during the prior year. The $19.0million dollar increase, or 29.2%, is primarily due to increased sales volume, including 5.1% organic sales growth and 7.9%growth attributed to our recent acquisitions. The increase in operating income is also partially due to the reduction inacquisition related expenses of $4.1 million as compared to the prior year. Income from operations for the fiscal year 2017 was $65.0 million, compared to $70.3 million during the prior year. Thedecrease of $5.5 million was primarily due to acquisition related costs of $7.8 million, an increase in restructuring costs of$1.6 million, and overall organic sales volume declines. These decreases were partially offset by the positive performance ofour Horizon Scientific and Standex Electronic Japan acquisitions. Discussion of the performance of each of our reportable segments is fully explained in the segment analysis that follows. Interest Expense Interest expense for fiscal year 2018 was $8.0 million, an increase from $4.0 million in fiscal year 2017. The increase is dueto higher borrowings associated with the recent acquisitions, in addition to working capital increases to support increasedsales activity. Our effective interest rate of 3.29% as of June 30, 2018, increased 150 basis points as compared to 2.24% as ofJune 30, 2017. In addition, we incurred $0.9 million of charges associated with derivative activity related to the StandexElectronics Japan acquisition. Interest expense for the fiscal year 2017 was $4.0 million, an increase of $1.2 million as compared to the prior year. Interestexpense increases were due to higher borrowing costs and an increase in outstanding borrowings, primarily to fundacquisition activity.21Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Income Taxes On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was passed which resulted in the Company recordingprovisional estimates related to US taxes on foreign earnings, changes in the revaluation of deferred taxes, and foreignwithholding taxes on cash repatriation in our consolidated financial statements. As a result of the Act, the Company recordedthe following impacts for the year ending June 30, 2018: A $1.34 million tax provision for income taxes due to a revaluation of the Company's estimated deferred tax assets andliabilities. A $11.7 million tax provision related to a mandatory deemed repatriation of foreign earnings. Other changes implemented by the Act will not impact the Company until the fiscal year ending June 30, 2019. Theseinclude several other technical provisions such interest expense deduction limitations on both unrelated and related partydebt, new deemed foreign income inclusions under the Global Intangible Low-Taxed Income (GILTI) regime, the ForeignDerived Intangible Income (FDII) deduction for goods & services produced in the US and sold to foreign customers, the repealof the Section 199 deduction, and the change to executive compensation deductions under Section 162(m). In addition, as a result of the Tax Reform change on US federal taxation on cash repatriation, the Company has changed itsposition on reinvestment of foreign earnings in several foreign jurisdictions. We recorded a $7.8 million tax provisionrelated to the anticipated foreign withholding taxes and state taxes on future cash repatriation during the fourth quarter of2018. The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2018 was $40.6 million, oran effective rate of 52.6% compared to $15.4 million, or an effective rate of 24.8% for the year ended June 30, 2017, and$16.3 million, or an effective rate of 23.8% for the year ended June 30, 2016. Changes in the effective tax rates from period toperiod may be significant as they depend on many factors including, but not limited to, the amount of the Company's incomeor loss, the mix of income earned in the US versus outside the US, the effective tax rate in each of the countries in which weearn income, and any one-time tax issues which occur during the period. Capital Expenditures During 2018, capital expenditures increased to $26.5 million or 3.1% of net sales, as compared to $26.4 million, or 3.5%, ofnet sales in the prior year. Capital spending is focused on growth initiatives, cost reduction, and upgrades to extend thecapabilities of our capital assets. In general, we anticipate our capital expenditures over the long term will be approximately3% to 4% of net sales. We expect 2019 capital spending to be approximately $36.0 million which includes $5.0 millionallocated for a new Standex Electronics facility in Cincinnati, which replaces a legacy facility sold for $1.4 million in thethird quarter of fiscal year 2018. Backlog Backlog includes all active or open orders for goods and services. Backlog also includes any future deliveries based onexecuted customer contracts, so long as such deliveries are based on agreed upon delivery schedules. Backlog is notgenerally a significant factor in the Company’s businesses because of our relatively short delivery periods and rapid inventoryturnover with the exception of Engineering Technologies. Backlog orders are not necessarily an indicator of future saleslevels because of variations in lead times and customer production demand pull systems. Customers may delay delivery ofproducts or cancel orders prior to shipment, subject to possible cancellation penalties. Due to the nature of long termagreements in the Engineering Technologies group, the timing of orders and delivery dates can vary considerably resulting insignificant backlog changes from one period to another. In general, the majority of net realizable backlog beyond one yearcomes from the Engineering Technologies Group. Backlog orders in place at June 30, 2018 and 2017 are as follows (in thousands): 22Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. As of June 30, 2018 As of June 30, 2017 Total Backlog Backlog under1 year Total Backlog Backlog under 1yearFood Service Equipment$45,011$41,452 $49,660$47,039Engraving 19,279 19,269 21,584 21,584Engineering Technologies 98,289 74,199 92,154 61,329Electronics 69,059 64,180 60,092 56,741Hydraulics 14,481 14,377 6,846 6,846 Total$246,119$213,477 $230,336$193,539 Backlog realizable within one year increased $19.9 million, or 10.3% to $213.5 million at June 30, 2018 from $193.5million at June 30, 2017. Backlog increases were realized at the Engineering Technologies group segment primarily as aresult of increases in the space and aviation sectors. Segment Analysis (in thousands) Food Service Equipment 2018 compared to 2017 2017 compared to 2016(in thousands except % %percentages)2018 2017 Change 2017 2016 ChangeNet sales$ 396,866 $ 380,970 4.2% $ 380,970 $ 381,867 (0.2%)Income from operations34,853 33,436 4.2% 33,436 40,142 (16.7%)Operating income margin8.8% 8.8% 8.8% 10.5% Net sales for fiscal year 2018 increased $15.9 million, or 4.2% when compared to the prior year. Organic sales increased $4.8million or 1.3%; the acquisitions contributed $9.5 million or 2.5% and foreign exchange added $1.6 million or 0.4%.Refrigeration Solutions sales increased by 9.4%, which included organic sales increases of 5.2% and acquisition growth of4.2%. Refrigeration sales increased in the scientific and food service markets. The dealer, direct, and retail food servicemarkets recovered from prior year declines. Sales in Cooking Solutions decreased by 8.8% year over year due to the timing ofgrocery and convenience store rollouts in the current year, continued product rationalization and the timing of new productintroductions. Specialty Solutions sales increased 9.4% with solid volume from the beverage market and strong growth inmerchandising. The Standard Products businesses increased sales by 1.6% during the year while our Differentiated Productsbusinesses grew by 7.8%. Net sales for fiscal year 2017 decreased $0.9 million, or 0.2% when compared to the prior year. The Horizon Scientificacquisition added $23.4 million or 6.1%, while organic sales declined by $24.2 million or 6.3%. The organic sales declinewas driven by a 7.4% decrease in Refrigeration Solutions and a 9.9% decrease in Cooking Solutions, partially offset by a2.7% increase in Specialty Solutions. Four factors contributed to the organic Refrigeration sales decline: (i) continued loss ofmarket share into the dollar store market, (ii) delayed growth in the pharmacy sector due to merger delays, (iii) second halfmanufacturing issues which, in the short term, lengthened our delivery lead-times and (iv) the increasing importance ofbuying groups as a sales channel and their resultant lower margins. Sales from the Cooking Solutions group decreased due tonon-recurring rollouts in the supermarket channel, lower sales on rationalized low-margin products and lower sales to a fewmajor dealers. Specialty Solutions sales increased due to strong volume in our beverage segment and modest growth inmerchandising. Income from operations for fiscal year 2018 increased $1.4 million, or by 4.2%, when compared to the prior year, andoperating income margin was flat at 8.8%. Margins were negatively impacted by higher commodity prices and the plantrealignment in our Standard Products businesses. The realignment of the Refrigeration and Cooking Solutions plantoperations was largely completed in 2018 and should show benefits in 2019. The Scientific and Specialty Solutionsbusinesses had a positive impact on margins in fiscal year 2018. Our focus in fiscal year 2019 is to continue to grow ourDifferentiated Products businesses and realize the savings from the operational improvements implemented this year in theStandard Products businesses. Income from operations for fiscal year 2017 decreased $6.7 million, or 16.7%, when compared to the prior year, and operatingincome margin decreased from 10.5% to 8.8%. Fiscal year results were primarily impacted by sales declines in theRefrigeration Solutions group due to the factors discussed above. 23Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Engraving 2018 compared to 2017 2017 compared to 2016(in thousands except % %percentages)2018 2017 Change 2017 2016 ChangeNet sales$ 136,275 $ 105,943 28.6% $ 105,943 $ 124,120 (14.6%)Income from operations28,966 25,584 13.2% 25,584 29,579 (13.5%)Operating income margin21.3% 24.1% 24.1% 23.8% Net sales for fiscal year 2018 increased by $30.3 million or 28.6%, compared to the prior year with an organic growth rate of10.2%. The Piazza Rosa Group acquisition contributed $13.2 million or 12.5%. Sales in our Mold-Tech businesses grew dueto launches of new automotive models in the current year. New technologies sales of Architexture, laser, nickel shell, finishingand treatment grew by $17.8 million or 139% during the year. We expect Engraving sales growth in all regions in fiscal year2019 due to the increase in the number of new automotive launches and the expansion of our combined offerings to thetooling industry. Net sales for fiscal year 2017 decreased by $18.2 million or 14.6%, compared to the prior year. Excluding the impact of theend of prior year divesture of the Roll Plate and machinery business and foreign exchange, net sales grew $2.0 million or1.6%. Overall, Mold Tech increased its global market share for new automotive model introductions. Asia Pacific and Europesales grew $4.2 million in fiscal year 2017, partially offset by lower sales volume in North America, which was due to delayednew automotive launches. Income from operations in fiscal year 2018 increased by $3.4 million, or 13.2%, when compared to the prior year. Whileoverall operating income improved due to our new product offerings, these offerings required up-front investments whichnegatively impacted operating income margins for the year. We expect operating income margin improvements as theinvestments produce expected returns. In fiscal 2018, we were also negatively impacted by lower margins in Brazil, Sweden,and Germany. We believe that we have made the necessary changes to improve profitability in those locations in fiscal 2019. Income from operations in fiscal year 2017 decreased by $4.0 million, or 13.5%, when compared to the prior year. Net of theRoll Plate and Machinery business, income from operations decreased by $2.8 million, or 9.8%. The operating incomedecline was driven by decreased automotive volume in North America, the impact of a sales decline at the Innovent businessunit, and increased investments in growth laneways and new technologies to fuel future opportunities. Engineering Technologies 2018 compared to 2017 2017 compared to 2016(in thousands except % %percentages)2018 2017 Change 2017 2016 ChangeNet sales$ 90,781 $ 90,506 0.3% $ 90,506 $ 82,235 10.1%Income from operations6,449 9,662 (33.3%) 9,662 8,258 17.0%Operating income margin7.1% 10.7% 10.7% 10.0% Net sales in the fiscal year 2018 increased $0.3 million or 0.3% when compared to the prior year. Sales distribution by marketin 2018 was as follows: 50% aviation, 27% space, 11% oil and gas, 5% medical, and 7% other markets. Aviation sales grew14.3% from the prior year due to sales on new aircraft and engine platforms, including the Airbus A320 NEO and Boeing 737Max platforms. Space market sales decreased 7.9% from the prior year driven by lower sales in the satellite launch vehiclesegment, partially offset by an increase in the manned space segment. Defense and oil and gas markets also declined in fiscal2018. While we anticipate sales growth in fiscal 2019, we expect our first quarter sales will show a decline followed byincreases in the remainder of the fiscal year. Net sales in the fiscal year 2017 increased $8.3 million or 10.1% when compared to the prior year. Sales distribution bymarket in 2017 was as follows: 43% aviation, 29% space, 14% oil and gas, 5% medical, and 9% other markets. Althoughenergy sales rebounded from historical lows, we continued our conversion of this business to an aviation focused business. Aviation sales increased 2.8% from the prior year, despite delays experienced by key customers on new engine platforms.Space market sales increased 15.8% from the prior year driven by higher sales in both the satellite launch and vehicle markets. Defense related sales improved 11.6% from the prior year. Sales in the energy markets were up $4.6 million primarily due tocontract awards24Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.in the land based energy market. We expect continued strong growth in the aviation market from the various platforms withnacelle lipskin & inlet duct products, along with aircraft engine components with the various OEM’s and Tier One customers. Income from operations in fiscal 2018 decreased $3.2 million or 33.3% when compared to the prior year. The decrease inoperating income was due to delays in major aircraft programs, decreased spending on development programs in the space andaviation markets, and pricing pressure on legacy aircraft parts. Looking forward, we do anticipate improved margins as theaviation programs ramp to full volume in calendar year 2020. Income from operations in fiscal 2017 increased $1.4 million or 17.0% when compared to the prior year. The increase inoperating income was due to higher sales volume and a favorable product mix in the Energy and Space segments compared tothe prior year period. Electronics 2018 compared to 2017 2017 compared to 2016(in thousands except % %percentages)2018 2017 Change 2017 2016 ChangeNet sales$ 196,291 $ 136,689 43.6% $ 136,689 $ 118,319 15.5%Income from operations45,310 27,663 63.8% 27,663 21,104 31.1%Operating income margin23.1% 20.2% 20.2% 17.8% Net sales in the fiscal year 2018 increased $59.6 million, or 43.6%, when compared to the prior year. Organic sales growthwas $16.6 million, or 12.1%. The sales impact of the Standex Electronics Japan (“SEJ”) reed switch operation, acquired March31, 2017, as compared to the prior year was $37.1 million. Foreign exchange rates favorably affected sales by $5.9 million. Organic sales growth was strong in all major geographic areas and all major product lines with particular strength in sensorsand reed switches. Looking forward to our first quarter fiscal 2019, demand remains strong across all regions. Net sales in the fiscal year 2017 increased $18.4 million, or 15.5%, when compared to the prior year. Organic sales growthwas $5.2 million, or 4.3%. The full year effect of the prior year Northlake acquisition added $2.7 million in sales. The March31, 2017 acquisition of SEJ added $12.4 million. Foreign exchange rates adversely affected sales by $1.9 million. Organicsales growth was particularly strong in Europe driven by volume increases in expanding sensor applications. We alsoexperienced modest growth in North America and Asia. Income from operations in the fiscal year 2018 increased $17.7 million, or 63.8%, when compared to the prior year. Theoperating improvements were a result of the acquisition of SEJ reed switch business, along with operating efficiencies,product mix and higher organic sales growth in our base business, and the absence of $2.3 million of purchase accountingexpenses from the prior year. Income from operations in the fiscal year 2017 increased $6.6 million, or 31.1%, when compared to the same period in 2016. The operating improvements were a result of operating efficiencies and product mix as well as higher organic sales growth.The prior year acquisition of SEJ reed switch business and prior year acquisition of Northlake Engineering also impacted theEBIT improvement. The purchase accounting related to the SEJ reed switch business totaled $2.0 million. Hydraulics 2018 compared to 2017 2017 compared to 2016(in thousands except % %percentages)2018 2017 Change 2017 2016 ChangeNet sales$ 48,169 $ 41,150 17.1% $ 41,150 $ 45,045 (8.6%)Income from operations7,316 6,712 9.0% 6,712 7,947 (15.5%)Operating income margin15.2% 16.3% 16.3% 17.6% Net sales in fiscal year 2018 increased by $7.0 million, or 17.1% compared to the prior year. Sales distribution by channel in2018 was as follows: 37% dump trailer and truck, 26% refuse, 25% after-market, 5% export, and 7% other markets. Themajority of the increase in sales was from strong demand in the refuse and dump markets. Additionally, several new OEMcylinder applications on front-end loading garbage trucks and container handlers were secured during the year. We anticipatesales increases in the first half of fiscal year 2019 as the construction, housing and infrastructure markets remain robust. Wealso anticipate additional sales increases due to price increases we are implementing to partially offset the impact of newlyimposed tariffs on product we import from our Chinese operations.25Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Net sales in fiscal year 2017 decreased $3.9 million, or 8.6% compared to the prior year. Sales distribution by channel in 2017was as follows: 37% dump trailer and truck, 22% refuse, 24% after-market, 6% export, and 11% other markets. The decrease insales primarily resulted from a significant reduction in demand from the traditional North American dump trailer and truckmarkets. Income from operations in fiscal year 2018 increased $0.6 million when compared to the prior year. Margins were impactedin fiscal 2018 by material cost increases. However, we implemented price increases in the latter half of the fiscal year tomitigate some of these material price increases. Looking forward, some of our products are impacted by recently enacted andcurrently proposed tariffs on products manufactured by us in China. These tariffs will have a negative impact on margins infiscal 2019, if fully implemented. Income from operations in the fiscal year 2017 decreased $1.2 million or 15.5% when compared to the prior year due mostlyto the reduction of volume requirements for cylinders in the North American dump trailer and truck markets. Corporate, Restructuring and Other 2018 compared to 2017 2017 compared to 2016(in thousands except % %percentages)2018 2017 Change 2017 2016 Change Corporate$(27,512) $ (25,015) 10.0% $ (25,015) $ (24,996) 0.1% Restructuring(7,594) (5,825) 30.4% (5,825) (4,232) 37.6% Other Operating Expenses(3,749) (7,843) (52.2%) (7,843) (7,458) 5.2% Corporate expenses increased by 10.0% in fiscal 2018 due to increases in administrative compensation costs as a result ofimproved performance along with additional investments to support the Standex Value Creation System. During fiscal year 2017, Corporate expenses were flat when compared to the prior year. The restructuring and acquisition-related costs have been discussed above in the Company Overview. Discontinued Operations In pursuing our business strategy, we have divested certain businesses and recorded activities of these businesses asdiscontinued operations. Liquidity and Capital Resources At June 30, 2018, our total cash balance was $109.6 million, of which $101.8 million was held outside of the United States. Beginning in 2019, we expect to repatriate approximately $50 million of our cash held outside of the United States. Duringthe fourth quarter of 2018, we recorded a $7.8 million tax provision related to the anticipated foreign withholding taxes andstate taxes on future cash repatriation. The amount and timing of cash repatriation during 2019 will be dependent upon eachbusiness unit’s operational needs including requirements to fund working capital, capital expenditure, and jurisdictional taxpayments. Cash Flow Net cash provided by continuing operating activities for the year ended June 30, 2018 was $65.0 million compared to netcash provided by continuing operating activities of $64.0 million in the prior year. We generated $76.2 million from incomestatement activities and used $19.6 million of cash to fund working capital increases. Cash flow used in investing activitiesfor the year ended June 30, 2018 totaled $32.3 million. Uses of investing cash consisted primarily of capital expenditures of$26.5 million and $10.4 million for Piazza Rosa and other acquisition activities. These uses of investing cash were partiallyoffset by $2.1 million from proceeds of life insurance and $2.9 million from the net proceeds of the sale of a building inCincinnati, Ohio. We leased back the Cincinnati, Ohio building and, as a result of the transaction, recorded a $0.7 milliondeferred gain that will be amortized over the initial operating lease term which expires in May 2019. Cash used by financingactivities for the year ended June 30, 2018 were $11.9 million and included net borrowings of $1.3 million, cash paid fordividends of $8.9 million and stock repurchases of $2.7 million. Net cash provided by operating activities from continuing operations for the year ended June 30, 2017 was $64.0 million,compared to $81.2 million for the same period in 2016. The decrease was primarily due to increases in accounts receivableand inventory as well as a decrease in net income from continuing operations of $5.7 million. Net cash used for investingactivities from continuing operations for the year ended June 30, 2017 was $179.1 million, consisting primarily of $26.426Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.million for capital expenditure and $153.8 million to acquire the Horizon Scientific and Standex Electronics Japanbusinesses. Net cash used by financing activities for continuing operations for the year ended June 30, 2017 was $84.7million, consisting of debt borrowings of $99.5 million, cash dividends of $7.9 million, and repurchased treasury stock of$7.8 million. We sponsor a number of defined benefit and defined contribution retirement plans. The U.S. pension plan is frozen for allparticipants. We have evaluated the current and long-term cash requirements of these plans, and our existing sources ofliquidity are expected to be sufficient to cover required contributions under ERISA and other governing regulations. The fair value of the Company's U.S. defined benefit pension plan assets was $191.0 million at June 30, 2018, as comparedto $195.3 million as of June 30, 2017. During the fourth quarter of 2018, we made a $5.5 million voluntary contribution tothe defined benefit plan in the U.S. to accelerate tax benefits afforded to the Company by recent tax law changes. We participate in two multi-employer pension plans and sponsor five defined benefit plans including two in the U.S. and onein the U.K., Germany, and Ireland. The Company’s pension plan is frozen for U.S. employees and participants in the planceased accruing future benefits. Our primary U.S. defined benefit plan is not expected to be 100% funded under ERISA rulesat June 30, 2018, but, as a result of past contributions, we do not expect to make mandatory contributions to the plan until2020. We expect to pay $1.4 million in prescribed contributions to our U.K. funded defined benefit plan and other unfundeddefined benefit plans in the U.S. and Europe during fiscal year 2019. We have evaluated the current and long-term cash requirements of our defined benefit and defined contribution plans as ofJune 30, 2018 and determined our operating cash flows from continuing operations and available liquidity are expected to besufficient to cover the required contributions under ERISA and other governing regulations. We have an insurance program in place to fund supplemental retirement income benefits for five retired executives. Currentexecutives and new hires are not eligible for this program. At June 30, 2018, the underlying policies had a cash surrendervalue of $17.3 million and are reported net of loans of $8.6 million for which we have the legal right of offset. These amountsare reported net on our balance sheet. Capital Structure The Company Amended its Credit Agreement (“Credit Facility”, or “facility”) in December 2014. This five-year CreditFacility has a borrowing limit of $400 million, which can be increased by an amount of up to $100 million, in accordancewith specified conditions. The facility also includes a $10 million sublimit for swing line loans and a $30 million sublimitfor letters of credit. Under the terms of the Credit Facility, we pay a variable rate of interest and a commitment fee on borrowed amounts as wellas a commitment fee on unused amounts under the facility. The amount of the commitment fee depends upon both theundrawn amount remaining available under the facility and the Company’s funded debt to EBITDA (as defined in theagreement) ratio at the last day of each quarter. As our funded debt to EBITDA ratio increases, the commitment feeincreases. 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 generalcorporate purposes. The facility contains customary representations, warranties and restrictive covenants, as well as specificfinancial covenants. A significant drop in our adjusted earnings (as defined in our Credit Facility) would limit the amountof indebtedness that could be outstanding at the end of any fiscal quarter which could hinder our ability to makeacquisitions or otherwise limit our long-term growth prospects. Failure to comply with this covenant could result in anacceleration of the debt maturity. As of June 30, 2018, the Company has used $7.9 million against the letter of credit sub-facility and had the ability to borrow $198.1 million under the facility based on our current trailing twelve-month EBITDAas defined in the Credit Agreement. 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 EBITper the Credit Facility specifically excludes extraordinary and certain other defined items such as cash restructuring andacquisition-related charges up to $7.5 million, and unlimited non-cash charges including purchase accounting and goodwilladjustments. At June 30, 2018, the Company’s Interest Coverage Ratio was 11.32:1. Leverage Ratio - The Company’s ratio of funded debt to trailing twelve month Adjusted EBITDA per the facility, calculatedas Adjusted EBIT per the Credit Facility plus depreciation and amortization, may not exceed 3.5:1. At June 30, 2018, theCompany’s Leverage Ratio was 1.68:1.27Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.As of June 30, 2018, we had borrowings under our facility of $193.8 million. In order to manage our interest rate exposureon these borrowings, we are party to $75.0 million of active floating to fixed rate swaps. These swaps convert our interestpayments from LIBOR to a weighted average rate of 1.74%. The effective rate of interest for our outstanding borrowings,including the impact of the interest rate swaps, was 3.29%. Our primary cash requirements in addition to day-to-dayoperating needs include interest payments, capital expenditures, acquisitions, share repurchases, and dividends. Ourprimary sources of cash for these requirements are cash flows from continuing operations and borrowings under the facility. We expect that fiscal year 2019 depreciation and amortization expense will be between $22.0 and $23.0 million and $9.0and $10.0 million, respectively. The following table sets forth our capitalization at June 30: 2018 2017Long-term debt$ 193,772 $191,976Less cash and cash equivalents 109,602 88,566 Net debt 84,170 103,410Stockholders' equity 450,795 408,664 Total capitalization$534,965 $ 512,074 Stockholders’ equity increased year over year by $42.1 million, primarily as a result of current year net income of $36.6million and a favorable change of $8.7 million in unrealized pension losses, partially offset by $9.0 million for dividendsdeclared. The Company's net debt to capital percentage changed to 15.7% for the year ended June 30, 2018 from 20.2% netdebt to capital for the year ended June 30, 2017. The change in net debt to capital is primarily driven by cash generatedthrough operations. Contractual obligations of the Company as of June 30, 2018 are as follows (in thousands): Payments Due by Period Less More than 1 1-3 3-5 than 5Contractual Obligations Total Year Years Years YearsLong-term debt obligations$194,000 $- $194,000 $- $-Operating lease obligations 57,122 10,202 16,626 14,299 15,995Estimated interest payments (1) 9,565 6,377 3,188 - -Post-retirement benefit payments (2)33,920 1,324 12,967 16,732 2,897 Total$294,607 $17,903 $226,781 $31,031 $18,892 Estimated interest payments are based upon effective interest rates as of June 30, 2018, and exclude only those interestrate swaps which are assets to us. See Item 7A for further discussions surrounding interest rate exposure on our variablerate borrowings. Post-retirement benefits and pension plan contribution payments represents’ future pension payments to comply withlocal funding requirements. Our policy is to fund domestic pension liabilities in accordance with the minimum andmaximum limits imposed by the Employee Retirement Income Security Act of 1974 (“ERISA”), federal income tax lawsand the funding requirements of the Pension Protection Act of 2006. At June 30, 2018, we had $2.6 million of non-current liabilities for uncertain tax positions. We are not able to provide areasonable estimate of the timing of future payments related to these obligations. Off Balance Sheet Items At June 30, 2018, and 2017, the Company had standby letters of credit outstanding, primarily for insurance and tradefinancing purposes, of $7.9 million and $8.9 million, respectively. We had no other material off balance sheet items at June 30, 2018, other than the operating leases summarized above in the“Contractual obligations” table.28(1)(2)Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Other Matters Inflation – Certain of our expenses, such as wages and benefits, occupancy costs and equipment repair and replacement, aresubject to normal inflationary pressures. Inflation for medical costs can impact both our reserves for self-insured medicalplans as well as our reserves for workers' compensation claims. We monitor the inflationary rate and make adjustments toreserves whenever it is deemed necessary. Our ability to manage medical costs inflation is dependent upon our ability tomanage claims and purchase insurance coverage to limit the maximum exposure for us. Each of our segments is subject to theeffects of changing raw material costs caused by the underlying commodity price movements. In general, we do not enter intopurchase contracts that extend beyond one operating cycle. While Standex considers our relationship with our suppliers to begood, 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, BritishPound Sterling (Pound), Mexican (Peso), Japanese (Yen), and Chinese (Yuan). Defined Benefit Pension Plans – We record expenses related to these plans based upon various actuarial assumptions such asdiscount rates and assumed rates of returns. The Company’s pension plan was frozen for substantially all remaining eligibleU.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 allexisting applicable environmental laws and regulations and do not anticipate any instances of non-compliance that will havea 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 istypically the period with the lowest level of activity. Employee Relations – The Company has labor agreements with several union locals in the United States and several Europeanemployees belong to European trade unions. Critical Accounting Policies The Consolidated Financial Statements include accounts of the Company and all of our subsidiaries. The preparation offinancial statements in conformity with accounting principles generally accepted in the United States of America requires usto make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying ConsolidatedFinancial Statements. Although, we believe that materially different amounts would not be reported due to the accountingpolicies described below, the application of these accounting policies involves the exercise of judgment and use ofassumptions as to future uncertainties and, as a result, actual results could differ from these estimates. We have listed anumber 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, theprice to the buyer is fixed or determinable, and collectability is reasonably assured. For products that include installation, andif the installation meets the criteria to be considered a separate element, product revenue is recognized upon delivery, andinstallation revenue is recognized when the installation is complete. Revenues under certain fixed price contracts aregenerally recorded when deliveries are made. Sales and estimated profits under certain long-term contracts are recognized under the percentage-of-completion methods ofaccounting, whereby profits are recorded pro rata, based upon current estimates of costs to complete such contracts. Losses oncontracts are provided for in the period in which the losses become determinable. Revisions in profit estimates are reflectedon a cumulative basis in the period in which the basis for such revision becomes known. Any excess of the billings over costand 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 becomeuncollectible in the future. Our estimate for the allowance for doubtful accounts related to trade receivables includesevaluation of specific accounts where we have information that the customer may have an inability to meet its financialobligation 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 inventoryvalues on hand using specific aging categories, and records a provision for obsolete and excess inventory based on historicalusage and estimated future usage. As actual future demand or market conditions may vary from those projected bymanagement, adjustments to inventory valuations may be required.29Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Realization of Goodwill – Goodwill and certain indefinite-lived intangible assets are not amortized, but instead are tested forimpairment at least annually and more frequently whenever events or changes in circumstances indicate that the fair value ofthe asset may be less than its carrying amount of the asset. The Company’s annual test for impairment is performed using aMay 31st measurement date. We have identified our reporting units for impairment testing as our twelve operating segments, which are aggregated into ourfive reporting segments as disclosed in Note 17 – 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 estimatedfair value (Step 1). To the extent that the carrying value of the reporting unit exceeds its estimated fair value, a second step isperformed, wherein the reporting unit’s carrying value is compared to the implied fair value (Step 2). To the extent that thecarrying value exceeds the implied fair value, impairment exists and must be recognized. As quoted market prices are not available for the Company’s reporting units, the fair value of the reporting units is determinedusing a discounted cash flow model (income approach). This method uses various assumptions that are specific to eachindividual reporting unit in order to determine the fair value. In addition, the Company compares the estimated aggregate fairvalue 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-termgrowth rates, a terminal growth rate of 2.5%, and detailed management forecasts of future cash flows prepared by the relevantreporting unit. Fair values were determined primarily by discounting estimated future cash flows at a weighted average cost ofcapital of 10.04%. During our annual impairment testing, we evaluated the sensitivity of our most critical assumption, thediscount rate, and determined that a 200 basis point change in the discount rate selected would not have impacted the testresults. Additionally, the Company could reduce the terminal growth rate from its current 2.5% to 1.0% and the fair value ofall reporting units would still exceed their carrying value. While we believe that our estimates of future cash flows are reasonable, changes in assumptions could significantly affect ourvaluations and result in impairments in the future. The most significant assumption involved in the Company’s determinationof fair value is the cash flow projections of each reporting unit. As a result of our annual assessment, the Company determined that the fair value of the reporting units substantially exceededtheir respective carrying values. Therefore, no impairment charges were recorded in connection with our annual assessmentduring 2018. Cost of Employee Benefit Plans – We provide a range of benefits to certain retirees, including pensions and somepostretirement benefits. We record expenses relating to these plans based upon various actuarial assumptions such asdiscount rates, assumed rates of return, compensation increases and turnover rates. The expected return on plan assetsassumption of 7.0% in the U.S. is based on our expectation of the long-term average rate of return on assets in the pensionfunds and is reflective of the current and projected asset mix of the funds and considers the historical returns earned on thefunds. 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 ourpension assets. The U.S. discount rate of 4.4% reflects the current rate at which pension liabilities could be effectively settledat the end of the year. The discount rate is determined by matching our expected benefit payments from a stream of AA- orhigher bonds available in the marketplace, adjusted to eliminate the effects of call provisions. We review our actuarialassumptions, including discount rate and expected long-term rate of return on plan assets, on at least an annual basis andmake modifications to the assumptions based on current rates and trends when appropriate. Based on information providedby 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 inthe expected return on plan assets assumptions, holding our discount rate and other assumptions constant, would increase ordecrease pension expense by approximately $0.5 million per year. A twenty-five basis point change in our discount rate,holding all other assumptions constant, would have no impact on 2018 pension expense as changes to amortization of netlosses would be offset by changes to interest cost. In future years, the impact of discount rate changes could yield differentsensitivities. 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 forfuture cash flows of the acquired business and the allocation of those cash flows to identifiable intangible assets indetermining the estimated fair values for assets acquired and liabilities assumed. The fair values assigned to tangible andintangible assets acquired and liabilities assumed, are based on management’s estimates and assumptions, as well as otherinformation compiled30Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.by management, including valuations that utilize customary valuation procedures and techniques. If the actual results differfrom the estimates and judgments used in these fair values, the amounts recorded in the consolidated financial statementscould result in a possible impairment of the intangible assets and goodwill, or require acceleration of the amortizationexpense of finite-lived intangible assets. Allocations of the purchase price for acquisitions are based on estimates of the fair value of the net assets acquired and aresubject to adjustment upon finalization of the purchase price allocation. During this measurement period, the Company willadjust assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition datethat, if known, would have resulted in the recognition of those assets and liabilities as of that date. All changes that do notqualify as measurement period adjustments are included in current period earnings. Recently Issued Accounting Pronouncements See "Item 8. Financial Statements and Supplementary Data, Note 1. Summary of Accounting Policies” for informationregarding 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, 2018. 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 managementtechniques. We have internal policies and procedures that place financial instruments under the direction of the Treasurer andrestrict all derivative transactions to those intended for hedging purposes only. The use of financial instruments for tradingpurposes (except for certain investments in connection with the non-qualified defined contribution plan) or speculation isstrictly prohibited. The Company has no majority-owned subsidiaries that are excluded from the consolidated financialstatements. 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 ismitigated, in large part, by natural hedges developed with locally denominated debt service on intercompany accounts. Wealso mitigate certain of our foreign currency exchange rate risks by entering into forward foreign currency contracts from timeto time. The contracts are used as a hedge against anticipated foreign cash flows, such as loan payments, customerremittances, and materials purchases, and are not used for trading or speculative purposes. The fair values of the forwardforeign currency exchange contracts are sensitive to changes in foreign currency exchange rates, as an adverse change inforeign currency exchange rates from market rates would decrease the fair value of the contracts. However, any such losses orgains would generally be offset by corresponding gains and losses, respectively, on the related hedged asset or liability. AtJune 30, 2018 and 2017, the fair value, in the aggregate, of the Company’s open foreign exchange contracts was a liability of$2.8 million at the end of both periods. Our primary translation risk is with the Euro, British Pound Sterling, Peso, Japanese Yen and Chinese Yuan. A hypothetical10% appreciation or depreciation of the value of any these foreign currencies to the U.S. Dollar at June 30, 2018, would notresult in a material change in our operations, financial position, or cash flows. We hedge our most significant foreign currencytranslation risks primarily through cross currency swaps and other instruments, as appropriate. Interest Rate The Company’s effective rate on variable-rate borrowings under the revolving credit agreement is 3.29% and 2.41% atJune 30, 2018 and 2017, respectively. Our interest rate exposure is limited primarily to interest rate changes on our variablerate borrowings. From time to time, we will use interest rate swap agreements to modify our exposure to interest ratemovements. At June 30, 2018, we have $75.0 million of active floating to fixed rate swaps with terms ranging from one tofour years. These swaps convert our interest payments from LIBOR to a weighted average rate of 1.74%. At June 30, 2018and 2017, the fair value, in the aggregate, of the Company’s interest rate swaps was an asset of $1.3 million and a liability of$0.2 million respectively. A 25 basis point increase in interest rates would increase our annual interest expense by $0.3million. 31Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.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, 2018, no one customer accounted for more than 5% of our consolidated outstanding receivables or of our sales. Commodity Prices The Company is exposed to fluctuating market prices for all commodities used in its manufacturing processes. Each of oursegments is subject to the effects of changing raw material costs caused by the underlying commodity price movements. Ingeneral, we do not enter into purchase contracts that extend beyond one operating cycle. While Standex considers ourrelationship 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 priceincreases for steel products, other metal commodities and petroleum based products. In the past year, we have experiencedprice fluctuations for a number of materials including steel, copper wire, other metal commodities, refrigeration componentsand foam insulation. These materials are some of the key elements in the products manufactured in these segments. Whereverpossible, we will implement price increases to offset the impact of changing prices. The ultimate acceptance of these priceincreases, if implemented, will be impacted by our affected divisions’ respective competitors and the timing of their priceincreases.32Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Item 8. Financial Statements and Supplementary Data Consolidated Balance Sheets Standex International Corporation and Subsidiaries As of June 30 (in thousands, except share data)2018 2017 ASSETS Current assets: Cash and cash equivalents $109,602 $88,566 Accounts receivable, net 134,228 127,060 Inventories 127,223 119,401 Prepaid expenses and other current assets 10,558 8,397 Income taxes receivable 2,348 2,469 Deferred tax asset - 14,991 Total current assets 383,959 360,884 Property, plant and equipment, net 144,570 133,160Intangible assets, net 98,075 102,503Goodwill 251,762 242,690Deferred tax asset 7,447 1,135Other non-current assets 31,124 27,304 Total non-current assets 532,978 506,792 Total assets $916,937 $ 867,676 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $89,707 $ 96,487 Accrued liabilities 65,575 58,694 Income taxes payable 6,059 4,783 Total current liabilities 161,341 159,964 Long-term debt 193,772 191,976Deferred income taxes 26,816 24,986Pension obligations 57,826 70,745Other non-current liabilities 26,387 11,341 Total non-current liabilities 304,801 299,048 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, 12,705,562 and 12,662,661 shares outstanding in 2018 and 2017 41,976 41,976 Additional paid-in capital 61,328 56,783 Retained earnings 761,430 716,605 Accumulated other comprehensive loss (121,859) (115,938) Treasury shares (15,278,716 shares in 2018 and 15,321,617 shares in 2017) (292,080) (290,762) Total stockholders' equity 450,795 408,664 Total liabilities and stockholders' equity$916,937 $ 867,676 See notes to consolidated financial statements. 33Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Consolidated Statements of Operations Standex International Corporation and Subsidiaries For the Years Ended June 30(in thousands, except per share data) 2018 2017 2016Net sales $868,382 $ 755,258 $ 751,586Cost of sales (566,581) (502,504) (499,333)Gross profit 301,801 252,754 252,253 Selling, general and administrative 206,419 174,060 170,219Restructuring costs 7,594 5,825 4,232Acquisition related expenses 3,749 7,843 -Other operating (income) expense, net - - 7,458Income from operations 84,039 65,026 70,344 Interest expense 8,030 4,043 2,871Other non-operating (income) expense, net (1,243) (949) (1,052)Total 6,787 3,094 1,819 Income from continuing operations before income taxes 77,252 61,932 68,525Provision for income taxes (40,620) (15,355) (16,295)Income from continuing operations 36,632 46,577 52,230 Income (loss) from discontinued operations, net of tax (28) (32) (174) Net income $36,604 $ 46,545 $ 52,056 Basic earnings per share: Income (loss) from continuing operations $2.88 $ 3.68 $ 4.12Income (loss) from discontinued operations - - (0.01)Total $2.88 $ 3.68 $ 4.11 Diluted earnings per share: Income (loss) from continuing operations $2.86 $ 3.65 $ 4.09Income (loss) from discontinued operations - - (0.01)Total $2.86 $ 3.65 $ 4.08 See notes to consolidated financial statements. 34Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Consolidated Statements of Comprehensive Income Standex International Corporation and Subsidiaries For the Years Ended June 30, (in thousands) 2018 2017 2016 Net income (loss)$36,604 $ 46,545 $52,056Other comprehensive income (loss): Defined benefit pension plans: Actuarial gains (losses) and other changes in unrecognized costs$6,159 $3,689 $(26,619) Amortization of unrecognized costs 5,485 5,729 4,779 Derivative instruments: Change in unrealized gains and (losses) 2,541 (2,896) (1,010) Amortization of unrealized gains and (losses) into interest expense 292 (462) 567 Amortization of unrealized gains and (losses) into cost of goods sold - 75 112 Foreign currency translation gains (losses) 93 (472) (11,303)Other comprehensive income (loss) before tax$14,570 $5,663 $(33,474) Income tax (provision) benefit: Defined benefit pension plans: Actuarial gains (losses) and other changes in unrecognized costs$(1,436) $ (1,354) $10,075 Amortization of unrecognized costs (1,460) (2,012) (1,685) Derivative instruments: Change in unrealized gains and (losses) (339) (80) 384 Amortization of unrealized gains and (losses) into interest expense (43) (152) (216) Amortization of unrealized gains and (losses) into cost of goods sold - (28) (42)Income tax (provision) benefit to other comprehensive income (loss)$(3,278) $(3,626) $ 8,516 Other comprehensive income (loss), net of tax 11,292 2,037 (24,958)Comprehensive income (loss)$ 47,896 $48,582 $27,098 See notes to consolidated financial statements. 35Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Consolidated Statements of Stockholders' Equity Standex International Corporation and Subsidiaries Accumulated OtherTreasury Stock For the Years Ended June 30(in thousands, except as specified) CommonStock AdditionalPaid-inCapital RetainedEarnings ComprehensiveIncome (Loss) Shares AmountTotalStockholders’EquityBalance, June 30, 2015$ 41,976$ 47,254$ 632,864$ (93,017)15,333$(280,507)$ 348,570Stock issued for employee stock option and purchase plans,including related income tax benefit and other 31 (94) 1,725 1,756Stock-based compensation 5,089 5,089 Treasury stock acquired 71 (5,636) (5,636)Comprehensive income: Net Income 52,056 52,056Foreign currency translation adjustment (11,303) (11,303)Pension and OPEB adjustments, net of tax of $8.4 million (13,450) (13,450)Change in fair value of derivatives, net of tax of $0.2 million (205) (205)Dividends declared ($0.54 per share) (6,918) (6,918)Balance, June 30, 2016$ 41,976$ 52,374$ 678,002$ (117,975)15,310$(284,418)$ 369,959Stock issued for employee stock option and purchase plans,including related income tax benefit and other (614) (78) 1,462 848Stock-based compensation 5,023 5,023Treasury stock acquired 90 (7,806) (7,806)Comprehensive income: Net Income 46,545 46,545Foreign currency translation adjustment (472) (472)Pension and OPEB adjustments, net of tax of $3.4 million 6,052 6,052Change in fair value of derivatives, net of tax of $0.3 million (3,543) (3,543)Dividends declared ($0.62 per share) (7,942) (7,942)Balance, June 30, 2017$ 41,976$ 56,783$ 716,605$ (115,938)15,322$(290,762)$ 408,664Stock issued for employee stock option and purchase plans and other (417) (70) 1,334 917Stock-based compensation 4,962 4,962Treasury stock acquired 27 (2,652) (2,652)Adoption of ASU 2018-02 17,215 (17,215) -Comprehensive income: Net Income 36,604 36,604Foreign currency translation adjustment 94 94Pension and OPEB adjustments, net of tax of $2.9 million 8,748 8,748Change in fair value of derivatives, net of tax of $0.4 million 2,452 2,452Dividends declared ($0.70 per share) (8,994) (8,994)Balance, June 30, 2018$ 41,976$61,328$ 761,430$ (121,859)15,279$(292,080)$450,795 See notes to consolidated financial statements. 36Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Consolidated Statements of Cash Flows Standex International Corporation and Subsidiaries For the Years Ended June 30 (in thousands) 2018 2017 2016 Cash Flows from Operating Activities Net income $36,604 $ 46,545 $ 52,056 Income (loss) from discontinued operations ( (28) (32) (174) Income (loss) from continuing operations 36,632 46,577 52,230 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 29,163 20,315 17,953 Stock-based compensation 4,962 5,023 5,089 Deferred income taxes 7,391 (121) (6,756) Non-cash portion of restructuring charge (1,264) 1,414 2,323 Loss on assets held for sale - - 7,267 (Gain) loss on disposal of real estate and equipment (655) (652) 191 Excess tax benefit from share-based payment activity - - (795) Increase/(decrease) in cash from changes in assets and liabilities, net of effects from discontinued operations and business acquisitions:Accounts receivables, net (3,440) (6,013) 4,144 Inventories (6,814) (3,796) 1,729 Contributions to defined benefit plans (6,966) (1,443) (1,320) Prepaid expenses and other 1,786 61 1,092 Accounts payable (9,326) 4,552 (3,368) Accrued payroll, employee benefits and other liabilities12,444 3,726 6,731 Income taxes payable 1,090 (5,610) (5,289) Net cash provided by operating activities from continuing operations65,003 64,033 81,221 Net cash used for operating activities from discontinued operations(78) (594) (897) Net cash provided by operating activities 64,925 63,439 80,324 Cash Flows from Investing Activities Expenditures for capital assets (26,539) (26,448) (17,851) Expenditures for acquisitions, net of cash acquired (10,397) (153,815) (13,700) Expenditures for executive life insurance policies (310) (377) (417) Proceeds from sale of real estate and equipment 2,852 1,106 383 Other investing activity 2,129 483 - Net cash (used for) investing activities from continuing operations(32,265) (179,051) (31,585) Net cash provided by investing activities from discontinued operations- - 2,803 Net cash provided by (used for) investing activities (32,265) (179,051) (28,782) Cash Flows from Financing Activities Proceeds from borrowings 163,500 263,700 65,000 Payments of debt (164,788) (164,200) (75,000) Stock issued under employee stock option and purchase plans 915 848 942 Excess tax benefit from share-based payment activity - - 795 Purchase of treasury stock (2,652) (7,806) (5,636) Cash dividends paid (8,888) (7,852) (6,846) Net cash provided by (used for) financing activities (11,913) 84,690 (20,745) Effect of exchange rate changes on cash 289 (2,500) (4,937) Net change in cash and cash equivalents 21,036 (33,422) 25,860 Cash and cash equivalents at beginning of year 88,566 121,988 96,128 Cash and cash equivalents at end of year $109,602 $88,566 $121,988 Supplemental Disclosure of Cash Flow Information: Cash paid during the year for: Interest $6,178 $ 3,258 $ 2,351 Income taxes, net of refunds $ 22,145 $20,413 $ 24,769 See notes to consolidated financial statements. STANDEX INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS37Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.1. SUMMARY OF ACCOUNTING POLICIES Basis of Presentation and Consolidation Standex International Corporation (“Standex” or the “Company”) is a diversified manufacturing company with operations inthe United States, Europe, Asia, Africa, and Latin America. The accompanying consolidated financial statements include theaccounts of Standex International Corporation and its subsidiaries and are prepared in accordance with accounting principlesgenerally accepted in the United States of America (“GAAP”). All intercompany accounts and transactions have beeneliminated in consolidation. The Company considers events or transactions that occur after the balance sheet date, but before the financial statements areissued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. Weevaluated 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 andassumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingentassets and liabilities at the date of the financial statements and for the period then ended. Estimates are based on historicalexperience, actuarial estimates, current conditions and various other assumptions that are believed to be reasonable under thecircumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities whenthey are not readily apparent from other sources. These estimates assist in the identification and assessment of the accountingtreatment necessary with respect to commitments and contingencies. Actual results may differ from these estimates underdifferent assumptions or conditions. Cash and Cash Equivalents Cash and cash equivalents include highly liquid investments purchased with a maturity of three months or less. Theseinvestments are carried at cost, which approximates fair value. At June 30, 2018 and 2017, the Company’s cash wascomprised solely of cash on deposit. Trading Securities The Company purchases investments for its non-qualified defined contribution plan for employees who exceed certainthresholds under our traditional 401(k) plan. These investments are classified as trading and reported at fair value. Theinvestments generally consist of mutual funds, are included in other non-current assets and amounted to $2.4 million atJune 30, 2018 and $2.4 million at June 30, 2017. Gains and losses on these investments are recorded as other non-operatingincome (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 lossinherent in the Company’s account receivables portfolio. This estimate is derived from the Company’s knowledge of its endmarkets, customer base, products, and historical experience. The changes in the allowances for uncollectible accounts during 2018, 2017, and 2016 were as follows (in thousands): 2018 2017 2016Balance at beginning of year$2,406 $ 2,119 $ 2,226Acquisitions and other (169) 52 3Provision charged to expense 870 416 8Write-offs, net of recoveries (137) (181) (118)Balance at end of year$2,970 $2,406 $ 2,119 Inventories38Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Inventories are stated at the lower of (first-in, first-out) cost or market. Inventory quantities on hand are reviewed regularly,and provisions are made for obsolete, slow moving, and non-saleable inventory, based primarily on management’s forecast ofcustomer demand for those products in inventory. Long-Lived Assets Long-lived assets that are used in operations, excluding goodwill and identifiable intangible assets, are tested forrecoverability 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 liabilitiesat the lowest level where identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Animpairment loss is the amount by which the carrying amount of a long-lived asset (asset group) exceeds its estimated fairvalue. 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 theirestimated useful lives, generally using the straight-line method. Lives for property, plant and equipment are as follows: Buildings40 to 50 yearsLeasehold improvementsLesser of useful life or term, unless renewals aredeemed to be reasonably assuredMachinery and equipment8 to 15 yearsFurniture and Fixtures3 to 10 yearsComputer hardware and software3 to 7 years Routine maintenance costs are expensed as incurred. Major improvements are capitalized. Major improvements to leasedbuildings are capitalized as leasehold improvements and depreciated over the lesser of the lease term or the life of theimprovement. Amortization of computer hardware and software of $1.4 million, $0.6 million, and $0.6 million is included as a component ofdepreciation expense for the years ended June 30, 2018, 2017, and 2016, respectively. Goodwill and Identifiable Intangible Assets All business combinations are accounted for using the acquisition method. Goodwill and identifiable intangible assets withindefinite lives, are not amortized, but are reviewed annually for impairment or more frequently if impairment indicators arise.Identifiable intangible assets that are not deemed to have indefinite lives are amortized over the following useful lives: Customer relationships5 to 16 yearsPatents12 yearsNon-compete agreements5 to 10 yearsOther10 yearsDeveloped technology10-20 yearsTrade namesIndefinite 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 receivedto 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 judgmentassociated with the inputs used to measure their fair values. Hierarchical levels directly related to the amount of subjectivityassociated with the inputs to fair valuation of these assets and liabilities and the methodologies used in valuation are asfollows: Level 1 – Quoted prices in active markets for identical assets and liabilities. The Company’s deferred compensationplan assets consist of shares in various mutual funds (for the deferred compensation plan, investments are participant-39Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.directed) which invest in a broad portfolio of debt and equity securities. These assets are valued based on publiclyquoted market prices for the funds’ shares as of the balance sheet dates. For pension assets (see Note 16 – EmployeeBenefit 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 indirectlythrough correlation with market data. For foreign exchange forward contracts and interest rate swaps, the Companyvalues the instruments based on the market price of instruments with similar terms, which are based on spot andforward rates as of the balance sheet dates. For pension assets held in commingled funds (see Note 16 – EmployeeBenefit Plans), the Company values investments based on the net asset value of the funds, which are derived from thequoted market prices of the underlying fund holdings. The Company has considered the creditworthiness ofcounterparties in valuing all assets and liabilities. Level 3 – Unobservable inputs based upon the Company’s best estimate of what market participants would use inpricing the asset or liability. We did not have any transfers of assets and liabilities among Levels of the fair value measurement hierarchy during the yearsended June 30, 2018 or 2017. Cash and cash equivalents, accounts receivable, accounts payable and debt are carried at cost, which approximates fair value. The fair values of our financial instruments at June 30, 2018 and 2017 were (in thousands): 2018 Total Level 1 Level 2 Level 3Financial Assets Marketable securities - deferred compensation plan$2,362 $2,362 $- $- Foreign exchange contracts 1,357 - 1,357 - Interest rate swaps 1,325 - 1,325 - Financial Liabilities Foreign exchange contracts$4,204 $- $4,204 $- Interest rate swaps - - - - Contingent acquisition payments (a) 7,535 - - 7,535 2017 Total Level 1 Level 2 Level 3Financial Assets Marketable securities - deferred compensation plan$ 2,397 $ 2,397 $ - $ - Foreign exchange contracts 399 - 399 - Interest rate swaps 3,777 - 3,777 - Financial Liabilities Foreign exchange contracts$ 3,232 $ - $ 3,232 $ - Interest rate swaps 3,958 - 3,958 - 2,108 (a) The fair value of our contingent consideration arrangement is determined based on our evaluation as to the probabilityand amount of any deferred compensation that has been earned to date. Our financial liabilities based upon Level 3 inputs include contingent consideration arrangements relating to our acquisitionof Horizon Scientific or Piazza Rosa. We are contractually obligated to pay contingent consideration payments to the Sellersof these businesses based on the achievement of certain criteria. Contingent consideration payable to the Horizon seller is based on continued employment of the seller on the second andthird anniversary of the closing date of the acquisition. Contingent acquisition payment liabilities are scheduled to be paid inperiods through fiscal year 2020. As of June 30, 2018, we could be required to pay up to $8.0 million for contingentconsideration arrangements if specific criteria are achieved.40 Contingent acquisition payments(a) 2,108--Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Contingent consideration payable to the Piazza Rosa sellers is based on the achievement of certain revenue targets of each ofthe first three years following the acquisition. Contingent acquisition payments are payable in euros and can be paid inperiods through fiscal year 2021. As of June 30, 2018, we could be required to pay up to $1.7 million for contingentconsideration arrangements if the revenue targets are met. We have determined the fair value of the liabilities for the contingent consideration based on a probability-weighteddiscounted cash flow analysis. This fair value measurement is based on significant inputs not observable in the market andthus represents a Level 3 measurement within the fair value hierarchy. The fair value of the contingent consideration liabilityassociated with future payments was based on several factors, the most significant of which are continued employment of theseller and the risk-adjusted discount rate for the fair value measurement. As of June 30, 2018, neither the amount recognizedfor the contingent consideration arrangement, nor the range of outcomes or the assumptions used to develop the estimate hadchanged. Concentration of Credit Risk The Company is subject to credit risk through trade receivables and short-term cash investments. Concentration of risk withrespect to trade receivables is minimized because of the diversification of our operations, as well as our large customer baseand our geographical dispersion. No individual customer accounts for more than 5% of revenues or accounts receivable in theperiods presented. Short-term cash investments are placed with high credit-quality financial institutions. The Company monitors the amount ofcredit 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, theprice to the buyer is fixed or determinable, and collectability is reasonably assured. For products that include installation, andif the installation meets the criteria to be considered a separate element, product revenue is recognized upon delivery, andinstallation revenue is recognized when the installation is complete. Revenues under certain fixed price contracts aregenerally recorded when deliveries are made. Sales and estimated profits under certain long-term contracts are recognized under the percentage-of-completion methods ofaccounting, whereby profits are recorded pro rata, based upon current estimates of costs to complete such contracts. Losses oncontracts are fully recognized in the period in which the losses become determinable. Revisions in profit estimates arereflected on a cumulative basis in the period in which the basis for such revision becomes known. Any excess of the billingsover 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 thenatural 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, benefitsand other costs that are incurred directly or indirectly to support the manufacturing process. Selling, general andadministrative includes expenses associated with the distribution of our products, sales effort, administration costs and othercosts that are not incurred to support the manufacturing process. The Company records distribution costs associated with thesale of inventory as a component of selling, general and administrative expenses in the Consolidated Statements ofOperations. These expenses include warehousing costs, outbound freight charges and costs associated with distributionpersonnel. Our gross profit margins may not be comparable to those of other entities due to different classifications of costsand expenses. The Company purchased $2.4 million, $2.4 million, and $3.3 million from a 20% owned equity interest during the yearsended June 30, 2018, 2017, and 2016 respectively. The inventory was purchased under customary terms and conditions andsold to customers in the ordinary course of business. Earnings from this investment are not material and are accounted forunder the equity method. Our total advertising expenses, which are classified under selling, general, and administrative expenses are primarily related totrade shows, and totaled $4.3 million, $5.1 million, and $4.3 million for the years ended June 30, 2018, 2017, and 2016,respectively. Research and Development41Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Research and development expenditures are expensed as incurred. Total research and development costs, which are classifiedunder selling, general, and administrative expenses, were $6.1 million, $5.5 million, and $4.9 million for the years endedJune 30, 2018, 2017, and 2016, respectively. Warranties The expected cost associated with warranty obligations on our products is recorded when the revenue is recognized. TheCompany’s estimate of warranty cost is based on contract terms and historical warranty loss experience that is periodicallyadjusted for recent actual experience. Since warranty estimates are forecasts based on the best available information, claimscosts may differ from amounts provided. Adjustments to initial obligations for warranties are made as changes in theobligations become reasonably estimable. The changes in continuing operations warranty reserve, which are recorded as accrued liabilities, during 2018, 2017, and2016 were as follows (in thousands): 2018 2017 2016Balance at beginning of year$9,243 $9,085 $ 7,436Acquisitions and other charges (138) 301 (5)Warranty expense 9,223 9,203 13,503Warranty claims (8,972) (9,346) (11,849)Balance at end of year$9,356 $ 9,243 $ 9,085 The decrease in warranty expense during 2017 compared to 2016 is primarily due to the conclusion of the warranty period forpotential claims arising from production and manufacturing issues experienced in the Cooking Solutions business when theCompany transitioned from the Cheyenne plant to Nogales in fiscal year 2015. Additional warranty expense changes weredue to the decline in sales volume for warrantable products which reduced the potential for future claims. Stock-Based Compensation Plans Restricted stock awards generally vest over a three-year period. Compensation expense associated with these awards isrecorded based on their grant-date fair values and is generally recognized on a straight-line basis over the vesting periodexcept for awards with performance conditions, which are recognized on a graded vesting schedule. Compensation cost for anaward with a performance condition is based on the probable outcome of that performance condition. The stated vestingperiod is considered non-substantive for retirement eligible participants. Accordingly, the Company recognizes anyremaining unrecognized compensation expense upon participant reaching retirement eligibility. Foreign Currency Translation 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 ofthese operations are translated using average exchange rates. The resulting translation adjustment is reported as a componentof comprehensive income (loss) in the consolidated statements of stockholders’ equity and comprehensive income. Gains andlosses 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 certainanticipated foreign cash flows, such as foreign purchases of materials and loan payments from subsidiaries. The Companyenters into such contracts for hedging purposes only. The Company has designated certain of these currency contracts ashedges, and changes in the fair value of these contracts are recognized in other comprehensive income until the hedged itemsare recognized in earnings. Hedge ineffectiveness, if any, associated with these contracts will be reported in net income. The Company also uses interest rate swaps to manage exposure to interest rates on the Company’s variable rate indebtedness. The Company values the swaps based on contract prices in the derivatives market for similar instruments. The Company hasdesignated its interest rate swap agreements, including those that are forward-dated, as cash flow hedges, and changes in thefair value of the swaps are recognized in other comprehensive income until the hedged items are recognized in earnings. Hedge ineffectiveness, if any, associated with the swaps will be reported by the Company in interest expense.42Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The Company does not hold or issue derivative instruments for trading purposes. Income Taxes The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2018 was $40.6 million, oran effective rate of 52.6%, compared to $15.4 million, or an effective rate of 24.8% for the year ended June 30, 2017, and$16.3 million, or an effective rate of 23.8% for the year ended June 30, 2016. Changes in the effective tax rates from period toperiod may be significant as they depend on many factors including, but not limited to, the amount of the Company's incomeor loss, the mix of income earned in the US versus outside the US, the effective tax rate in each of the countries in which weearn income, and any one-time tax issues which occur during the period. The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2018 was impacted by thefollowing items: (i) a tax provision related to the impact of the Sec. 965 toll tax of $11.7 million, (ii) a tax provision related toa revaluation of deferred taxes due to the federal rate reduction of $1.3 million, and (iii) a tax provision related to expectedforeign withholding taxes on cash repatriation of $7.8 million. The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2017 was impacted by thefollowing items: (i) a provision of $0.4 million related to non-deductible transaction costs, (ii) a benefit of $0.6 million relatedto the R&D tax credit, and (iii) a benefit of $5.3 million due to the mix of income earned in jurisdictions with beneficial taxrates. The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2016 was impacted by thefollowing 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 injurisdictions with beneficial tax rates. Earnings Per Share (share amounts in thousands) 2018 2017 2016Basic – Average Shares Outstanding 12,698 12,666 12,682Effect of Dilutive Securities – Stock Options and Restricted Stock Awards 90 102 102Diluted – Average Shares Outstanding 12,788 12,768 12,784 Both basic and dilutive income is the same for computing earnings per share. There were no outstanding instruments that hadan anti-dilutive effect at June 30, 2018, 2017 and 2016. Recently Issued Accounting Pronouncements In May 2014, the Financial Accounts Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2014-09,“Revenue from Contracts with Customers (Topic 606),” which amends most of the existing revenue recognition guidance,including industry-specific guidance. ASU 2014-09 establishes a single comprehensive model for companies to use inaccounting for revenue arising from contracts with customers. Under ASU No. 2014-09, an entity should recognize revenuewhen it transfers promised goods or services to customers in an amount that reflects the consideration to which the entityexpects to be entitled in exchange for those goods or services and requires additional disclosure about the nature, amount,timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments andchanges in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In early 2016, the FASB issuedadditional updates: ASU No. 2016-10, 2016-11 and 2016-12. These updates provide further guidance and clarification onspecific items within the previously issued update. The Company will adopt Topic 606 under the modified retrospectivemethod and will only apply this method to contracts that are not completed as of the date of adoption. Application of thismethod will result in a cumulative effect of initially applying the standard as an adjustment to the opening balance of retainedearnings at the date of initial application for any open contracts as of the adoption date. The Company established a global steering committee with a project plan to analyze the impact of this standard. Theassessment phase of the project plan, which included identifying the various revenue streams, initiating contract reviews andreviewing current accounting policies and practices to identify potential differences that would result from the application ofthe standard is complete. This assessment included (1) utilizing questionnaires to assist with the identification of revenuestreams, (2) performing sample contract analyses for each revenue stream identified, (3) assessing the noted differences in43Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.recognition and measurement that may result from adopting this new standard, (4) performing detailed analyses of contractswith larger customers, and (5) developing plans to test transactions for consistency with contract provisions that affectrevenue recognition. As part of the analysis phase, the committee analyzed the impact of the standard on its contract portfolio by reviewing asample of its contracts to identify potential differences that would result from applying the requirements of the new standard.The committee also analyzed the impact of requirements for identifying contracts, performance obligations, and variableconsideration. Based on procedures performed, the committee has identified two areas that will be impacted by application of the newrevenue standard. In the Food Service Equipment segment, the Company bases volume-related rebate accruals on theachievement of certain pre-defined tiers. The new guidance requires the Company to calculate the rebate accrual onanticipated sales for the rebate period, rather than measurement of actual achievement of specific tiers. The Company expectsto record a one-time catch up adjustment for this change, upon adoption of the new standard during the quarter endingSeptember 30, 2018, of $1.5 million. In Engineering Technologies, the committee analyzed certain long-term contracts,currently recognizing revenue utilizing the point-in-time method, to determine if any of the three criteria in ASC 606-10-25-27 are being met which would require revenue to be recognized over time under the new standard. It was determined that $0.7 million in net sales will be moved from point in time to overtime. The net change for EngineeringTechnologies will be approximately $0.1 million after cost of sales of $0.6 million. The net impact will be reflected as areduction to retained earnings in our quarterly report for the quarter ending September 30, 2018. The Company is also evaluating the disclosure requirements under the new standard that are effective in the first quarter offiscal year 2019. The Company will continue to evaluate these disclosure requirements and incorporate the collection ofrelevant data into its reporting process in the first quarter of fiscal year 2019. During the first quarter of fiscal year 2019, the Company will continue to analyze the adoption impact and disclose the finalimpact in our September 30 2018 10Q. In November 2015, the FASB issued ASC Update 2015-17, Income Taxes (Topic 740): Balance Sheet Classification ofDeferred Taxes, as part of its simplification initiatives. This update requires deferred tax liabilities and assets to be classifiedas non-current on the consolidated condensed balance sheet for fiscal years beginning after December 15, 2016, and interimperiods within those annual periods. Early application is permitted. An entity can elect adoption prospectively orretrospectively to all periods presented. We have adopted ASU 2015-17 prospectively. As a result, we have presented alldeferred tax assets and liabilities as noncurrent on our consolidated balance sheet as of June 30, 2018, but have notreclassified current deferred assets and liabilities on our consolidated balance sheet as of June 30, 2017. There was no impacton our results of operations as a result of the adoption of ASU 2015-17. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 increases transparency andcomparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing keyinformation about leasing arrangements. A modified retrospective transition approach is required for lessees for capital andoperating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financialstatements, with certain practical expedients available. For leases with a term of twelve months or less, a lessee is permitted tomake an accounting policy election by class of underlying asset not to recognize lease assets and liabilities. ASU 2016-02 iseffective for fiscal years beginning after December 15, 2018. While we are continuing to assess the effect of the adoption, wecurrently believe the most significant potential changes relate to (i) recognition of right-of-use assets and lease liabilities onour balance sheet for equipment and real estate operating leases, and (ii) the derecognition of existing assets and liabilities forcertain sale-leaseback transactions that currently do not qualify for sale accounting. The Company anticipates the adoptionwill have a material impact on the Company’s consolidated financial statements due to the materiality of the underlyingleases subject to the new guidance, however are unable to quantify that effect until our analysis is complete. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies theaccounting for goodwill impairments by eliminating step two from the goodwill impairment test. Instead, if the carryingamount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess,limited to the total amount of goodwill allocated to that reporting unit. ASU 2017-04 also clarifies the requirements forexcluding and allocating foreign currency translation adjustments to reporting units related to an entity's testing of reportingunits for goodwill impairment. It further clarifies that an entity should consider income tax effects from any tax-deductiblegoodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. ASU2017-04 is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.The Company is currently assessing the potential impact of the adoption of ASU 2017-04 on our consolidated financialstatements.44Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.In March 2017, the FASB issued ASU 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentationof Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which changes how employers that sponsordefined benefit pension or other postretirement benefit plans present the net periodic benefit cost in the income statement.The new guidance requires the service cost component of net periodic benefit cost to be presented in the same incomestatement line items as other employee compensation costs arising from services rendered during the period. Othercomponents of the net periodic benefit cost are to be stated separately from service cost and outside of operating income. Thisguidance is effective for fiscal years beginning after December 15, 2017 (fiscal 2019 for the Company) and interim periodswithin those annual periods. The amendment is to be applied retrospectively. The provisions of the new standard will impactthe classification of pension expense in the Statement of Operations and will impact both current and historical operatingincome and Other Expense – Non Operating beginning in the first quarter of fiscal year 2019. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815); Targeting Improvements toAccounting for Hedging Activities, which improves the financial reporting of hedging relationships to better portray theeconomic results of an entity’s risk management activities in its financial statements and to make certain targetedimprovements to simplify the application of hedge accounting guidance. The new guidance requires additional disclosuresincluding cumulative basis adjustments for fair value hedges and the effect of hedging on individual income statement lineitems. This guidance is effective for fiscal years beginning after December 15, 2018 (fiscal 2020 for the Company), andinterim periods within those fiscal years. The amendment is to be applied prospectively. The Company is in the preliminarystages of assessing the potential impact of the adoption of ASU 2017-12 on our consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220):Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which will allow a reclassificationfrom accumulated other comprehensive income to retained earnings for the tax effects resulting from "An Act to Provide forReconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018" (the "Act") thatare stranded in accumulated other comprehensive income. This standard also requires certain disclosures about stranded taxeffects. This ASU, however, does not change the underlying guidance that requires that the effect of a change in tax laws orrates be included in income from continuing operations. ASU 2018-02 is effective for interim and annual periods beginningafter December 15, 2018, with early adoption permitted. It must be applied either in the period of adoption or retrospectivelyto each period in which the effect of the change in the U.S. federal corporate income tax rate in the Act is recognized. Weelected to early adopt this ASU during the fiscal third quarter of 2018. The amount of the reclassification was $17.2 million. 2. ACQUISITIONS Each of the Company’s recent acquisitions are strategically significant to the future growth prospects of the Company. TheCompany evaluated the significance of each acquisition on a standalone basis and in aggregate, considering both qualitativeand quantitative factors. Piazza Rosa Group During the first quarter of fiscal year 2018, the Company acquired the Piazza Rosa Group. The Italy-based privately heldcompany is a leading provider of mold and tool treatment and finishing services for the automotive and consumer productsmarkets. We have included the results of the Piazza Rosa Group in our Engraving segment in our Condensed ConsolidatedFinancial Statements. The Company paid $10.1 million in cash for all of the issued and outstanding equity interests of the Piazza Rosa Group andalso paid $2.8 million subsequent to closing in order to satisfy assumed debt of the entity at the time of acquisition. TheCompany has estimated that total cash consideration will be adjusted by $2.6 million based upon achievement of certainrevenue metrics over the next three years. The preliminary purchase price was allocated to the net tangible and identifiable intangible assets acquired and liabilitiesassumed based on their fair values on the closing date. Goodwill recorded from this transaction is attributable to potentialrevenue increases from the combined competencies with Standex Engraving’s worldwide presence and Piazza Rosa Group’stexturizing capabilities. The combined companies create a global tool finishing service leader and open additionalopportunities in the broader surface engineering market. Intangible assets of $4.1 million were preliminarily recorded, consisting of $2.3 million of customer relationships to beamortized over a period of eight years, $1.6 million for trademarks, and $0.2 million of other intangibles assets. Since thepreliminary valuation, the Company adjusted goodwill by $0.5 million primarily as a result of identification of otheridentifiable assets. 45Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The Company will finalize its purchase accounting for this acquisition in the first quarter of fiscal year 2019, and will recordan approximate $1.5 million reduction to identified intangible assets with a corresponding increase to goodwill. Thegoodwill of $6.6 million created by the transaction is not deductible for income tax purposes. The components of the fair value of the Piazza Rosa Group acquisition, including the allocation of the purchase price atJune 30, 2018, are as follows (in thousands): Preliminary Allocation Adjustments Preliminary Allocation September 30, 2017 June 30, 2018Fair value of business combination: Total cash consideration $10,056 $ - $10,056Fair value of contingent consideration - 2,617 2,617Total $10,056 $ 2,617 $12,673Identifiable assets acquired and liabilities assumed: Other acquired assets $2,678 $1,664 $4,342Inventories 637 (2) 635Property, plant, and equipment 5,005 558 5,563Identifiable intangible assets 4,087 (1) 4,086Goodwill 6,218 416 6,634Liabilities assumed (7,387) - (7,387)Deferred taxes (1,182) (18) (1,200)Total $10,056 $ 2,617 $12,673 OKI Sensor Device Corporation During the third quarter of fiscal year 2017, the Company acquired all of the outstanding shares of OKI Sensor DeviceCorporation from OKI Electric Industry Co., Ltd. Located in Kofu City, Japan, OKI Sensor Device Corporation is the world’sleading designer and supplier of magnetic reed switches. Now named Standex Electronics Japan Corporation (“StandexElectronics Japan”), the acquisition enhances the Company’s access to important Asian markets and enables the Company tooffer a world class suite of reed switches and related magnetic solutions while continuing to serve Standex Electronics Japan’sdiverse distribution channels. We have included the results of Standex Electronics Japan in our Electronics segment in ourCondensed Consolidated Financial Statements. The Company paid $129.2 million in cash, net of cash acquired, for 100% of the outstanding stock of Standex ElectronicsJapan. The preliminary purchase price was allocated to the net tangible and identifiable intangible assets acquired andliabilities assumed based on their fair values on the closing date. Goodwill recorded from this transaction is attributable topotential revenue increases from enhanced access to our Asian markets and synergies created from the vertical integrationwith a key supplier. Intangible assets of $51.4 million were recorded, consisting of $47.8 million of developed technology to be amortized over aperiod of 10-20 years, $3.4 million of customer relationships to be amortized over a period of fifteen years, and $0.2 million ofproduct order backlog which was amortized during fiscal year 2017. Since the preliminary valuation, the Company adjustedgoodwill by $3.4 million as a result of tax adjustments, a pension adjustment of $1.9 million and purchase accountingchanges including a decrease in the fair value of developed technology, fixed assets, and customer relationships of $2.3million, $0.2 million, and $0.2 million, respectively, and an additional $0.1 million of product order backlog which wasamortized during fiscal year 2017. The goodwill of $79.4 million created by the transaction is not deductible for income taxpurposes. The components of the fair value of the Standex Electronics Japan acquisition, including the final allocation of purchase priceare as follows (in thousands):46Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Final AllocationFair value of business combination: Cash payments $137,676Less: cash acquired (8,521)Total $129,155Identifiable assets acquired and liabilities assumed: Other acquired assets $10,339Inventories 8,203Property, plant, and equipment 18,206Identifiable intangible assets 51,400Goodwill 79,434Liabilities assumed (19,279)Deferred taxes (19,148)Total $129,155 The Company finalized the purchase price allocation during the quarter ended March 31, 2018. The following table reflects the unaudited pro forma operating results of the Company for the years ended June 30, 2018 and2017, which give effect to the acquisition of Standex Electronics Japan as if it had occurred at the beginning of each periodpresented. The pro forma information combines the historical financial results of the Company and Standex ElectronicsJapan, adjusted for changes in foreign exchange rates. The pro forma results are not necessarily indicative of the operatingresults that would have occurred had the acquisition been effective at the beginning of each period, nor are they intended tobe indicative of results that may occur in the future. The pro forma information does not include the effects of any synergiesrelated to the Standex Electronics Japan acquisition, transactions between the entities prior to acquisition, or the pre-acquisition impact of other businesses acquired by the Company during this period as they were not material to theCompany’s historical results of operations. (Unaudited Pro Forma) For the year endedJune 30,In thousands2018 2017Net Sales$868,382 $805,235Net Income$36,823 $57,810Earnings per share: Basic$2.90 $4.56Diluted$2.88 $4.53 * Fiscal year 2017 unaudited pro-forma results have been recast as a result of the adoption of Accounting Standards Update (ASU) 2016-09,Improvements to Employee Share-Based Payment Accounting. Pro forma earnings during the year ended June 30, 2018 were adjusted to exclude tax-affected acquisition-related costsincurred during the first quarter of $0.2 million. Pro forma earnings during the year ended June 30, 2017 were adjusted to include expense of $1.8 million for amortization ofintangible assets recognized at fair value, depreciation expense of $0.9 million for the fair value adjustment of the acquiredfixed assets, and $0.8 million of interest expense associated with incremental borrowings under the Company’s CreditFacility. Pro forma earnings were also adjusted to exclude non-recurring acquisition-related costs of $4.2 million. Horizon Scientific During the second quarter of fiscal year 2017, the Company acquired Horizon Scientific, a supplier of laboratory refrigeratorsand freezers, as well as cryogenic equipment for the scientific, bio-medical and pharmaceutical markets. We believe the47Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.acquisition of Horizon Scientific enhances Standex’s penetration of the refrigeration markets in the growing scientific sector.We have included the operating results of Horizon Scientific in our Food Service Equipment segment in our CondensedConsolidated Financial Statements. The Company paid $24.7 million in cash, net of cash acquired, for 100% of the outstanding stock of Horizon Scientific. Thepurchase price was subject to cash and net working capital adjustments of $0.3 million which was paid in fiscal year 2018along with deferred compensation of up to $8.0 million. The purchase price was allocated to the net tangible and identifiableintangible assets acquired and liabilities assumed based on their fair values on the closing date. Intangible assets of $16.2 million have been recorded, consisting of $14.5 million of customer relationships which areexpected to be amortized over a period of fifteen years, $1.4 million of trademarks which are indefinite lived, and $0.3 millionof product order backlog which amortized during the current fiscal year. The goodwill of $6.7 million created by thetransaction is not deductible for income tax purposes. The components of the fair value of the Horizon Scientific acquisition including the allocation of the purchase price are asfollows (in thousands): Final AllocationFair value of business combination: Cash payments $26,457Identified cash and net working capital adjustment 341Less: cash acquired (1,797)Total $25,001Identifiable assets acquired and liabilities assumed: Current assets $ 4,863Inventories 4,470Property, plant, and equipment 1,616Identifiable intangible assets 16,150Goodwill 6,660Liabilities assumed (2,374)Deferred taxes (6,384) Total $25,001 Transaction costs associated with this acquisition were immaterial. All transaction costs were recorded as general andadministrative expense during the year ended June 30, 2017. 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 powerdistribution 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 periodof twelve and half years, $2.4 million of trademarks which are indefinite-lived and $0.3 million of non-compete which areexpected 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):48Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FinalFair value of business combination: Cash payments$14,015Less: cash acquired (315)Total$13,700Identifiable assets acquired and liabilities assumed: Current assets$2,810Property, plant, and equipment 1,407Identifiable intangible assets 6,824Goodwill 5,121Other non-current assets 158Liabilities assumed (2,620)Total$13,700 Acquisition-Related Costs Acquisition-related costs include costs related to acquired businesses and other pending acquisitions. These costs consist of(i) deferred compensation and (ii) acquisition-related professional service fees and expenses, including financial advisory,legal, accounting, and other outside services incurred in connection with acquisition activities, and regulatory matters relatedto acquired entities. These costs do not include the amortization of the acquired intangible assets or purchase accountingexpenses, which we define as acquired backlog and the step-up of inventory to fair value. Deferred compensation costs relate to payments due to the seller of Horizon Scientific for $2.8 million on the secondanniversary and $5.6 million on the third anniversary of the closing date of the purchase. For the years ended June 30, 2018and 2017, we recorded deferred compensation costs of $2.8 million and $2.1 million, respectively, for estimated deferredcompensation earned by the Horizon Scientific seller. The payments are contingent on the seller remaining an employee ofthe Company with limited exceptions at each anniversary date. Acquisition related costs of $5.7 million in 2017 consisted of $2.7 million of investment banker fees for services provided inconnection with the Standex Electronics Japan transaction and $3.0 million for third-party due diligence expenses alsorelated to Standex Electronics Japan and other acquisitions. The components of acquisition-related costs are as follows (dollars in thousands): June 30,2018 June 30, 2017Deferred compensation arrangements $ 2,810$ 2,108 Acquisition-related costs 9395,735Total$3,749$ 7,843 3. INVENTORIES Inventories are comprised of (in thousands): June 30 2018 2017Raw materials$58,878 $53,313Work in process 33,507 28,110Finished goods 34,838 37,978 Total$127,223 $119,401 Distribution costs associated with the sale of inventory are recorded as a component of selling, general and administrativeexpenses and were $ 25.5 million, $20.4 million, and $20.1 million in 2018, 2017, and 2016, respectively.49Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.4. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consist of the following (in thousands): June 30 2018 2017 Land, buildings and leasehold improvements $83,459 $ 78,048 Machinery, equipment and other 217,749 199,419 Total 301,208 277,467 Less accumulated depreciation 156,638 144,307Property, plant and equipment - net $144,570 $ 133,160 Depreciation expense for the years ended June 30, 2018, 2017, and 2016 totaled $18.8 million, $14.7 million, and $13.7million, respectively. 5. GOODWILL Goodwill and certain indefinite-lived intangible assets are not amortized, but instead are tested for impairment at leastannually and more frequently whenever events or changes in circumstances indicate that the fair value of the asset may be lessthan its carrying amount. 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 twelve operating segments, which are aggregatedinto five reporting segments as disclosed in Note 17 – Industry Segment Information. As quoted market prices are not available for the Company’s reporting units, the fair value of the reporting units is determinedusing a discounted cash flow model (income approach). This method uses various assumptions that are specific to eachindividual reporting unit in order to determine the fair value. In addition, the Company compares the estimated aggregate fairvalue 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 significantlyaffect valuations and result in impairments in the future. The most significant assumption involved in the Company’sdetermination of fair value is the cash flow projections of each reporting unit. If the estimates of future cash flows for eachreporting unit may be insufficient to support the carrying value of the reporting units, the Company will reassess itsconclusions related to fair value and the recoverability of goodwill. We completed our annual impairment testing as of May 31, 2018, and determined that the fair value of each of its reportingunits substantially exceeded each unit’s respective carrying value, therefore, no impairment charges were recorded inconnection with our testing and assessment during 2018 and 2017. Changes to goodwill during the years ended June 30, 2018 and 2017 are as follows (in thousands): 2018 2017Balance at beginning of year$260,629 $ 175,293Accumulated impairment losses 17,939 17,939Balance at beginning of year, net 242,690 157,354Acquisitions 7,655 85,561Foreign currency translation 1,417 (225)Balance at end of year$251,762 $ 242,690 50Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.6. INTANGIBLE ASSETS Intangible assets consist of the following (in thousands): Tradenames CustomerRelationships (Indefinite-lived) DevelopedTechnology Other TotalJune 30, 2018 Cost$66,802 $20,396 $48,281 $4,927 $140,406Accumulated amortization (33,917) - (4,709) (3,705) (42,331)Balance, June 30, 2018$32,885 $20,396 $43,572 $1,222 $98,075 June 30, 2017 Cost$ 64,247 $ 18,715 $47,586 $4,503 $135,051Accumulated amortization (28,764) - (826) (2,958) (32,548)Balance, June 30, 2017$ 35,483 $ 18,715 $46,760 $1,545 $ 102,503 Amortization expense from continuing operations for the years ended June 30, 2018, 2017, and 2016 totaled $9.0 million,$5.0 million, and $3.6 million, respectively. At June 30, 2018, aggregate amortization expense is estimated to be $9.0million in fiscal 2019, $8.5 million in fiscal 2020, $7.9 million in fiscal 2021, $7.4 million in fiscal 2022, $6.7 million infiscal 2023, and $38.2 million thereafter. 7. DEBT Long-term debt is comprised of the following at June 30 (in thousands): 2018 2017Bank credit agreements$194,000 $ 192,500Other - 6 Total funded debt 194,000 192,506Issuance Cost (228) (530) Total long-term debt$193,772 $ 191,976 Long-term debt is due as follows (in thousands): 2019$-2020 (matures December 2019) 194,000 2021 -2022 -2023 -Thereafter - Funded Debt 194,000Issuance costs (228)Debt, net issuance cost$193,772 Bank Credit Agreements 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 beincreased by an amount of up to $100 million, in accordance with specified conditions contained in the agreement. Thefacility also includes a $10 million sublimit for swing line loans and a $30 million sublimit for letters of credit. The facilityamends and restates a previously existing $225 million revolving credit agreement, which was scheduled to expire inJanuary 2017. Under the terms of the Credit Agreement, we will pay a variable rate of interest and a commitment fee on borrowed amountsas well as a commitment fee on unused amounts under the facility. The amount of the commitment fee will depend uponboth the undrawn amount remaining available under the facility and the Company’s funded debt to EBITDA (as defined in51Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.the agreement) ratio at the last day of each quarter. As our funded debt to EBITDA ratio increases, the commitment fee willincrease. 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 generalcorporate purposes. As of June 30, 2018, the Company had the ability to borrow $198.1 million under the facility based onour current EBITDA. The facility contains customary representations, warranties and restrictive covenants, as well asspecific financial covenants which the Company was compliant with as of June 30, 2018. The Company’s current financialcovenants 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. AdjustedEBIT per the Credit Agreement specifically excludes extraordinary and certain other defined items such as cash restructuringand acquisition-related charges up to $7.5 million, and unlimited non-cash charges including gains or losses on sale ofproperty and goodwill adjustments. At June 30, 2018, the Company’s Interest Coverage Ratio was 11.40:1. 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. AtJune 30, 2018 the Company’s Leverage Ratio was 1.67:1. As of June 30, 2018, we had borrowings under our facility of $194 million and the effective rate of interest for outstandingborrowings under the facility was 3.29%. Our primary cash requirements in addition to day-to-day operating needs includeinterest payments, capital expenditures, and dividends. Our primary sources of cash for these requirements are cash flowsfrom continuing operations and borrowings under the facility. In order to manage our interest rate exposure, we are party to $75.0 million of active floating to fixed rate swaps. Theseswaps convert our interest payments from LIBOR to a weighted average rate of 1.74%. Other Long-Term Borrowings At June 30, 2018, and 2017, the Company had standby letter of credit sub-facility outstanding, primarily for insurance andtrade financing purposes of $7.9 million and $8.9 million, respectively. 8. ACCRUED LIABILITIES Accrued expenses recorded in our Consolidated Balance Sheets at June 30, consist of the following (in thousands): 2018 2017Payroll and employee benefits$31,749 $28,522Workers' compensation 2,728 2,399Warranty 9,356 9,243Fair value of derivatives 2,853 3,014Other 18,889 15,516 Total$65,575 $ 58,694 The increase in other liabilities during 2018 compared to 2017 is primarily due to the inclusion of $1.2 million of otherliabilities from acquired entities. 9. DERIVATIVE FINANCIAL INSTRUMENTS Interest Rate SwapsIn order to manage our interest rate exposure, we are party to $75.0 million of active floating to fixed rate swaps. Theseswaps convert our interest payments from LIBOR to a weighted average rate of 1.74% at June 30, 2018.52Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The fair value of the swaps recognized in accrued liabilities and in other comprehensive income (loss) at June 30, 2018 and2017 is as follows (in thousands): Fair Value at June 30,Effective Date NotionalAmountFixed InterestRateMaturity 2018 2017December 19, 2014 20,0001.18%December 19, 2017$- $8December 19, 2014 5,0001.20%December 19, 2017 - 1December 18, 2015 15,0001.46%December 19, 2018 55 (1)December 19, 2015 10,0002.01%December 19, 2019 74 (106)May 24, 2017 25,0001.88%April 24, 2022 764 (60)May 24, 2017 25,0001.67%May 24, 2020 432 (23) $1,325 $(181) The Company reported no losses for the years ended June 30, 2018, 2017, and 2016, as a result of hedge ineffectiveness.Future changes in these swap arrangements, including termination of the agreements, may result in a reclassification of anygain 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 expenseconcurrent with the hedged exposure. Foreign Exchange Contracts Forward foreign currency exchange contracts are used to limit the impact of currency fluctuations on certain anticipatedforeign cash flows, such as foreign purchases of materials and loan payments between subsidiaries. The Company enters intosuch contracts for hedging purposes only. The Company has designated certain of these currency contracts as hedges, andchanges in the fair value of these contracts are recognized in other comprehensive income until the hedged items arerecognized in earnings. Hedge ineffectiveness, if any, associated with these contracts will be reported in net income. At June30, 2018 and 2017, the Company had outstanding forward contracts related to hedges of intercompany loans with netunrealized gain / (losses) of $(2.9) million and $(2.8) million, respectively, which approximate the unrealized gains or losseson the related loans. The contracts have maturity dates ranging from 2018-2023, which correspond to the relatedintercompany loans. The notional amounts of these instruments, by currency in thousands, are as follows: Currency 2018 2017USD 64,558 73,000Euro 21,300 21,335Pound Sterling 6,826 6,962Peso 54,000 54,000Canadian 20,600 20,600 The table below presents the fair value of derivative financial instruments as well as their classification on the balance sheet atJune 30, (in thousands): Asset Derivatives 2018 2017Derivative designated asBalance Balance hedging instrumentsSheet Sheet Line Item Fair Value Line Item Fair ValueInterest rate swapsOther Assets $1,325 Accrued Liabilities $-Foreign exchange contractsOther Assets 1,357 Accrued Liabilities - $2,682 $ -53Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Liability Derivatives 2018 2017Derivative designated asBalance Balance hedging instrumentsSheet Sheet Line Item Fair Value Line Item Fair ValueInterest rate swapsAccrued Liabilities $- Accrued Liabilities $ 181Foreign exchange contractsAccrued Liabilities 4,204 Accrued Liabilities 2,833 $4,204 $ 3,014The table below presents the amount of gain (loss) recognized in comprehensive income on our derivative financialinstruments (effective portion) designated as hedging instruments and their classification within comprehensive income forthe periods ended (in thousands): 2018 2017 2016Interest rate swaps $1,367 $ 282 $ (743)Foreign exchange contracts 1,174 (3,178) (267) $2,541 $(2,896) $(1,010) The table below presents the amount reclassified from accumulated other comprehensive income (loss) to net income for theperiods ended (in thousands): Details about Accumulated Affected line itemOther Comprehensive in the StatementsIncome (Loss) Components 2018 2017 2016 of OperationsInterest rate swaps $171 $ 399 $ 567 Interest expenseForeign exchange contracts - 75 112 Cost of goods soldForeign exchange contracts 121 (861) - Interest expense $292 $(387) $679 10. INCOME TAXES On December 22, 2017, the Tax Cuts and Jobs Act (the “Act” or “TCJA”) was passed which, among other things, reduces thefederal corporate tax rate to 21.0% effective for taxable years starting on or after January 1, 2018. For the year ending June 30,2018, the Company recorded federal taxes using a blended federal rate of 28.0%. During the quarter ended December 31,2017 (Q2 FY2018), the Company reported provisional amounts for the toll/transition tax and the change in the U.S. deferredtax. Pursuant to SEC guidance provided in Staff Accounting Bulletin No. 118, the Company is utilizing the measurementperiod approach for the income tax effects of tax reform for which the accounting is incomplete and expects to completeprocess in FY19 as the FY18 tax returns are finalized. During the fourth quarter of 2018, the Company updated the impact of the tax law as follows: The Company recorded provision for income taxes of $56 thousand during the quarter due to a revaluation of theCompany's estimated deferred tax assets as of December 31, 2017. The increase was a result of a change in the currentyear activity from the prior quarter for a total year-to date impact of approximately $1.34 million. The Company has recorded a tax benefit of approximately $1.49 million to its provision for income taxes during thequarter related to a mandatory deemed repatriation of foreign earnings. This amount includes a state tax benefit of$.54 million based on updated state guidance for a year-to date impact of approximately $11.7 million. This amountmay change when the Company finalizes the calculation of post-1986 foreign E&P previously deferred from U.S.federal taxation. In addition, further interpretations of the TCJA from U.S. federal and state governments andregulatory organizations may change the provisional tax liability or the accounting treatment of the provisional taxliability. Under the Act, the Company is permitted to pay this tax over an eight-year period commencing with the duedate of the 2018 tax return. Since these provisions during the quarter are still based on estimates, the Company will continue to measure the impact ofthese areas and record any changes in subsequent quarters when information and guidance become available. 54Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Other law changes implemented by the Act such as the repeal of the Section 199 manufacturing deduction, changes to thecalculation for Section 162(m) executive compensation deduction, interest deduction limitation and Global Intangible LowTaxed Income (GILTI), and others will not have any impact on the Company until the fiscal year ending June 30, 2019. Asallowed under US GAAP, the Company has elected to treat any taxes due on future U.S. inclusions in taxable income underthe GILTI provision as a current-period expense when incurred. The Company will continue to monitor guidance regardingthese changes for how it will impact the financial statements in later periods. In addition, as a result of the Tax Reform change on US federal taxation on cash repatriation, current US debts levels andupdated cash flow planning, the Company has changed its position on reinvestment of foreign earnings in several foreignjurisdictions. As a result, the Company has recorded a tax provision of approximately $7.8 million during the quarterrelated to the anticipated foreign withholding taxes and state taxes on future cash repatriation. The components of income from continuing operations before income taxes are as follows (in thousands): 2018 2017 2016U.S. Operations$ 7,525 $ 16,257 $ 23,996Non-U.S. Operations 69,727 45,675 44,529 Total$ 77,252 $ 61,932 $ 68,525 The Company utilizes the asset and liability method of accounting for income taxes. Deferred income taxes are determinedbased on the estimated future tax effects of differences between the financial and tax bases of assets and liabilities given theprovisions of the enacted tax laws. The components of the provision for income taxes on continuing operations (inthousands) were as shown below: 2018 2017 2016Current: Federal$11,057 $ 2,229 $ 11,014State 498 230 523Non-U.S. 21,674 13,017 11,514 Total Current 33,229 15,476 23,051Deferred: Federal$2,012 $ 2,141 $ (5,214)State 1,091 (290) (1,060)Non-U.S. 4,288 (1,972) (482) Total Deferred 7,391 (121) (6,756) Total$40,620 $ 15,355 $ 16,295 A reconciliation from the U.S. Federal income tax rate on continuing operations to the total tax provision is as follows: 2018 2017 2016Provision at statutory tax rate28.0% 35.0% 35.0%State taxes1.5% (0.1%) (0.5%)Impact of foreign operations(0.9%) (8.0%) (6.7%)Federal tax credits(1.2%) (1.3%) (1.8%)Tax Reform16.7% 0.0% 0.0%Cash repatriation9.5% 0.0% 0.0%Contributions, net0.0% 0.0% (1.3%)Other(1.0%) (0.8%) (0.9%)Effective income tax provision52.6% 24.8% 23.8% Due to the effective date of the Act’s rate reduction on our fiscal year, the Company recorded a blended statutory rate for theyear ended June 30, 2018. Changes in the effective tax rates from period to period may be significant as they depend on many factors including, but notlimited to, size of the Company’s income or loss and any one-time activities occurring during the period.55Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2018 was impacted by thefollowing items: (i) a tax provision related to the impact of the Sec. 965 toll tax of $11.7 million, (ii) a tax provision related toa revaluation of deferred taxes due to the federal rate reduction of $1.3 million, and (iii) a tax provision related to expectedforeign withholding taxes on cash repatriation of $7.8 million. The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2017 was impacted by thefollowing items: (i) a benefit of $0.6 million related to the R&D tax credit, and (ii) a benefit of $5.3 million due to the mix ofincome earned in jurisdictions with beneficial tax rates. The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2016 was impacted by thefollowing 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 $4.9 million due to the mix of income earnedin jurisdictions with beneficial tax rates. Significant components of the Company’s deferred income taxes are as follows (in thousands): 2018 2017Deferred tax liabilities: Depreciation and amortization$(39,775) $ (55,041) Withholding Taxes (7,833) - Other - -Total deferred tax liability$(47,608) $ (55,041) Deferred tax assets: Accrued compensation$2,657 $ 4,127 Accrued expenses and reserves 4,808 6,886 Pension 13,522 26,309 Inventory 1,613 2,677 Other 452 939 Net operating loss and credit carry forwards 8,668 6,773Total deferred tax asset$31,720 $ 47,711 Less: Valuation allowance (3,482) (1,530) Net deferred tax asset (liability)$(19,370) $ (8,860) The Company estimates the degree to which deferred tax assets, including net operating loss and credit carry forwards willresult in a benefit based on expected profitability by tax jurisdiction and provides a valuation allowance for tax assets andloss carry forwards that it believes will more likely than not go unrealized. The valuation allowance at June 30, 2018 appliesto state and foreign loss carry forwards, which management has concluded that it is more likely than not that these tax benefitswill not be realized. The increase (decrease) in the valuation allowance from the prior year was due to the current year activityin those same state and foreign loss jurisdictions.As of June 30, 2018, the Company had gross state net operating loss ("NOL") and credit carry forwards of approximately $61.6million and $2.5 million, respectively, which may be available to offset future state income tax liabilities and expire atvarious dates from 2018 through 2037. In addition, the Company had foreign NOL carry forwards of approximately $3.1million, $2.4 million of which carry forward indefinitely and $0.7 million that carry forward for 10 years. Under ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, all excess tax benefits and taxdeficiencies are recognized as income tax expense or benefit in the income statement. Accordingly, we recorded discreteincome tax benefits in the consolidated statements of income of $395 during the fiscal year ended June 30, 2018, for excesstax benefits related to equity compensation. As a result of the tax reform law passed on December 22, 2017, undistributed foreign earnings were subject to the U.S. one-time mandatory transition tax and are eligible to be repatriated to the U.S. without additional U.S. tax under the Tax Act andcompanies are now eligible to receive 100 percent dividend received deduction for foreign dividends. However, thepermanent reinvestment assertion must still be assessed and made regarding potential liabilities for foreign withholding taxes. Historically, we have not provided deferred taxes on the cumulative undistributed earnings of our foreign subsidiaries astheses were deemed to be permanently reinvested. As of June 30, 2018, we reassessed our position regarding our permanent56Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.reinvestment in various foreign jurisdictions. As a result, we determined that assessment of previously undistributed earningsof certain foreign subsidiaries no longer meet the requirements for indefinite reinvestment under applicable accountingguidance. Therefore, we recognized deferred tax liabilities of approximately $4.2 million that relate to foreign withholdingtaxes on these earnings. In addition, we have determined that current earnings from several foreign jurisdictions will nolonger be reinvested. As such the Company has recorded deferred tax liabilities of approximately $3.1 million related toforeign withholding taxes on these current year earnings. It is expected deferred tax liabilities will continue to be recordedon current earnings in future periods from these jurisdictions. Lastly, the Company maintains its permanent reinvestment onearnings in certain foreign jurisdictions. If repatriated, these earnings would generate a tax liability of approximately $1.8million.The total provision for income taxes included in the consolidated financial statements was as follows (in thousands): 2018 2017 2016Continuing operations$40,620 $ 15,355 $ 16,295Discontinued operations (15) (27) (55)Total Provision$40,605 $ 15,328 $ 16,240 The changes in the amount of gross unrecognized tax benefits during 2018, 2017 and 2016 were as follows (in thousands): 2018 2017 2016Beginning Balance$2,991 $2,978 $ 1,054 Additions based on tax positions related to the current year 12 12 2,125 Additions for tax positions of prior years - 1 - Reductions for tax positions of prior years - - (201)Ending Balance$3,003 $ 2,991 $ 2,978 If the unrecognized tax benefits in the table above were recognized in a future period, $2.5 million of the unrecognized taxbenefit 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 aresult, it is reasonably expected that net unrecognized tax benefits from these various jurisdictions would be recognizedwithin the next twelve months. The recognition of these tax benefits is not expected to have a material impact to theCompany's financial statements. The Company does not reasonably expect any other significant changes in the next twelvemonths. The following tax years, in the major tax jurisdictions noted, are open for assessment or refund: CountryYears Ending June 30,United States2015 to 2018Canada2014 to 2018Germany2016 to 2018Ireland2016 to 2018Portugal2014 to 2018United Kingdom2016 to 2018 The Company’s policy is to include interest expense and penalties related to unrecognized tax benefits within the provisionfor income taxes on the consolidated statements of operations. At both June 30, 2018 and June 30, 2017, the company hadless than $0.1 million for accrued interest expense on unrecognized tax benefits. 11. COMMITMENTS The Company leases certain property and equipment under agreements with initial terms ranging from one to sixty years.Rental expense related to continuing operations for the years ended June 30, 2018, 2017, and 2016 was approximately $10.2million, $8.0 million and $6.6 million, respectively.57Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The gross minimum annual rental commitments under non-cancelable operating leases, principally real-estate at June 30,2018`: (in thousands) Lease Sublease Net obligation2019 10,202 329 9,8732020 8,704 336 8,3682021 7,923 346 7,5772022 7,095 356 6,7392023 7,204 367 6,837Thereafter 15,995 2,670 13,325 12. CONTINGENCIES From time to time, the Company is subject to various claims and legal proceedings, including claims related to environmentalremediation, either asserted or unasserted, that arise in the ordinary course of business. While the outcome of theseproceedings and claims cannot be predicted with certainty, the Company’s management does not believe that the outcome ofany 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’smanagement 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 andperformance share units to provide equity incentive compensation to key employees and directors. The stock award programoffers employees and directors the opportunity to earn shares of our stock over time, rather than options that give theemployees and directors the right to purchase stock at a set price. The Company has stock plans for directors, officers andcertain key employees. Total compensation cost recognized in income for equity based compensation awards was $4.9 million, $5.0 million, and $5.1million for the years ended June 30, 2018, 2017, and 2016, respectively, primarily within Selling, General, and AdministrativeExpenses. The total income tax benefit recognized in the consolidated statement of operations for equity-basedcompensation plans was $1.2 million, $1.9 million, and $1.8 million for the years ended June 30, 2018, 2017 and 2016,respectively. There were 157,921 shares of common stock reserved for issuance under various compensation plans at June 30, 2018. Restricted Stock Awards The Company may award shares of restricted stock to eligible employees and non-employee directors of the Company at nocost, giving them in most instances all of the rights of stockholders, except that they may not sell, assign, pledge or otherwiseencumber such shares and rights during the restriction period. Such shares and rights are subject to forfeiture if certainemployment conditions are not met. During the restriction period, recipients of the shares are entitled to dividend equivalentson such shares, providing that such shares are not forfeited. Dividends are accumulated and paid out at the end of therestriction period. During 2018, 2017, and 2016, the Company granted 51,792, 51,563, and 48,984 shares, respectively, ofrestricted stock to eligible participants. Restrictions on the stock awards generally lapse between fiscal 2018 and fiscal 2020. For the years ended June 30, 2018, 2017, and 2016, $3.7 million, $3.6 million, and $2.6 million, respectively, was recognizedas compensation expense related to restricted stock awards. Substantially all awards are expected to vest.58Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.A summary of restricted stock awards activity during the year ended June 30, 2018 is as follows: Restricted Stock Awards Number Aggregate of Intrinsic Shares ValueOutstanding, June 30, 2017115,703 $ 10,494,262Granted51,792 Exercised / vested(37,970) $757,216Canceled(9,515) Outstanding, June 30, 2018120,010 $12,258,515 Restricted stock awards granted during 2018, 2017 and 2016 had a weighted average grant date fair value of $93.73, $85.07,and $77.38, respectively. The grant date fair value of restricted stock awards is determined based on the closing price of theCompany’s common stock on the date of grant. The total intrinsic value of awards exercised during the years endedJune 30, 2018, 2017, and 2016 was $0.8 million, $0.8 million, and $1.1 million, respectively. As of June 30, 2018, there was $4.1 million of unrecognized compensation costs related to awards expected to be recognizedover a weighted-average period of 1.38 years. Executive Compensation Program The Company operates a compensation program for key employees. The plan contains both an annual component as well as along-term component. Under the annual component, participants may elect to defer up to 50% of their annual incentivecompensation in restricted stock which is purchased at a discount to the market. Additionally, non-employee directors of theCompany 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 suchshares are not forfeited. Dividend equivalents are accumulated and paid out at the end of the restriction period. Therestrictions on the units expire after three years. At June 30, 2018 and 2017, respectively, 31,760 and 35,707 shares ofrestricted stock units are outstanding and subject to restrictions that lapse between fiscal 2018 and fiscal 2020. Thecompensation expense associated with this incentive program is charged to income over the restriction period. The Companyrecorded compensation expense related to this program of $0.3 million, $0.4 million, and $0.2 million for the years endedJune 30, 2018, 2017 and 2016, respectively. As of June 30, 2018, there was $0.3 million of unrecognized compensation costs related to awards expected to be recognizedover a weighted-average period of 1.21 years. The fair value of the awards under the annual component of this incentive program is measured using the Black-Scholesoption-pricing model. Key assumptions used to apply this pricing model are as follows: 2018 2017 2016Risk-free interest rates 1.55% 0.71% 1.10%Expected life of option grants (in years) 3 3 3Expected volatility of underlying stock 25.6% 25.7% 26.6%Expected quarterly dividends (per share)$0.16 $ 0.14 $ 0.12 Under the long-term component, grants of performance share units (“PSUs”) are made annually to key employees and theshare units are earned based on the achievement of certain overall corporate financial performance targets over theperformance period. At the end of the performance period, the number of shares of common stock issued will be determinedby adjusting upward or downward from the target in a range between 50% and 200%. No shares will be issued if the minimumperformance threshold is not achieved. The final performance percentage, on which the payout will be based, considering theperformance metrics established for the performance period, will be certified by the Compensation Committee of the Board ofDirectors. Beginning in 2017, awards granted by the Committee provide that the PSUs will be converted to shares of common stock ifthe Company’s EBITDA (earnings before interest, taxes, depreciation and amortization) and return on invested capital meetspecified levels approved by the Committee. A participant’s right to any shares that are earned will cliff vest in three years. An executive whose employment terminates prior to the vesting of any award for a reason other than death, disability,retirement, or following a change in control, will forfeit the shares represented by that award. In certain circumstances, such as59Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.death, disability, or retirement, PSUs are paid on a pro-rata basis. In the event of a change in control, vesting of the awardsgranted is accelerated. A summary of the awards activity under the executive compensation program during the year ended June 30, 2018 is asfollows: Annual Component Performance Stock Units Weighted Number Average Aggregate Number Aggregate of Exercise Intrinsic of Intrinsic Shares Price Value Shares ValueNon-vested, June 30, 201735,707 $ 59.11 $ 318,334 52,890 $4,254,256Granted9,050 $68.03 24,567 Vested(10,930) $55.76 428,893 (15,780) $1,194,319Forfeited(2,067) $60.62 (3,167) Non-vested, June 30, 201831,760 $62.71 442,850 58,028 $5,013,531 Restricted stock awards granted under the annual component of this program in fiscal 2018, 2017, and 2016 had a grant datefair value of $96.56, $87.05, and $82.79, respectively. The PSUs granted in fiscal 2018, 2017 and 2016 had a grant date fairvalue of $91.75, $83.92, and $76.61, respectively. The total intrinsic value of awards vested under the executivecompensation program during the years ended June 30, 2018 was $1.6 million, and $2.3 million for the years ended June 30,2017 and June 30, 2016. The Company recognized compensation expense related to the PSUs of $0.9 million, $1.0 million, and $2.3 million for theyears ended June 30, 2018, 2017 and 2016 respectively based on the probability of the performance targets being met. Thetotal unrecognized compensation costs related to non-vested performance share units was $2.0 million at June 30, 2018,which is expected to be recognized over a weighted average period of 1.3 years. Employee Stock Purchase Plan The Company has an Employee Stock Purchase Plan that allows employees to purchase shares of common stock of theCompany at a discount from the market each quarter. The ESPP plan, which was effective as of July 1, 2005, providedemployees the option to purchase Standex stock at a discount of 5%. The Plan was modified, effective as of April 1, 2017, toincrease the stock purchase discount to 15% and is considered a compensatory Plan. Under this new Plan, shares of our stockmay be purchased by employees quarterly at 85% of the fair market value on the last day of each quarter. The 15% discount isrecorded as a component of SG&A in the Company’s Consolidated Statements of Operations. Shares of stock reserved for theplan were 81,315 at June 30, 2018. Shares purchased under this plan aggregated to 5,622, 3,742, and 3,809 in 2018, 2017 and2016, respectively, at an average price of $86.01, $84.17, and $75.66, 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): 2018 2017Foreign currency translation adjustment $(25,013) $ (25,107)Unrealized pension losses, net of tax (95,112) (86,646)Unrealized losses on derivative instruments, net of tax (1,734) (4,185)Total $(121,859) $ (115,938)60Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.15. RESTRUCTURING The Company has undertaken a number of initiatives that have resulted in severance, restructuring, and related charges. Asummary of charges by initiative is as follows (in thousands): Involuntary Employee Severance and Year Ended June 30, Benefit Costs Other Total 2018 Restructuring Initiatives $2,668 $3,825 $6,493 Prior Year Initiatives 224 877 1,101 Total expense $2,892 $4,702 $7,594 2017 Restructuring Initiatives $ 1,863 $ 3,590 $ 5,453 Prior Year Initiatives - 372 372 Total expense $ 1,863 $ 3,962 $ 5,825 2016 Restructuring Initiatives $ 1,046 $ 893 $ 1,939 Prior Year Initiatives 96 2,197 2,293 Total expense $ 1,142 $ 3,090 $ 4,232 2018 Restructuring Initiatives The Company continues to focus on our efforts to reduce cost and improve productivity across our businesses, particularlythrough headcount reductions, facility closures, and consolidations. During the fiscal year ended June 30, 2018, we incurredrestructuring expenses from 2018 initiatives related to three restructuring programs that are intended to improve profitability,streamline production and enhance capacity to support future growth: (1) the realignment of management functions at theFood Service Equipment Group level; (2) headcount reduction and plant realignment with regard to the standard productsbusinesses within Food Service Equipment; and (3) the exit of an unprofitable Engraving business in Brazil. Involuntary EmployeeSeverance and BenefitCosts Other Total Restructuring liabilities at June 30, 2017 $- $- $- Additions and adjustments 2,838 3,149 5,987 Payments (2,676) (3,124) (5,800) Restructuring liabilities at June 30, 2018 $162 $25 $187 2017 Restructuring Initiatives The Company continues to focus on our efforts to reduce cost and improve productivity across our businesses, particularlythrough headcount reductions, facility closures, and consolidations. The Company’s 2017 initiatives are from three primaryareas. First, Engineering Technologies incurred $3.6 million of expense related to manufacturing footprint optimization at theEnginetics, Huber Heights, Ohio facility which allowed us to close its East Lake, Ohio facility. We vacated and sublet the EastLake facility for approximately the same aggregate lease costs for which we are obligated under the lease. Second, we spent$1.2 million to gain organizational efficiencies within the Food Service Equipment segment. Finally, we spent $0.5 million tomove our Electronics facility in China due to government directives related to all businesses in the area where our facility waslocated. The Company anticipates further restructuring charges in 2019 based upon market conditions and cost reduction activities toimprove our competitive advantage.61Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Activity in the reserves related to 2017 restructuring initiatives is as follows (in thousands): Involuntary Employee Severance and Benefit Costs Other TotalRestructuring Liabilities at June 30, 2017$ 506 $801 $1,307 Additions and adjustments 532 1,044 1,576 Payments (745) (1,845) (2,590)Restructuring Liabilities at June 30, 2018$293 $- $293 Activity in the reserves related to prior year restructuring initiatives is as follows (in thousands): Involuntary Employee Severance and Benefit Costs Other TotalRestructuring Liabilities at June 30, 2016$ 74 $ 256 $ 330 Additions 1,927 3,742 5,669 Payments (1,495) (2,760) (4,255)Restructuring Liabilities at June 30, 2017$506 $1,238 $ 1,744 The Company’s total restructuring expenses by segment are as follows (in thousands): Involuntary Employee Severance and Year Ended June 30, Benefit Costs Other TotalFiscal Year 2018 Food Service Equipment $ 962 $ 3,203 $ 4,165Engineering Technologies 224 874 1,098Engraving 1,199 489 1,688Electronics 215 84 299Corporate and Other 292 52 344 Total expense $ 2,892 $ 4,702 $ 7,594 Fiscal Year 2017 Food Service Equipment $ 1,101 $ 85 $ 1,186Engineering Technologies 809 3,070 3,879Engraving 6 - 6Electronics 11 488 499Corporate and Other (64) 319 255 Total expense $ 1,863 $ 3,962 $ 5,825 Fiscal Year 2016 Food Service Equipment $ 138 $ 2,841 $ 2,979Engineering Technologies 160 - 160Engraving 92 - 92Electronics 624 217 841Corporate and Other 128 32 160 Total expense $ 1,142 $ 3,090 $ 4,232 62Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.16. EMPLOYEE BENEFIT PLANS Retirement Plans The Company has defined benefit pension plans covering certain current and former employees both inside and outside of theU.S. The Company’s pension plan for U.S. salaried employees was frozen as of December 31, 2007, and participants in theplan ceased accruing future benefits. The Company’s pension plan for U.S. hourly employees was frozen for substantially allparticipants as of July 31, 2013, and replaced with a defined contribution benefit plan. Net periodic benefit cost for U.S. and non-U.S. plans included the following components (in thousands): U.S. Plans Foreign Plans Year Ended June 30, Year Ended June 30, 2018 2017 2016 2018 2017 2016Service Cost$3 $3 $70 $187 $37 $34 Interest Cost 10,079 10,451 11,489 1,050 1,022 1,428 Expected return on plan assets (13,484) (13,761) (13,864) (947) (1,152) (1,294)Recognized net actuarial loss 4,579 4,760 3,979 941 1,016 835 Amortization of prior servicecost (benefit) - - 14 (37) (48) (49)Net periodic benefit cost(benefit)$1,177 $1,453 $1,688 $1,194 $875 $954 The following table sets forth the funded status and amounts recognized as of June 30, 2018 and 2017 for our U.S. and foreigndefined benefit pension plans (in thousands): U.S. Plans Foreign Plans Year Ended June 30, Year Ended June 30, 2018 2017 2018 2017Change in benefit obligation Benefit obligation at beginning of year$259,963 $269,162 $42,141 $41,820Service cost 3 3 187 37Interest cost 10,079 10,451 1,050 1,022Actuarial loss (gain) (10,761) (3,624) (2,701) 1,016Benefits paid (16,188) (16,029) (1,639) (1,352)Foreign currency exchange rate & other changes - - 2,156 (402)Projected benefit obligation at end of year$243,096 $259,963 $41,194 $42,141Change in plan assets Fair value of plan assets at beginning of year$195,328 $197,850 $36,921 $35,007Actual return on plan assets 6,070 13,223 1,113 2,677Employer contribution 5,750 284 1,196 1,143Benefits paid (16,188) (16,029) (1,638) (1,352)Foreign currency exchange rate - - 525 (554)Fair value of plan assets at end of year$190,960 $195,328 $38,117 $36,921 Funded Status$(52,136) $(64,635) $(3,076) $(5,220)Amounts recognized in the consolidated balance sheetsconsists of: Prepaid Benefit Cost$- $- $4,759 $1,324Current liabilities (219) (220) (1,926) (330)Non-current liabilities (51,917) (64,415) (5,909) (6,330)Net amount recognized$(52,136) $(64,635) $(3,076) $(5,336) Unrecognized net actuarial loss$121,281 $129,207 $4,778 $8,484Unrecognized prior service cost - - (45) (33)Accumulated other comprehensive income, pre-tax$121,281 $129,207 $4,733 $8,45163Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The accumulated benefit obligation for all defined benefit pension plans was $283.9 million and $301.6 million at June 30,2018 and 2017, respectively. The estimated actuarial net loss for the defined benefit pension plans that will be amortized from accumulated othercomprehensive income into net periodic benefit cost over the next fiscal year is $4.5 million. Plan Assets and Assumptions The fair values of the Company’s pension plan assets at June 30, 2018 and 2017 by asset category, as classified in the threelevels of inputs described in Note 1 under the caption Fair Value of Financial Instruments, are as follows (in thousands): June 30, 2018 Total Level 1 Level 2 Level 3Cash and cash equivalents$4,482 $325 $4,157 $-Common and preferred stocks 89,934 16,353 73,581 -U.S. Government securities 14,461 - 14,461 -Corporate bonds and other fixed income securities 102,105 6,711 95,394 -Other 18,095 - 18,095 - $229,077 23,389 205,688 - June 30, 2017 Total Level 1 Level 2 Level 3Cash and cash equivalents$11,160 $452 $10,708 $ - Common and preferred stocks 94,951 16,976 77,975 - U.S. Government securities 11,989 - 11,989 - Corporate bonds and other fixed income securities 97,691 6,728 90,963 - Other 16,458 - 16,458 - $232,249 $24,156 $208,093 $ - Asset allocation at June 30, 2018 and 2017 and target asset allocations for 2018 are as follows: U.S. Plans Foreign Plans Year Ended June 30, Year Ended June 30,Asset Category2018 2017 2018 2017Equity securities33% 33% 20% 21%Debt securities33% 29% 44% 44%Global balanced securities24% 26% 35% 28%Other10% 12% 1% 7%Total100% 100% 100% 100% 2018Asset Category – TargetU.S. U.K.Equity securities32% 18%Debt and market neutral securities33% 45%Global balanced securities25% 37%Other10% 0%Total100% 100% Our investment policy for the U.S. pension plans targets a range of exposure to the various asset classes. Standex rebalancesthe portfolio periodically when the allocation is not within the desired range of exposure. The plan seeks to provide returns inexcess of the various benchmarks. The benchmarks include the following indices: S&P 500; Citigroup PMI EPAC; CitigroupWorld Government Bond and Barclays Aggregate Bond. A third-party investment consultant tracks the plan’s portfoliorelative to the benchmarks and provides quarterly investment reviews which consist of a performance and risk assessment onall investment managers and on the portfolio. 64Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Certain managers within the plan use, or have authorization to use, derivative financial instruments for hedging purposes, thecreation of market exposures and management of country and asset allocation exposure. Currency speculation derivatives arestrictly prohibited. Year Ended June 302018 2017 2016Plan assumptions - obligation Discount rate0.38 - 4.40% 1.90 - 4.00% 1.50 - 4.00%Rate of compensation increase3.6% 3.70% 3.30% Plan assumptions - cost Discount rate0.43 - 4.00% 1.50 - 4.00% 2.30 - 4.70%Expected return on assets2.55 - 7.00% 3.75 - 7.10% 3.90 - 7.10%Rate of compensation increase3.70% 3.30% 3.75% Included in the above are the following assumptions relating to the obligations for defined benefit pension plans in theUnited States at June 30, 2018; a discount rate of 4.4% and expected return on assets of 7.0%. The U.S. defined benefitpension plans represent the majority of our pension obligations. The expected return on plan assets assumption is based onour expectation of the long-term average rate of return on assets in the pension funds and is reflective of the current andprojected asset mix of the funds. The discount rate reflects the current rate at which pension liabilities could be effectivelysettled at the end of the year. The discount rate is determined by matching our expected benefit payments from a stream ofAA- 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: 2019, $17.6 million; 2020, $17.4 million; 2021, $17.2million; 2022, $17.7 million; 2023, $17.8 million and thereafter, $89.3 million. The Company expects to make $1.4 millionof contributions to its pension plans in 2019. The Company operates defined benefit plans in Germany and Japan which are unfunded. Multi-Employer Pension Plans We contribute to a number of multiemployer defined benefit plans under the terms of collective bargaining agreements thatcover our union-represented employees. These plans generally provide for retirement, death and/or termination benefits foreligible 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 otherparticipating employers. If a participating employer stops contributing to the multiemployer plan, the unfunded obligations of the plan maybe 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 anamount based on the underfunded status of the plan, referred to as a withdrawal liability. However, cessation ofparticipation in a multiemployer plan and subsequent payment of any withdrawal liability is subject to thecollective bargaining process. The following table outlines the Company’s participation in multiemployer pension plans for the periods ended June 30,2018, 2017, and 2016, and sets forth the yearly contributions into each plan. The “EIN/Pension Plan Number” columnprovides the Employer Identification Number (“EIN”) and the three-digit plan number. The most recent Pension ProtectionAct zone status available in 2017 and 2016 relates to the plans’ two most recent fiscal year-ends. The zone status is based oninformation that we received from the plans’ administrators and is certified by each plan’s actuary. Among other factors, planscertified in the red zone are generally less than 65% funded, plans certified in the orange zone are both less than 80% fundedand have an accumulated funding deficiency or are expected to have a deficiency in any of the next six plan years, planscertified 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/orangezone plans, or a rehabilitation plan (“RP”) for red zone plans, is either pending or has been implemented. For all plans, theCompany’s contributions do not exceed 5% of the total contributions to the plan in the most recent year.65Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Pension Fund EIN/PlanNumberPension Protection ActZone Status Contributions SurchargeImposed?ExpirationDate ofCollectiveBargainingAgreement 2018 2017 FIP/RP Status 2018 2017 2016New England Teamstersand Trucking IndustryPension Fund 04-6372430-001 Red Red Yes/Implemented $ 482 $ 530 $ 485 No April 2021 IAM National PensionFund, National PensionPlan 51-6031295-002 Green Green N/A 638 633 575 NoOct. 2019 -May 2021 $1,120 $1,163 $1,060 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 theBoard of Directors, may make contributions on behalf of our employees under the plans. Company contributions were $3.7 million, $4.0 million, and $4.0 million for the years ended June 30, 2018, 2017, and 2016, respectively. At June 30, 2018,the salaried plan holds approximately 68,000 shares of Company common stock, representing approximately 6.26% of theholdings of the plan. 17. 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 eight operating segments that manufacture and sell commercial foodservice equipment; Engraving – provides mold texturizing, slush molding tools, project management and design services, rollengraving, hygiene product tooling, low observation vents for stealth aircraft, and process machinery for a numberof industries; Engineering Technologies – provides net and near net formed single-source customized solutions in themanufacture of engineered components for the aviation, aerospace, defense, energy, industrial, medical, marine, oiland gas, and manned and unmanned space markets. Electronics – manufacturing and selling of electronic components for applications throughout the end-user marketspectrum; 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 Corporatesegment 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 theexpenses associated with corporate activities to our operating segments. These corporate expenses include the costs for thecorporate headquarters, salaries and wages for the personnel in corporate, professional fees related to corporate matters andcompliance efforts, stock-based compensation and post-retirement benefits related to our corporate executives, officers anddirectors, and other compliance related costs. The Company has a process to allocate and recharge certain direct costs to theoperating segments when such direct costs are administered and paid at corporate. Such direct expenses that are recharged onan intercompany basis each month include such costs as insurance, workers’ compensation programs, audit fees and pensionexpense. The accounting policies applied by the reportable segments are the same as those described in the Summary ofAccounting Policies footnote to the consolidated financial statements. There are no differences in accounting policies whichwould be necessary for an understanding of the reported segment information.66•••••Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Industry Segments (in thousands)Net Sales Depreciation and Amortization 2018 2017 2016 2018 2017 2016Food Service Equipment$396,866 $380,970 $ 381,867 $5,960 $5,206 $5,030Engraving 136,275 105,943 124,120 5,483 3,100 3,403Engineering Technologies 90,781 90,506 82,235 6,006 5,976 5,363Electronics 196,291 136,689 118,319 10,564 4,960 3,200Hydraulics 48,169 41,150 45,045 750 730 651Corporate and Other - - - 400 343 306Total$868,382 $ 755,258 $ 751,586 $29,163 $20,315 $17,953 Income (Loss) From Operations Capital Expenditures(2) 2018 2017 2016 2018 2017 2016Food Service Equipment$34,853 $33,436 $40,142 $3,790 $5,088 $4,560Engraving 28,966 25,584 29,579 9,401 7,807 4,031Engineering Technologies 6,449 9,662 8,258 3,537 6,510 6,562Electronics 45,310 27,663 21,104 8,263 4,000 2,796Hydraulics 7,316 6,712 7,947 1,399 1,058 988Restructuring charge (7,594) (5,825) (4,232) - - - Acquisition-related costs (3,749) (7,843) - - - - Gain on sale of real estate - 652 - - - - Other operating income(expense), net (1) - - (7,458) - - - Corporate (27,512) (25,015) (24,996) 257 418 96Total$84,039 $65,026 $70,344 $26,647 $24,881 $19,033Interest expense (8,030) (4,043) (2,871) Other, net 1,243 949 1,052 Income from continuingoperations before incometaxes $77,252 $ 61,932 $ 68,525 Other operating expense in 2016 consists primarily of a $7.3 million charge to adjust the Roll, Plate, andMachinery business in the Engraving segment to its net realizable value (2) Includes capital expenditures in accounts payable of $0.4 million, $0.5 million, and $2.1 million at June 30,2018, 2017, and 2016 respectively. Goodwill Identifiable Assets 2018 2017 2018 2017Food Service Equipment$63,464 $63,464 $249,573 $ 243,414Engraving 26,675 20,000 149,973 115,664Engineering Technologies 44,247 44,120 150,150 150,805Electronics 113,798 112,047 318,564 292,776Hydraulics 3,059 3,059 25,646 21,405Corporate & Other (3) 497 - 23,031 43,612Total$251,762 $ 242,690 $916,937 $867,676 (3) The decrease of Corporate identifiable assets in the periods presented reflects the use offoreign corporate cash in 2017 to acquire Standex Electronics Japan. See discussionrelated to the purchase in Note 2 of the consolidated financial statements. 67(1)Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Net sales (4) 2018 2017 2016United States$593,141 $523,266 $ 548,058Asia Pacific 108,569 86,480 70,269EMEA (5) 149,249 124,990 107,765Other Americas 17,423 20,522 25,494Total$868,382 $ 755,258 $ 751,586 (4) Net sales were identified based on geographic location where our products and services were initiated.(5) EMEA consists primarily of Europe, Middle East and S. Africa. Long-lived assets 2018 2017 2016United States$84,887 $84,365 $ 76,545Asia Pacific 30,910 30,268 7,035EMEA (6) 25,709 15,816 17,287Other Americas 3,064 2,711 5,819Total$144,570 $133,160 $ 106,686 (6) EMEA consists primarily of Europe, Middle East and S. Africa. 18. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The unaudited quarterly results of operations for the years ended June 30, 2018 and 2017 are as follows (in thousands, exceptfor per share data): 2018 First Second Third FourthNet sales$214,379 $ 209,751 $ 216,743 $227,508Gross profit 74,181 71,526 73,772 82,320Net income 13,998 (2,807) 12,800 12,610EARNINGS PER SHARE (1) Basic$1.10 $(0.22) $1.01 $0.99 Diluted$1.10 $(0.22) $1.00 $0.99 2017 First Second Third FourthNet sales$179,600 $ 173,854 $184,715 $ 217,089Gross profit 61,776 56,894 61,348 72,736Net income 14,344 10,442 7,660 14,131EARNINGS PER SHARE (1) Basic$1.13 $0.82 $0.60 $1.12 Diluted$1.12 $0.82 $0.60 $1.11 Basic and diluted earnings per share are computed independently for each reporting period. Accordingly, thesum of the quarterly earnings per share amounts may not agree to the year-to-date amounts. During the fourth quarter of fiscal 2017, we adopted Accounting Standards Update (ASU) 2016-09 requiring therecognition of excess tax benefits as a component of income tax expense which were historically recognized in equity. Asrequired, our Q1-Q3 2017 results have been recast to allocate $0.6 million of the benefit to the applicable periods. Inaddition, the ASU requires a prospective update to the treasury method of calculating weighted average diluted sharesoutstanding resulting in the inclusion of additional shares in our diluted EPS calculation.68(1)Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.19. DISPOSAL OF A BUSINESSDuring the first quarter of fiscal year 2017, the Company sold its U.S. Roll Plate and Machinery business, as it was notstrategic and did not meet our growth and return expectations. This divestiture also allows the Company’s management tofocus on higher growth and better return businesses within the Engraving segment.During the fourth quarter of fiscal year 2016, the Company recorded a $7.3 million non-cash loss to adjust the net assets ofthe business to their net realizable value. The expense is recorded as a component of Other Operating Income, net. The saleof the business does not constitute a significant strategic shift that will have a major effect on the entity’s operations andfinancial results. 20. SUBSEQUENT EVENT On August 23, 2018, the Company announced that it had acquired Michigan-based Tenibac-Graphion, Inc., a provider ofchemical and laser texturing services. Privately held Tenibac-Graphion, Inc. reported revenues of $25 million for the yearended December 31, 2017. The acquisition closed during August 2018, and will be reporting operating results into ourEngraving segment.69Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and ShareholdersStandex International CorporationOpinion on the financial statementsWe have audited the accompanying consolidated balance sheets of Standex International Corporation (a Delawarecorporation) and subsidiaries (the “Company”) as of June 30, 2018 and 2017, and the related consolidated statements ofoperations, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the periodended June 30, 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financialstatements present fairly, in all material respects, the financial position of the Company as of June 30, 2018 and 2017, and theresults of its operations and its cash flows for each of the three years in the period ended June 30, 2018, in conformity withaccounting 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)(“PCAOB”), the Company’s internal control over financial reporting as of June 30, 2018, based on criteria established in the2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO), and our report dated August 28, 2018 expressed an unqualified opinion.Basis for opinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinionon the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and performthe audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether dueto error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financialstatements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures includedexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audits alsoincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating theoverall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ GRANT THORNTON LLPWe have served as the Company’s auditor since 2015. Boston, MassachusettsAugust 28, 201870Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.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 anevaluation 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 theperiod covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded asof June 30, 2018, that the disclosure controls and procedures are effective in ensuring that the information required to bedisclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarizedand reported within the time periods specified in the Commission's rules and forms and (ii) that such information isaccumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief FinancialOfficer 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 proceduresas they relate to the internal control over financial reporting for an acquired business during the first year following suchacquisition. As discussed in Note 2 to the consolidated financial statements contained in this Report, the Company acquiredall of the outstanding stock of the Piazza Rosa Group. The acquisition represents approximately 1.5% of the Company'sconsolidated revenue for the year ended June 30, 2018, and approximately 1.8% of the Company's consolidated assets at June30, 2018. Management's evaluation and conclusion as to the effectiveness of the design and operation of the Company’sdisclosure controls and procedures as of June 30, 2018 excludes any evaluation of the internal control over financial reportingof the Piazza Rosa Group. There were no changes in the Company’s internal control over financial reporting identified in connection withmanagement’s evaluation that occurred during the fourth quarter of our fiscal year (ended June 30, 2018) that has materiallyaffected, 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 isdesigned to provide reasonable assurance as to the reliability of the Company’s financial reporting and the preparation offinancial 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 overfinancial 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 ChiefFinancial Officer, has concluded that our internal control over financial reporting was effective as of June 30, 2018 to providereasonable assurance of achieving its objectives. These results were reviewed with the Audit Committee of the Board ofDirectors. Grant Thornton, LLP, the independent registered public accounting firm that audited our consolidated financialstatements included in this Annual Report on Form 10-K, has issued an unqualified attestation report on the Company’sinternal control over financial reporting, which is included below. Inherent Limitation on Effectiveness of Controls No matter how well designed, internal control over financial reporting has inherent limitations. Internal control over financialreporting determined to be effective can provide only reasonable, not absolute, assurance with respect to financial statementpreparation and may not prevent or detect all misstatements that might be due to error or fraud. In addition, a design of acontrol system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relativeto their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absoluteassurance that all control issues and instances of fraud, if any, within the Company have been detected.71Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and ShareholdersStandex International CorporationOpinion on internal control over financial reportingWe have audited the internal control over financial reporting of Standex International Corporation (a Delaware corporation)and subsidiaries (the “Company”) as of June 30, 2018, based on criteria established in the 2013 Internal Control—IntegratedFramework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion,the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2018, basedon 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)(“PCAOB”), the consolidated financial statements of the Company as of and for the year ended June 30, 2018, and our reportdated August 28, 2018 expressed an unqualified opinion on those financial statements.Basis for opinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for itsassessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’sReport on Internal Control over Financial Reporting (“Management’s Report”). Our responsibility is to express an opinion onthe Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered withthe PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securitieslaws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and performthe audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained inall material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing therisk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based onthe assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that ouraudit provides a reasonable basis for our opinion.Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal controlover financial reporting of Piazza Rosa S.r.l. (“Piazza Rosa”), a wholly-owned subsidiary, whose financial statements reflecttotal assets and revenues constituting 1.8 and 1.5 percent, respectively, of the related consolidated financial statementamounts as of and for the year ended June 30, 2018. As indicated in Management’s Report, Piazza Rosa was acquired during2018. Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excludedinternal control over financial reporting of Piazza Rosa.Definition and limitations of internal control over financial reportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company’s internal control over financial reporting includes those policies and proceduresthat (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary topermit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts andexpenditures of the company are being made only in accordance with authorizations of management and directors of the72Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, ordisposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequatebecause of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Boston, MassachusettsAugust 28, 201873Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.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 120days after the close of the fiscal year ended June 30, 2018 (the “Proxy Statement”). The information required by this item andnot provided in Part 1 of this report under Item 1 “Executive Officers of Standex” is incorporated by reference from the ProxyStatement under the captions “Election of Directors,” “Stock Ownership in the Company,” “Other Information Concerningthe 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 ofDirectors. Information regarding the process for identifying and evaluating candidates for director are set forth andincorporated in reference to the information in the Proxy Statement under the caption “Corporate Governance/NominatingCommittee Report.” Information regarding the Audit Committee Financial Expert and the identification of the Audit Committee is incorporatedby 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 Section3(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 financialmanagement that applies to our chief executive officer, principal financial officer, principal accounting officer, controller orpersons performing similar functions. Our corporate governance section also includes our code of business conduct andethics for all employees. In addition, we will promptly post any amendments to or waivers of the code of ethics for seniorfinancial management on our website. You can find this and other corporate governance information at www.standex.com. Item 11. Executive Compensation Information regarding executive compensation is incorporated by reference from the Proxy Statement under the captions andsub-captions: “Executive Compensation,” “Compensation Discussion and Analysis,” “Compensation Committee Report,”“2018 Summary Compensation Table,” “Other Information Concerning the Company, Board of Directors and ItsCommittees,” and “Directors Compensation.” 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 isincorporated by reference in the Proxy Statement under the caption “Stock Ownership of Certain Beneficial Owners.” Thebeneficial ownership of Standex Common Stock of all directors and executive officers of the Company is incorporated byreference in the Proxy Statement under the caption and sub-caption “Stock Ownership in the Company” and “StockOwnership by Directors, Nominees for Director and Executive Officers,” respectively.74Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The Equity Compensation Plan table below represents information regarding the Company’s equity based compensation planat June 30, 2018. (A) (B) (C) Number of Securities To Weighted-Average Number of Securities Remaining Be Issued Upon Exercise Exercise Price Of Available For Future Issuance Under Of Outstanding Options, Outstanding Options, Equity Compensation Plans (ExcludingPlan CategoryWarrants And Rights Warrants And Rights Securities reflected in Column (A))Equity compensation plansapproved by stockholders209,985 $ 9.85 157,921Equity compensation plans notapproved by stockholders- - -Total209,985 $ 9.85 157,921 The Company has one equity compensation plan, approved by stockholders, under which equity securities of the Companyhave been authorized for issuance to employees and non-employee directors. This plan is further described in the “Notes toConsolidated 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 underthe 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 “Electionof 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 professionalservices rendered by the professional accountant for audit of the Company’s annual financial statements and review offinancial statements included in the Company’s Form 10-K as well as others are incorporated by reference in the ProxyStatement under the caption “Independent Auditors’ Fees.” PART IV Item 15. Exhibits and Financial Statement Schedules Financial Statements Financial Statements covered by the Reports of Independent Registered Public Accounting Firm Consolidated Statements of Operations for the fiscal years ended June 30, 2018, 2017 and 2016 Consolidated Balance Sheets as of June 30, 2018 and 2017 Comprehensive Income for the fiscal years ended June 30, 2018, 2017 and 2016 Consolidated Statements of Stockholders’ Equity for the fiscal years ended June 30, 2018, 2017 and 2016 Consolidated Statements of Cash Flows for the fiscal years ended June 30, 2018, 2017 and 2016 Notes to Consolidated Financial Statements Financial Statements Schedule The following financial statement schedule is included as required by Item 8 to this report on Form 10-KSchedule II – Valuation and Qualifying Accounts is included in the Notes to Consolidated Financial StatementsAll other schedules are not required and have been omitted Incorporated 75(a)1.(A)(B)(C)(D)(E)(F) 2.Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Filed Herewith Exhibits 12/31/1998 dated October 27, 1998 filed as Exhibit 3(i). 2/4/2015 effective January 30, 2015 filed as Item 5.03, Exhibit 3.1 6/30/2016 January, 20, 2014 between the Company and David Dunbar* 6/30/2010 dated August 25, 2010 between the Company and Thomas D. DeByle* 6/30/2016 April 4, 2016 between the Company and Alan J. Glass* 6/30/2016 August 17, 2015 between the Company and Ross McGovern* 6/30/2016 July 27, 2015 between the Company and Paul Burns* 6/30/2012 And Restated 2008 Long Term Incentive Plan, effective October 28, 2008. Filed as Exhibit 10.* 6/30/2001 Insurance Plan effective April 27, 1994 and as Amended and restated on April 25, 2001 filed as Exhibit 10(k).* 6/30/1995 Retirement Plan adopted April 26, 1995 and Amended on July 26, 1995 filed as Exhibit 10(n).* 5/5/2008 and executive officers of the Company filed as Item 1.01, Exhibit 10.* 6/30/2018 Incentive Plan Award 1/31/2008 compensated employees filed as Item 5.02.* 6/30/2005 Senior Financial Officers is incorporated by reference as Exhibit 14. 76Exhibit by Reference Number Exhibit Description Form Date 3.(b)3.(i)Restated Certificate of Incorporation of Standex,10-Q(ii)By-Laws of Standex, as amended, and restated8-K10.(a)Employment Agreement dated10-K(b)Amended and Restated Employment Agreement10-K(c)Employment Agreement dated10-K(d)Employment Agreement dated10-K(e)Employment Agreement dated10-K(f)Standex International Corporation Amended and10-K(g)Standex International Corporation Executive Life10-K(h)Standex International Corporation Supplemental10-K(i)Form of Indemnification Agreement for directors8-K(j)Standex International Corporation Long Term10-K(k)Standex Deferred Compensation Plan for highly8-K(l)Code of Ethics for Chief Executive Officer and10-KSource: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.12/19/2014 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 9/30/2016 2016 by and among Standex International Corporation, as buyer, and Gregory J. Deutschmann, as sellers, of Horizon Scientific, Inc., filed as Exhibit 10 3/31/2017 2017 by Mold-Tech Singapore Pte. Ltd. a subsidiary of Standex International Corporation, as buyer and Oki Electric Industry Co., Ltd. as sellers, of all Outstanding stock of Oki Sensor Device Corporation (English translation of Japanese original document) X August 2, 2016 between the Company and James Zupancic* X X Accounting Firm Grant Thornton LLP X Chorman, Jeffrey S. Edwards, Gerald H. Fickenscher, Thomas J. Hansen, Michael Hickey and Daniel B. Hogan X Chief Executive Officer X Chief Financial Officer X 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.77(m)Amended and Restated Credit Agreement8-K(n)Stock Purchase Agreement dated as of October 17,10-Q(o)Share Purchase Agreement dated as of February 2,10-Q10.Employment Agreement dated10-K21.Subsidiaries of Standex International Corporation23.1Consent of Independent Registered Public24.Powers of Attorney of Charles H. Cannon, Thomas E.31.1Rule 13a-14(a) Certification of President and31.2Rule 13a-14(a) Certification of Vice President and32.Section 1350 Certification101.INS101.SCH101.CAL101.DEF101.LAB101.PRESource: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Standex InternationalCorporation has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto dulyauthorized, on August 28, 2018. 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 followingpersons on behalf of Standex International Corporation and in the capacities indicated on August 28, 2018: Title President/Chief Executive Officer David Dunbar Vice President/Chief Financial Officer Thomas D. DeByle Chief Accounting Officer / Assistant Treasurer Sean Valashinas David Dunbar, pursuant to powers of attorney which are being filed with this Annual Report on Form 10-K, has signed belowon August 28, 2018 as attorney-in-fact for the following directors of the Registrant: Charles H. CannonThomas J. HansenThomas E. ChormanMichael A. HickeyJeffrey S. EdwardsDaniel B. HoganGerald H. Fickenscher /s/ DAVID DUNBARDavid Dunbar Supplemental Information to be furnished with reports filed pursuant to Section 15(d) of the Act by Registrants which havenot registered securities pursuant to Section 12 of the Act.The Company will furnish its 2017 Proxy Statement and proxy materials to security holders subsequent to the filing of theannual report on this Form. Copies of such material shall be furnished to the Commission when they are sent to securityholders.78Signature/s/ DAVID DUNBAR/s/ THOMAS D. DEBYLE/s/ SEAN VALASHINASSource: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.INDEX TO EXHIBITS Employment Agreement dated August 2, 2016 between theCompany and James Zupancic Subsidiaries of Standex Consent of Independent Registered Public Accounting FirmGrant Thornton LLP Powers of Attorney of Charles H. Cannon, Thomas E. Chorman,Jeffrey S. Edwards, Gerald Fickenscher, Thomas J. Hansen, MichaelA. Hickey and Daniel B. Hogan. Rule 13a-14(a) Certification of President and Chief Executive Officer Rule 13a-14(a) Certification of Vice President and Chief FinancialOfficer Section 1350 Certification END OF FORM 10-K SUPPLEMENTAL INFORMATION FOLLOWSTitle Retired Chairman and CEO, JBT Corporation CEO, Foam Partners LLC President and Chief Executive Officer; Chairman of the Board Chairman and Chief Executive Officer, Cooper Standard Holdings, Inc. Retired Vice President, Europe, Middle East, and Africa, Crompton Corporation Former Vice Chairman of Illinois Tool Works, Inc. Executive Vice President and President of the Global Institutional Business, Ecolab Inc. Executive Director, Passim Folk Music and Cultural Center ________________________Member of Audit Committee Member of Compensation Committee Member of Corporate Governance/Nominating Committee Member of Executive Committee 791021232431.131.232Board of DirectorsCharles H. Cannon, Jr., 1, 2, 4Thomas E. Chorman 1, 2, 3David Dunbar 4Jeffrey S Edwards 2, 3Gerald H. Fickenscher 1, 3Thomas J. Hansen 1, 4Michael A. HickeyDaniel B. Hogan, Ph. D. 31234Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Corporate OfficersPresident 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 Tax Director Vice President, Chief Human Resources Officer Vice President of Strategy and Business Development Vice President of Operational Excellence Shareholder Information Standex International Corporation 11 Keewaydin Drive, Suite 300 Salem, NH 03079 (603) 893-9701 Facsimile: (603) 893-7324 www.Standex.com Listed on the New York Stock Exchange (Ticker symbol: SXI) 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, 250Royall Street, Canton, MA 02021) regarding changes in name, address orownership of stock; lost certificates of dividends; and consolidation ofaccounts. The Annual Meeting of Stockholders will be held at 9:00 a.m. on Tuesday,October 23, 2017 at Standex International Corporation’s CorporateHeadquarters, 11 Keewaydin Drive 3rd Floor, Salem, NH 03079 80David DunbarThomas D. DeByleAlan J. GlassStacey S. ConstasSean ValashinasChristopher J. SeilerRoss McGovernPaul BurnsJames ZupancicCorporate HeadquartersCommon StockTransfer Agent and RegistrarIndependent AuditorsShareholder ServicesStockholders’ MeetingSource: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EMPLOYMENT AGREEMENTTHIS IS AN AGREEMENT made and entered into as of the 2nd day of August, 2016 (the"Effective Date") by and between Standex International Corporation, a Delaware corporation withexecutive offices located at 11 Keewaydin Drive, Suite 300, Salem, New Hampshire 03079 (the"Employer") and James Zupancic, an individual residing at TBC (the "Employee").Employment; Term. Employer hereby agrees to employ Employee, and Employee hereby agrees toserve Employer on a full-time basis as Vice President, Operational Excellence ofthe Employer, subject to the direction and control of the Chief Executive Officer ofthe Employer, through June 30, 2017 (the "Initial Term"). Thereafter theAgreement shall automatically renew for successive one (1) year termscommencing on July 1st of each year and end on June 30th of the next succeedingyear (the "Renewal Term") unless otherwise terminated pursuant to Section 1(b) ofthis Agreement. Subject to the provisions for termination otherwise included in Section 5 herein,either the Employer or the Employee shall have the right to terminate thisAgreement 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, statinghis/its intention to terminate the Agreement. Such termination will be effective at theend of the Notice Period. In the event of notice of termination by the Employer, theprovisions of Section 6 shall apply. Best Efforts. Employee agrees, as long as this Agreement is in effect, to continueto devote his best efforts and time and attention to the business of Employer and to the performanceof his executive, managerial and supervisory duties. 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 activecapacity, any business other than that of the Employer or any affiliate, associate or subsidiarycorporation of Employer. It is the express intent of the Employer and Employee that: (i) thecovenants and affirmative obligations of this Section be binding obligations to be enforced to thefullest extent permitted by law; (ii) in the event of any determination of unenforceability of thescope of any covenant or obligation, its limitation which a court of competent jurisdiction deemsfair and reasonable, shall be the sole basis for relief from the full enforcement thereof; and (iii) inno 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 reasonof the expiration of this Agreement or for any other reason), within the United States, directly orindirectly, control, manage, operate, joint or participate in the control, management or operation ofany business which directly or indirectly competes with any business of the Employer at the timeof such termination. The Employee shall not during the term of this non-competition provisioncontact any employees of the Employer for the purpose of inducing or otherwise encouraging saidemployees to leave their employment with the Employer.No provision contained in this Section shall restrict Employee from making investments inother 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 fromowning less than five (5) percent of the outstanding securities of companies which compete withany present or future business of Employer and which are listed on a national stock exchange oractively traded on the NASDAQ National Market System.11.(a)(b)2.3.Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Compensation; Fringe Benefits. Base Compensation. Employer agrees to compensate the Employee for his servicesduring the period of his employment hereunder at a minimum base salary of TwoHundred Twenty-Five Thousand Dollars ($225,000) per annum, payablesemimonthly. Employee shall be entitled to receive such increases in this minimumbase salary, as the Compensation Committee of the Board of Directors of Employershall, in their sole discretion determine. Signing Bonus. Within thirty (30) days of the Effective Date, Employee willreceive a one-time cash payment of Forty Thousand Dollars ($40,000) (the"Signing Bonus") which shall be subject to payroll taxes and withholding. IfEmployee voluntarily terminates his employment or is terminated for cause inaccordance with Section 5(c) with the Employer prior to his twelve-monthanniversary of the Effective Date, the Employee agrees to repay the Signing Bonusin full to the Employer. Annual Incentive Compensation. Employee shall receive an annual incentive bonusopportunity payable each September after the close of the fiscal year, at a target of30% of base compensation and variable from 0% to 200% of target based on acombination of the achievement of certain financial metrics and individualperformance against individual strategic goals set by the Compensation Committeeof the Board of Directors of the Employer. For fiscal year 2017, (July 1, 2016through June 30, 2017) the Employee shall receive an annual incentive of no lessthan the pro-rated 100% target, based on results achieved, which will be pro-ratedto the Effective Date. Long Term Incentive Compensation. Employee shall receive a long term incentiveopportunity pursuant to the terms of the Long Term Incentive Plan of the Employerat a target of 30% of base compensation consisting of grants of time based restrictedstock units and performance based restricted stock units. Actual stock earned isvariable from 0% to 200% of target based on achievement of certain metricsestablished by the Compensation Committee of the Board of Directors of theEmployer. Other Benefit Plans and Programs. Employee shall also be entitled to participate inthe Standex Management Stock Purchase Program, the Standex Retirement SavingsPlan and such other incentive, welfare and defined contribution retirement benefitplans as are made available, from time to time to senior divisional managementemployees of the Employer. Termination. In addition to the provisions concerning notice of termination in thesecond paragraph of Section 1, this Agreement shall terminate upon the following events: Death: Employee's employment shall terminate upon his death, and all liability ofEmployer shall thereupon cease except for compensation for past servicesremaining unpaid and for any benefits due to Employee's estate or others under theterms of any benefit plan of Employer then in effect in which Employeeparticipated. Disability: In the event that Employee becomes substantially disabled during theterm of this Agreement for a period of six consecutive months so that he is unableto perform the services as contemplated herein, then Employer, at its option, mayterminate Employee's employment upon written notification to Employee. Untilsuch termination option is exercised, Employee will continue to receive his full 24.(a)(b)(c)(d)(e)5.(a)(b)Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.salary and fringe benefits during any period of illness or other disability,regardless of duration. Material Breach: In the event of the commission of any material breach of the termsof this Agreement by the Employee or Employer, the non-breaching party maycause this Agreement to be terminated on ten (10) days written notice. Employermay remove Employee from all duties and authority commencing on the first day ofany such notice period, however, payment of compensation and participation in allbenefits shall continue through the last day of such notice period. For purposes ofthis Agreement, material breach by Employee shall be defined as: An act or acts of dishonesty on the Employee's part which are intended toresult in his substantial personal enrichment at the expense of the Employer; the Employee willfully, deliberately and continuously fails to materially andsubstantially perform his duties hereunder and which result in material injuryto the Employer (other than such failure resulting from the Employee'sincapacity due to physical or mental disability) after demand for substantialperformance is given by the Employer to the Employee specificallyidentifying the manner in which the Employer believes Employee has notmaterially and substantially performed his duties hereunder; or the Employee willfully and deliberately fails to comply with the Employer'scode of conduct, financial corporate policies or other significant, writtencorporate policies of the Employer. No action, or failure to act, shall be considered "willful" if it is done by theEmployee in good faith and with reasonable belief that his action or omission wasin 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 anyseverance under Section 6 below.Severance. In the event that Employee's employment is terminated pursuantto Section 1 of this Agreement (exclusive of a termination after a change in control whereseverance is governed by the provisions contained in Section 13 herein and exclusive oftermination 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 terminationof employment. Severance will be paid in accordance with normal and customary payrollpractices of the Employer. The aggregate severance will be equal to the Employee's thencurrent, annual base compensation. Invention and Trade Secret Agreement. Employee agrees that theInvention 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 theInvention and Trade Secret Agreement shall be superseded by the non-compete provisionsof Section 3 of this Agreement. Specific Performance. It is acknowledged by both parties that damageswill be an inadequate remedy to Employer in the event that Employee breaches or threatensto breach his commitments under Section 3 or under the Invention and Trade SecretAgreement. Therefore, it is agreed that Employer may institute and maintain an action orproceeding to compel the specific performance of the promises of Employee containedherein and therein. Such remedy shall, however, be cumulative, and not exclusive, to anyother remedy, which Employer may have. Entire Agreement; Amendment. This Agreement supersedes anyemployment understanding or agreement (except the Invention and Trade SecretAgreement) which may have been previously made by Employer or its respectivesubsidiaries or affiliates with Employee, and this Agreement, together with the Inventionand Trade Secret Agreement, represents all the terms 3(c)(i)(ii)(iii)6.7.8.9.Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.and conditions and the entire agreement between the parties hereto with respect tosuch employment. This Agreement may be modified or amended only by a writtendocument signed by Employer and Employee. Assignment. This Agreement is personal between Employer and Employeeand may not be assigned; provided, however, that Employer shall have the absolute right atany 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. Governing Law; Binding Nature of Agreement. This Agreement shall begoverned 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 tothe benefit of, the parties hereto and their respective heirs, executors, administrators,successors and assigns. Survival. The obligations contained in Sections 3, 5 6, 7 and 13 herein shallsurvive the termination of this Agreement. In addition, the termination of this Agreementshall not affect any of the rights or obligations of either party arising prior to or at the timeof the termination of this Agreement or which may arise by any event causing thetermination of this Agreement. Change of Control. In the event of a change in control of Employer required to be reported under Item6(e) of Schedule 14A of Regulation 14A of the Securities Exchange Act of 1934: Employer may terminate Employee's employment only upon conclusiveevidence of substantial and indisputable intentional personal malfeasance inoffice such as a conviction for embezzlement of Employer's funds; and Employee may terminate his employment at any time if there is a change inhis general area of responsibility, title or place of employment, or if his salaryor benefits are lessened or diminished. Following a change of control of Employer, any termination of Employee'semployment either by Employee pursuant to Section 13(a)(ii) or by Employer under anycircumstances other than involving conclusive evidence of substantial and indisputableintentional personal malfeasance in office, then: Employee shall be promptly paid a lump sum payment equal to one times hiscurrent annual base salary plus one times the higher of the Employee's thencurrent target bonus or most recent actual bonus amount under the AnnualIncentive Program as in effect on the date immediately prior to the changes incontrol; Employee shall become 100% vested in all benefit plans in which heparticipates including but not limited to the Management Savings Programportion of the Standex Annual Incentive Program and all restricted stockgrants and performance share units granted under the Standex Long TermIncentive Program, or any successor plan of the Employer, and any otherstock based plans of the Employer; and All life insurance and medical plan benefits covering the Employee and hisdependents shall be continued at the expense of Employer for the one-year 410.11.12.13.(a)(i)(ii)(b)(i)(ii)(iii)Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.period following such termination as if the Employee were still anemployee of the Employer. Notices. Any notice to be given pursuant to this Agreement shall be sent bycertified 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 thepreamble to this Agreement or at such other address as either party may from time to timedesignate in writing. Covenants Several. In the event that any covenant of this Agreement shallbe determined invalid or unenforceable and the remaining provisions can be given effect,then such remaining provisions shall remain in full force and effect. Compliance with Section 409A of the Code. To the extent applicable, it isintended 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 anyprovision that would cause the Agreement to fail to satisfy Section 409A of the Code shallhave no force and effect until amended to comply with Section 409A of the Code (whichamendment may be retroactive to the extent permitted by Section 409A of the code andmay be made by the Employer at any time and without the consent of the Employee). Inthe event that any payment of benefits hereunder may, in the determination of theEmployer, be subject to section 409A(a)(1) of the Code, the payment of such benefits shallbe delayed to the minimum extent necessary so that such benefits are not subject to theprovisions of Section 409A(a)(1) of the Code. The Employer may attach such conditionsto or adjust the amounts paid hereunder to preserve, as closely as possible, the economicconsequences that would otherwise have applied to the payment; provided however, thatno such condition or adjustment shall result in the payments being subject to Section409A(a)(1) of the Code. The Employer further reserves the right to make suchamendments to this Agreement as are necessary to conform the Agreement to therequirements of Section 409A, and the Employee agrees to execute any such amendments. IN WITNESS WHEREOF, Employer has caused this Agreement to be executed on itsbehalf by its authorized officers and Employee has executed this Agreement as of the day and yearfirst above written. STANDEX INTERNATIONAL CORPORATION /s/ James Zupancic By: _____________________________________ ______________________________James Zupancic President/CEO 514.15.16. /s/ David DunbarDavid DunbarIts:Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 21 STANDEX INTERNATIONAL CORPORATION AND SUBSIDIARIESSUBSIDIARIES OF REGISTRANT Information is set forth below concerning all operating subsidiaries of the Company as ofJune 30, 2018 (except subsidiaries which, considered in the aggregate do not constitute asignificant subsidiary).Jurisdiction of Incorporation Texas Ohio Brazil South Carolina Singapore Wisconsin Wisconsin United Kingdom Mexico Mexico Delaware Japan United Kingdom Virginia The Netherlands United Kingdom Germany United Kingdom Italy Ireland Canada Michigan Delaware Name of SubsidiaryAssociated American Industries, LLCCustom Hoists, Inc.Dornbusch & Cia Industria E. Comercio Ltda.Horizon Scientific, Inc.Mold-Tech Singapore Pte. Ltd.Nor-Lake, IncorporatedNorthlake Engineering, Inc.Precision Engineering International LimitedS. I. de Mexico S.A. de C.V.Standex de Mexico S.A. de C.V.Standex Electronics, Inc.Standex Electronics Japan CorporationStandex Electronics (U.K.) LimitedStandex Engraving L.L.C.Standex Europe B.V.Standex Holdings LimitedStandex International GmbHStandex International LimitedStandex International S.r.l.Standex (Ireland) LimitedSXI LimitedTenibac-Graphion, Inc.Ultrafryer Systems, LLCSource: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 23 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We have issued our reports dated August 28, 2018, with respect to the consolidated financialstatements, and internal control over financial reporting included in the Annual Report of StandexInternational Corporation on Form 10-K for the year ended June 30, 2018. We consent to theincorporation by reference of said reports in the Registration Statements of Standex InternationalCorporation on Form S-3/A (File No. 333-207143) and on Forms S-8 (File No. 333-147190 andFile No. 333-179513)./s/ GRANT THORNTON LLPBoston, MassachusettsAugust 28, 2018 Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. POWER OF ATTORNEY The undersigned, being a director of Standex International Corporation(“Standex”), hereby constitutes David A. Dunbar and Alan J. Glass, and each ofthem singly, my true and lawful attorney with full power to them, and each ofthem singly, to sign for me and in my name in my capacity as a director ofStandex, the Annual Report of Standex on Form 10-K for the fiscal year endedJune 30, 2018, and any and all amendments thereto and generally to do suchthings in my name and behalf to enable Standex to comply with the requirementsof the Securities and Exchange Commission relating to Form 10-K. Witness my signature as of the 17th day of August, 2018. /s/ Charles H. Cannon, Jr. _______________________________ Charles H. Cannon, Jr. Exhibit 24Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. POWER OF ATTORNEY The undersigned, being a director of Standex International Corporation(“Standex”), hereby constitutes David A. Dunbar and Alan J. Glass, and each ofthem singly, my true and lawful attorney with full power to them, and each ofthem singly, to sign for me and in my name in my capacity as a director ofStandex, the Annual Report of Standex on Form 10-K for the fiscal year endedJune 30, 2018, and any and all amendments thereto and generally to do suchthings in my name and behalf to enable Standex to comply with the requirementsof the Securities and Exchange Commission relating to Form 10-K. Witness my signature as of the 17th day of August, 2018. /s/ Thomas E. Chorman _______________________________ Thomas E. Chorman EXHIBIT 24Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. POWER OF ATTORNEY The undersigned, being a director of Standex International Corporation(“Standex”), hereby constitutes David A. Dunbar and Alan J. Glass, and each ofthem singly, my true and lawful attorney with full power to them, and each ofthem singly, to sign for me and in my name in my capacity as a director ofStandex, the Annual Report of Standex on Form 10-K for the fiscal year endedJune 30, 2018, and any and all amendments thereto and generally to do suchthings in my name and behalf to enable Standex to comply with the requirementsof the Securities and Exchange Commission relating to Form 10-K. Witness my signature as of the 17th day of August, 2018. /s/ Jeffrey S. Edwards _______________________________ Jeffrey S. Edwards EXHIBIT 24Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. POWER OF ATTORNEY The undersigned, being a director of Standex International Corporation(“Standex”), hereby constitutes David A. Dunbar and Alan J. Glass, and each ofthem singly, my true and lawful attorney with full power to them, and each ofthem singly, to sign for me and in my name in my capacity as a director ofStandex, the Annual Report of Standex on Form 10-K for the fiscal year endedJune 30, 2018, and any and all amendments thereto and generally to do suchthings in my name and behalf to enable Standex to comply with the requirementsof the Securities and Exchange Commission relating to Form 10-K. Witness my signature as of the 17th day of August, 2018. /s/ Gerald H. Fickenscher _______________________________ Gerald H. Fickenscher EXHIBIT 24Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.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 ofthem singly, my true and lawful attorney with full power to them, and each ofthem singly, to sign for me and in my name in my capacity as a director ofStandex, the Annual Report of Standex on Form 10-K for the fiscal year endedJune 30, 2018, and any and all amendments thereto and generally to do suchthings in my name and behalf to enable Standex to comply with the requirementsof the Securities and Exchange Commission relating to Form 10-K. Witness my signature as of the 17th day of August, 2018. /s/ Thomas J. Hansen _______________________________ Thomas J. Hansen Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. POWER OF ATTORNEY The undersigned, being a director of Standex International Corporation(“Standex”), hereby constitutes David A. Dunbar and Alan J. Glass, and each ofthem singly, my true and lawful attorney with full power to them, and each ofthem singly, to sign for me and in my name in my capacity as a director ofStandex, the Annual Report of Standex on Form 10-K for the fiscal year endedJune 30, 2018, and any and all amendments thereto and generally to do suchthings in my name and behalf to enable Standex to comply with the requirementsof the Securities and Exchange Commission relating to Form 10-K. Witness my signature as of the 17th day of August, 2018 ./s/ Michael A. Hickey _______________________________ Michael A. Hickey EXHIBIT 24Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. POWER OF ATTORNEY The undersigned, being a director of Standex International Corporation(“Standex”), hereby constitutes David A. Dunbar and Alan J. Glass, and each ofthem singly, my true and lawful attorney with full power to them, and each ofthem singly, to sign for me and in my name in my capacity as a director ofStandex, the Annual Report of Standex on Form 10-K for the fiscal year endedJune 30, 2018, and any and all amendments thereto and generally to do suchthings in my name and behalf to enable Standex to comply with the requirementsof the Securities and Exchange Commission relating to Form 10-K. Witness my signature as of the 17th day of August, 2018. /s/ Daniel B. Hogan _______________________________ Daniel B. Hogan EXHIBIT 24Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 31.1 RULE 13a-14(a) CERTIFICATION I, David Dunbar, certify that: I have reviewed this Quarterly Report on Form 10-Q of Standex International Corporation for the quarterending June 30, 2018; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit tostate a material fact necessary to make the statements made, in light of the circumstances under which suchstatements 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 theregistrant 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 disclosurecontrols and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controlover financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant andhave: Designed such disclosure controls and procedures, or caused such disclosure controls and proceduresto 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; Designed such internal control over financial reporting, or caused such internal control overfinancial reporting to be designed under our supervision, to provide reasonable assurance regardingthe reliability of financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles; Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented inthis report our conclusions about the effectiveness of the disclosure controls and procedures, as ofthe end of the period covered by this report based on such evaluation; and Disclosed in this report any change in the registrant’s internal control over financial reporting thatoccurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in thecase of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and 1.2.3.4.(a)(b)(c)(d)Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation ofinternal control over financial reporting, to the registrant’s auditors and the audit committee of theregistrant’s board of directors (or persons performing the equivalent functions): All significant deficiencies and material weaknesses in the design or operation of internal controlover financial reporting which are reasonably likely to adversely affect the registrant’s ability torecord, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have asignificant role in the registrant’s internal control over financial reporting. Date: August 28, 2018 /s/ David Dunbar______________________________David DunbarPresident/Chief Executive Officer5.(a)(b)Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 31.2 RULE 13a-14(a) CERTIFICATION I, Thomas D. DeByle, certify that: I have reviewed this Quarterly Report on Form 10-Q of Standex International Corporation for the quarterending June 30, 2018; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit tostate a material fact necessary to make the statements made, in light of the circumstances under which suchstatements 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 theregistrant 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 disclosurecontrols and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controlover financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant andhave: Designed such disclosure controls and procedures, or caused such disclosure controls and proceduresto 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; Designed such internal control over financial reporting, or caused such internal control overfinancial reporting to be designed under our supervision, to provide reasonable assurance regardingthe reliability of financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles; Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented inthis report our conclusions about the effectiveness of the disclosure controls and procedures, as ofthe end of the period covered by this report based on such evaluation; and Disclosed in this report any change in the registrant’s internal control over financial reporting thatoccurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in thecase of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and 1.2.3.4.(a)(b)(c)(d)Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation ofinternal control over financial reporting, to the registrant’s auditors and the audit committee of theregistrant’s board of directors (or persons performing the equivalent functions): All significant deficiencies and material weaknesses in the design or operation of internal controlover financial reporting which are reasonably likely to adversely affect the registrant’s ability torecord, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have asignificant role in the registrant’s internal control over financial reporting. Date: August 28, 2018 /s/ Thomas D. DeByle______________________________Thomas D. DeByleVice President/Chief Financial Officer5.(a)(b)Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 32 CertificationPursuant to Section 906 of the Sarbanes-Oxley Act of 2002(18 U.S.C. Sec. 1350)With Respect to the Standex International CorporationQuarterly Report on Form 10-QFor the Fiscal Quarter Ended June 30, 2018 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350,chapter 63 of title 18, United States Code), the undersigned Chief Executive Officer and Chief Financial Officerrespectively of Standex International Corporation, a Delaware corporation (the “Company”) do hereby certify that: The Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2018 (the“Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) as applicable, ofthe Securities Exchange Act of 1934, as amended; and Information contained in the Form 10-Q fairly presents, in all material respects, the financialcondition and results of operations of the Company. /s/ David Dunbar David Dunbar Chief Executive Officer /s/ Thomas D. DeByle Thomas D. DeByle Chief Financial Officer 1.2.Dated:August 28, 2018Dated:August 28, 2018Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: STANDEX INTERNATIONAL CORP/DE/, 10-K, August 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.

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