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
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended June 30, 2020
Commission File Number 001-07233
STANDEX INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its Charter)
DELAWARE
(State of incorporation)
31-0596149
(I.R.S. Employer Identification No.)
23 KEEWAYDIN DRIVE, Salem, New Hampshire
(Address of principal executive offices)
03079
(Zip Code)
(603) 893-9701
(Registrant’s telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE
SECURITIES EXCHANGE ACT OF 1934:
Title of Each Class
Common Stock, Par Value $1.50 Per Share
Trading Symbol(s) Name of Each Exchange on Which Registered
SXI
New York Stock Exchange
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. YES ☒ 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 ☒
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit such files). YES ☒ NO ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein
and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,
smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐
Non-accelerated filer ☐
Smaller Reporting
Company ☐
Emerging growth
company ☐
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the
Exchange Act. __
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES ☐ NO ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant at the
close of business on December 31, 2019 was approximately $983,021,425. Registrant’s closing price as reported on the
New York Stock Exchange for December 31, 2019 was $79.35 per share.
The number of shares of Registrant's Common Stock outstanding on August 18, 2020 was 12,380,901.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Registrant’s 2020 Annual Meeting of Stockholders (the “Proxy Statement”) are
incorporated by reference into Part III of this report.
Forward Looking Statement
Statements contained in this Annual Report on Form 10-K that are not based on historical facts are “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements
may be identified by the use of forward-looking terminology such as “should,” “could,” “may,” “will,” “expect,”
“believe,” “estimate,” “anticipate,” “intend,” “continue,” or similar terms or variations of those terms or the negative
of those terms. There are many factors that affect the Company’s business and the results of its operations and that
may cause the actual results of operations in future periods to differ materially from those currently expected or
anticipated. These factors include, but are not limited to: materially adverse or unanticipated legal judgments, fines,
penalties or settlements; conditions in the financial and banking markets, including fluctuations in exchange rates and
the inability to repatriate foreign cash; domestic and international economic conditions, including the impact, length
and degree of economic downturns on the customers and markets we serve and more specifically conditions in the food
service equipment, automotive, construction, aerospace, energy, oil and gas, transportation, consumer appliance and
general industrial markets; lower-cost competition; the relative mix of products which impact margins and operating
efficiencies in certain of our businesses; the impact of higher raw material and component costs, particularly steel,
petroleum based products and refrigeration components; an inability to realize the expected cost savings from
restructuring activities including effective completion of plant consolidations, cost reduction efforts including
procurement savings and productivity enhancements, capital management improvements, strategic capital
expenditures, and the implementation of lean enterprise manufacturing techniques; the inability to achieve the savings
expected from global sourcing of raw materials and diversification efforts in emerging markets; the impact on cost
structure and on economic conditions as a result of actual and threatened increases in trade tariffs; the inability to
attain expected benefits from strategic alliances or acquisitions and the inability to effectively consummate and integrate
such acquisitions and achieve synergies envisioned by the Company; market acceptance of our products; our ability to
design, introduce and sell new products and related product components; the ability to redesign certain of our products
to continue meeting evolving regulatory requirements; the impact of delays initiated by our customers; and our ability
to increase manufacturing production to meet demand; and potential changes to future pension funding requirements.
In addition, any forward-looking statements represent management's estimates only as of the day made and should not
be relied upon as representing management's estimates as of any subsequent date. While the Company may elect to
update forward-looking statements at some point in the future, the Company and management specifically disclaim any
obligation to do so, even if management's estimates change.
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PART I
Item 1. Business
Standex International Corporation was incorporated in 1975 and is the successor of a corporation organized in 1955.
As used in this report, the terms “we,” “us,” “our,” the “Company” and “Standex” mean Standex International
Corporation and its subsidiaries. We have paid dividends each quarter since Standex became a public corporation in
November 1964. Overall management, strategic development and financial control are led by the executive staff at our
corporate headquarters in Salem, New Hampshire.
Unless otherwise noted, references to years are to fiscal years. Currently our fiscal year end is June 30. For further
clarity, our fiscal year 2020 includes the twelve-month period from July 1, 2019 to June 30, 2020.
We are a diversified industrial manufacturer with leading positions in a variety of products and services that are used in
diverse commercial and industrial markets. As of the end of the fiscal third quarter 2020, we had nine operating
segments aggregated into five reportable segments. During the third quarter of 2020, we announced the divestiture of
our Refrigerated Solutions Group (RSG) consistent with our strategy to focus our financial assets and managerial
resources on our higher growth and operating margin businesses. The divestiture of RSG was completed and
consideration was exchanged in April of fiscal year 2020. Subsequent to the disposition of the RSG, we reviewed the
quantitative and qualitative characteristics of our remaining businesses, including the manner in which our chief
operating decision maker makes decisions regarding these businesses, and determined that we have seven operating
segments that aggregate to five reportable segments.
Our new reportable segment structure is as follows:
● Electronics operating segment
● Engraving operating segment
● Scientific operating segment
● Engineering Technologies Group operating segment
● Specialty Solutions – an aggregation of our Federal, Procon, and Hydraulics operating segments.
Our segments differentiate themselves by collaborating with our customers in order to develop and deliver custom
solutions or engineered components that solve problems for our customers or otherwise meet their needs (a business
model we refer to as “Customer Intimacy”).
Our long-term strategy is to enhance shareholder value by building larger, more profitable “Customer Intimacy” focused
industrial platforms through a value creation system that assists management in meeting specific corporate and business
unit financial and strategic performance goals in order to create, improve, and enhance shareholder value. The Standex
Value Creation System is a methodology which provides standard work and consistent tools used throughout the
company in order to achieve our organization’s goals. The Standex Value Creation System employs four components:
Balanced Performance Plan, Growth Disciplines, Operational Excellence, and Talent Management. The Balanced
Performance Plan process aligns annual goals throughout the company and provides a standard reporting, management
and review process. It is focused on setting, tracking and reviewing annual and quarterly targets that support our short
and long-term goals. The Growth Disciplines use a standard work playbook of tools and processes including market
maps, market tests, and growth laneways to identify, explore and execute on opportunities that expand the business
organically and through acquisitions. Operational Excellence also employs a standard work playbook of tool and
processes, based on LEAN, to improve operating execution (effectiveness), eliminate waste (efficiency) and thereby
improve profitability, cash flow and customer satisfaction. Finally, Talent Management is an organizational
development process that provides training, development, and succession planning for employees throughout our
worldwide organization. The Standex Value Creation System ties all of these disciplines together under a common
umbrella by providing standard playbook of tools and processes to deliver our business objectives.
●
It is our objective to grow larger and more profitable business units through both organic (Growth
Disciplines) and inorganic (acquisition) activities. We seek to identify and implement organic growth
initiatives such as new product and service development, new and current customer acquisition /
expansion, geographic market enlargement, sales channel partner extension, and new business model
investigation. Also, we have a long-term objective to create sizable business platforms by adding
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strategically aligned acquisitions to strengthen the individual businesses, create both sales and cost
synergies with our core business platforms, and accelerate their growth and margin improvement. We
also look to drive continuous improvement within our business platforms to enhance the execution of their
current core business to accelerate growth and improve margins. In these pursuits, we have a particular
focus on identifying and investing in opportunities that complement our current products and services and
will increase the global presence and capabilities of our businesses. From time to time, we have divested,
and likely will continue to divest, businesses that we feel are not strategic or do not meet our growth and
return expectations.
● Our objective to grow larger and more profitable business platforms also relies upon Operational
Excellence, which drives continuous improvement and thereby margin expansion of our businesses. We
recognize that our businesses are competing in a global economy that requires us to improve our
competitive position, and we continue to deploy these capabilities to drive improvements in the cost
structure of our businesses. These efforts include but are not limited to the application of LEAN, the use
of low cost manufacturing facilities in countries such as Mexico and India, the consolidation of
manufacturing facilities to achieve economies of scale and leveraging of fixed infrastructure costs, the use
of alternate sourcing to achieve procurement cost reductions, and the investment of capital 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. Our priority for the use of capital is to use cash flow generated from operations for maintenance
and safety capital assets; investment in capital assets to fund the strategic growth programs described
above, including acquisitions, if our return and investment criteria are met; repayment of outstanding debt
if our liquidity levels meet our criteria; and to return cash to our shareholders through the payment of
dividends and stock buybacks.
Please visit our website at www.standex.com to learn more about us or to review our most recent SEC filings. The
information on our website is for informational purposes only and is not incorporated into this Annual Report on
Form 10- K.
Description of Segments
Electronics
Our Electronics group is a global component and value-added solutions provider of both sensing and switching
technologies along with magnetic power conversion components and assemblies. We are focused on designing,
engineering, and manufacturing innovative solutions, components and assemblies to solve our customers’ application
needs with a commitment to a customer first attitude through our Partner/Solve/Deliver® approach. Our approach
allows us to expand the business through pursuing organic growth with our current customers, developing new products
and technologies for both new and existing customers, driving geographic expansion, and pursuing inorganic growth
through strategic acquisitions.
Components are manufactured in plants located in the U.S., Mexico, the U.K., Germany, Japan, China and India.
Markets and Applications
Our diverse and highly engineered products and solutions and vertically integrated manufacturing capabilities are vital
to an array of markets and provide safe and efficient power transformation, current monitoring, isolation, as well as
sensors and relays to monitor systems for function and safety. The end-user of our engineered solution is typically an
Original Equipment Manufacturer (“OEM”) industrial equipment manufacturer. End-user markets include, but are not
limited to, smart-grid, alternative energy, appliances, HVAC, security, military, medical, aerospace, test and
measurement, power distribution, transportation and general industrial applications.
Brands
Business unit names are Standex Electronics, Standex-Meder Electronics, Northlake Engineering, Agile Magnetics,
Standex Electronics Japan, and the MEDER, KENT, and KOFU reed switch brands.
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Products
Our sensing products employ technologies such as reed switch, Hall effect, inductive, conductive and other
technologies. Sensing based solutions include reed relays, fluid level, proximity, motion, flow, HVAC condensate as
well as custom electronic sensors containing our core technologies. The magnetics or power conversion products
include custom wound transformers and inductors for low and high frequency applications, current sense technology,
advanced planar transformer technology, value added assemblies, and mechanical packaging.
Customers
The business sells to a wide variety of industrial, medical, power, automotive and consumer goods customers globally
through a direct sales force, regional sales managers, and field applications engineers, commissioned agents,
representative groups, and distribution channels.
Engraving
Engraving creates custom textures and surface finishes on tooling to enhance the beauty and function of a wide range
of consumer goods and automotive products. We focus on continuing to meet the needs of a changing marketplace by
offering experienced craftsmanship while investing in new technologies such as laser engraving and soft surface skin
texturized tooling. Our growth strategy is to continue to develop new technologies to enhance surface textures, both
organically and with bolt-on acquisitions. We are one company operating in 23 countries using a consistent approach
to guarantee harmony on global programs in service of our customers.
Markets and Applications
Standex Engraving Mold Tech has become the global leader in its industry by offering a full range of services to OEM’s,
Tier 1 suppliers, mold makers and product designers. From start to finish, these services include the design of bespoke
textures, the verification of the texture on a prototype, engraving a mold, enhancing and polishing it, and then offering
on-site try-out support with ongoing tool maintenance and texture repair capabilities. In addition to these services, we
also produce soft trim tooling such as in mold graining (IMG) and nickel shells.
Engraving companies and brands also include:
●
●
Piazza Rosa and World Client Services which both offer laser engraving and tool finishing in Europe and
Mexico.
Tenibac-Graphion provides additional texturizing and prototyping capabilities in North America and
China.
● GS Engineering employs advanced processes and technology to rapidly produce molds for the creation of
●
soft-touch surfaces.
Innovent, located in North America and Europe, is a specialized supplier of tools and machines used to
produce diapers and products that contain absorbent materials between layers of non-woven fabric.
Products and Services
Texturing is achieved with either a laser or a chemical etching technique.
●
●
Laser Engraving offers superior features previously unavailable on products, such as multiple gloss levels,
the elimination of paint and optimized scratch performance, and sharp definition for precise geometric
patterns.
Chemical Engraving produces carefully designed textures and finishes without seams or distortion. Our
Digital Transfer Technology offers an exclusive service which guarantees consistency, pattern integrity
and texture harmony around the world.
Architexture Design Studio uses proprietary technology called Model-Tech® which utilizes proven expertise to create
and test custom textures. During the Model-Tech process, an original texture is first designed to offer beauty and
function which ultimately is used to create a large-format skin that can be wrapped on a model for testing.
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Tooling Performance services include the enhancement, finishing and repair of a tool to improve its use during
manufacturing.
●
●
Tool Enhancement services increase the wear resistance of the mold. Processes include advanced tool
finishing services, anti-scratch, laser hardening in localized areas, Tribocoat® and Release Coat.
Tool Finishing and Repair allows customers to achieve outstanding quality while saving valuable time.
These services include laser micro-welding, polishing and lapping, laser cladding to accommodate
engineering changes, mold assembly, tool management, maintenance, texture repair and on-site support.
Soft Trim Tooling and nickel shell molds are used to produce soft surfaces that emulate the feel of natural materials.
Customers
This business has become the global leader providing these products and services by offering a full range of services to
OEM’s, product designers, Tier 1 suppliers and toolmakers all around the world.
Scientific
The Scientific business is a provider of specialty temperature-controlled equipment for the medical, scientific,
pharmaceutical, biotech and industrial markets. The group designs and produces its products in Summerville, SC.
Our product portfolio is used to control the temperatures of critical healthcare products, medications, vaccines and
laboratory samples. We focus on solving customer problems for these critical applications and deliver innovative
products and solutions meeting the unique needs of our customers.
Markets and Applications
The scientific and healthcare equipment that we design and manufacture is used in hospitals, pharmacies, clinical
laboratories, reference laboratories, physicians’ offices, life science laboratories, government facilities, and industrial
testing laboratories. Our product offerings include:
●
●
●
Laboratory and medical grade refrigerators, freezers and accessories,
Cryogenic storage tanks and accessories,
Environmental stability chambers and incubators.
Brands
Our products are sold under a number of different brands including American BioTech Supply (ABS), Lab Research
Products (LRP), Cryosafe, and CryoGuard.
Customers
Scientific products are sold to medical and laboratory distributors, healthcare facilities, research universities,
pharmaceutical companies, and pharmacies.
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Engineering Technologies
The Engineering Technologies Group is a provider of innovative, turnkey metal-formed solutions for OEM and Tier 1
manufacturers for their advanced engineering designs.
Our solutions seek to reduce input weight, material cost, part count, and complexity for unique customer design
challenges involving all formable materials with particular focus on large dimensions, large thickness or thin-wall
construction, complex shapes and contours, and/or single-piece construction requirements. Engineering Technologies
devises and manufactures these cost-effective components and assemblies by combining a portfolio of best-in-class
forming technologies and technical experience, vertically integrated manufacturing processes, and group wide technical
and design expertise.
We intend to grow sales and product offerings by investing in advancements in our current and new technologies and
identifying new cutting-edge solutions for these capabilities in existing and adjacent markets via customer and research
collaboration.
Our segment is comprised of two businesses, Spincraft, with locations in Billerica, MA, New Berlin, WI, and Newcastle
upon Tyne in the U.K, and Enginetics, located in Huber Heights, OH.
Brands
This business unit’s brand names are Spincraft and Enginetics.
Markets and Applications
Spincraft products serve applications within the space, aviation, defense, energy, medical, and general industrial
markets.
●
●
●
The space market we serve is comprised of components for space launch systems including fuel tanks,
tank domes, combustion liners, nozzles, and crew vehicle structures.
The aviation market offerings include a large portfolio of components and assemblies including inlet ducts
and lipskins.
The defense market we serve covers a wide spectrum of metal applications including missile nose cones
and fabrications, large dimension exhaust systems, navy-nuclear propulsion, and engine components for
military aircraft
● Applications within the energy market include components and assemblies for new and MRO gas turbines,
as well as solutions for oil & gas exploration operations
Enginetics aviation market offerings include a large portfolio of components within engines such as seals, heat shield,
and combustor elements, as well as components of aero structures.
Customers
Engineering Technologies components are sold directly to large space, aviation, defense, energy and medical
companies, or suppliers to those companies.
Specialty Solutions
Specialty Solutions is a collection of our three remaining businesses: Federal Industries, Procon, and Custom Hoists.
These businesses differentiate themselves in their respective markets by collaborating with our customers in order to
develop and deliver custom solutions.
Federal Industries provides merchandising solutions to retail and food service customers whose revenue stream is
enhanced through food presentation. Federal focuses on the challenges of enabling retail and food service
establishments to provide food and beverages that are fresh and appealing while at the same time providing for food
safety, and energy efficiency. Our key differentiator is the ability to customize products to match customers’ décor
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within industry lead-time. This differentiator is used to target the convenience store, school cafeterias and quick-service
restaurant segments.
Procon is a global supplier of pump solutions to the beverage, medical, welding and ink markets. Through collaboration
between our customers and our product development teams, we provide custom fluid pumping solutions to OEM
manufacturers, and aftermarket distributors. We manufacture globally, utilizing the latest techniques and processes to
ensure the highest quality and acute attention to detail in order for our products to meet the demands of the applications
and environmental conditions required by our customers.
Custom Hoists is a supplier of engineered hydraulic cylinders that meet customer specific requirements for demanding
applications. Our engineering expertise coupled with broad manufacturing capabilities and responsiveness to customer
needs drives our top line growth opportunities. We leverage our full line of products for the construction markets in
dump truck and trailer applications and deep expertise in the refuse market to expand into new adjacent markets,
targeting the most challenging custom applications. Flexible design capability, a global supply chain and speed to
market enable us to be successful in growing our business. Our team is dedicated to superior customer service through
our technical engineering support and on-time delivery.
Specialty Solutions Locations
Specialty Solutions products are designed and/or manufactured in Hayesville, OH; Smyrna TN; Nogales, MX;
Belleville, WI; Tianjin, China; and Mountmellick, Ireland.
Markets and Applications
Federal custom designs and manufactures refrigerated, heated and dry merchandising display cases for bakery, deli,
confectionary and packaged food products utilized in restaurants, convenience stores, quick-service restaurants,
supermarkets, drug stores and institutions such as hotels, hospitals, and school cafeterias.
Procon custom fluid pump solutions are sold into the global carbonation, coffee, and beer chilling beverage markets as
well as reverse osmosis water treatment, medical, welding, and commercial ink markets.
Industries that utilize Custom Hoist’s single and double acting telescopic and piston rod hydraulic cylinders include
construction equipment, refuse, airline support, mining, oil and gas, and other material handling applications. We also
sell specialty pneumatic cylinders and promote complete wet line kits, which are complete hydraulic systems that
include a pump, valves, hoses and fittings. 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, vacuum trucks, compactors, balers, airport catering vehicles, container handling equipment for
airlines, lift trucks, yard tractors, and underground mining vehicles.
Customers
Specialty Solutions products are sold to OEMs, distributors, service organizations, aftermarket repair outlets, end-users,
dealers, buying groups, consultants, government agencies and manufacturers.
Working Capital
Our primary source of working capital is the cash generated from continuing operations. No segments require any
special working capital needs outside of the normal course of business.
Competition
Standex manufactures and markets products many of which have achieved a unique or leadership position in their
market, however, we encounter competition in varying degrees in all product groups and for each product line.
Competitors include domestic and foreign producers of the same and similar products. The principal methods of
competition are product performance and technology, price, delivery schedule, quality of services, and other terms and
conditions.
International Operations
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We have international operations in all of our business segments. International operations are conducted at 66 locations,
in Europe, Canada, China, Japan, India, Southeast Asia, Korea, Mexico, Brazil, and South Africa. See the Notes to
Consolidated Financial Statements for international operations financial data. Our net sales from continuing
international operations decreased from 42% in 2019 to 40% in 2020. International operations are subject to certain
inherent risks in connection with the conduct of business in foreign countries including, exchange controls, price
controls, limitations on participation in local enterprises, nationalizations, expropriation and other governmental action,
restrictions of repatriation of earnings, and changes in currency exchange rates.
Research and Development
We develop and design new products to meet customer needs in order to offer enhanced products or to provide
customized solutions for customers. Developing new and improved products, broadening the application of established
products, and continuing efforts to improve our methods, processes, and equipment continues to drive our success.
However, due to the nature of our manufacturing operations and the types of products manufactured, expenditures for
research and development are not significant to any individual segment or in the aggregate. Research and development
costs are quantified in the Notes to Consolidated Financial Statements.
Environmental Matters
Based on our knowledge and current known facts, we believe that we are presently in substantial compliance with all
existing applicable environmental laws and regulations and do not anticipate (i) any instances of non-compliance that
will have a material effect on our future capital expenditures, earnings or competitive position or (ii) any material capital
expenditures for environmental control facilities.
Financial Information about Geographic Areas
Information regarding revenues from external customers attributed to the United States, all foreign countries and any
individual foreign country, if material, is contained in the Notes to Consolidated Financial Statements, “Industry
Segment Information.”
Number of Employees
As of June 30, 2020, we employed approximately 3,800 employees of which approximately 1,100 were in the United
States. About 250 of our U.S. employees were represented by unions. Approximately 44% of our production workforce
is situated in low-cost manufacturing regions such as Mexico and Asia.
Executive Officers of Standex
The executive officers of the Company as of June 30, 2020 were as follows:
Name
Age Principal Occupation During the Past Five Years
David Dunbar
58 President and Chief Executive Officer of the Company since January 2014.
Ademir Sarcevic
45 Vice President and Chief Financial Officer of the Company since September 2019. Various
positions over the years at Pentair plc from 2012 to September 2019 with increasing
responsibility ending as Senior Vice President and Chief Accounting Officer.
Alan J. Glass
56 Vice President, Chief Legal Officer and Secretary of the Company since April 2016. Vice
President, General Counsel and Secretary of CIRCOR International, Inc. from 2000 through
2016.
Sean Valashinas
49 Vice President, Chief Accounting Officer and Assistant Treasurer of the Company since
October 2007.
Paul Burns
47 Vice President of Strategy and Business Development since July 2015.
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Annemarie Bell
56 Vice President of Human Resources since June 2019, Interim Vice President of Human
Resources from October 2018 through June 2019; Vice President of Human Resources for
four of Standex business units from October 2015 through October 2018, Director of
Human Resources and Human Resources Business Partner at PerkinElmer from 2007
through 2015.
James Hooven
49 Vice President of Operations and Supply Chain since February 2020, Senior Vice President
for Hillenbrand Inc.
The executive officers are elected each year at the first meeting of the Board of Directors subsequent to the annual
meeting of stockholders, to serve for one-year terms of office. There are no family relationships among any of the
directors or executive officers of the Company.
Long-Lived Assets
Long-lived assets are described and discussed in the Notes to Consolidated Financial Statements under the caption
“Long-Lived Assets.”
Available Information
Standex’s corporate headquarters are at 23 Keewaydin Drive, Salem, New Hampshire 03079, and our telephone number
at that location is (603) 893-9701.
The U.S. Securities and Exchange Commission (the “SEC”) maintains an internet website at www.sec.gov that contains
our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy statements,
and all amendments thereto. All reports that we file with the SEC may be read and copied at the SEC’s Public Reference
Room at 100 F Street, N.E., Washington, DC 20549. Information about the operation of the Public Reference Room
can be obtained by calling the SEC at 1-800-SEC-0330. Standex’s internet website address is www.standex.com. Our
annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy statements, and
all amendments thereto, are available free of charge on our website as soon as reasonably practicable after such reports
are electronically filed with or furnished to the SEC. In addition, our code of business conduct, our code of ethics for
senior financial management, our corporate governance guidelines, and the charters of each of the committees of our
Board of Directors (which are not deemed filed by this reference), are available on our website and are available in print
to any Standex shareholder, without charge, upon request in writing to “Chief Legal Officer, Standex International
Corporation, 23 Keewaydin Drive, Salem, New Hampshire, 03079.”
The certifications of Standex’s Chief Executive Officer and Chief Financial Officer, as required by the rules adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, are filed as exhibits to this Form 10-K.
Item 1A. Risk Factors
An investment in the Company involves various risks, including those mentioned below and those that are discussed
from time to time in our other periodic filings with the Securities and Exchange Commission. Investors should carefully
consider these risks, along with the other information filed in this report, before making an investment decision regarding
the Company. Any of these risks could have a material adverse effect on our financial condition, results of operations
and/or value of an investment in the Company.
The ongoing COVID-19 pandemic has, and could continue to adversely affect our revenues, operating results, cash
flow and financial condition.
Our business and operations, and the operations of our suppliers, business partners and customers, have been, and are
expected to continue to be adversely affected by the ongoing Coronavirus (or COVID-19) pandemic which is impacting
worldwide economic activity including in many countries or localities in which we operate, sell, or purchases good and
services. There can be no assurance that COVID-19 will not impact our business generally as a result of the virus’
potential impact on delays in supply chain, production and/or purchases from our customers and timely payment from
any customers who may be experiencing liquidity issues due to the pandemic. Due to the spread of COVID-19, we
have modified our business practices, including employee travel restrictions, employee work locations, and cancellation
of physical participation in non-critical meetings, events and conferences pursuant to applicable government guidelines.
There is no certainty that such measures will be sufficient to mitigate the risks posed by COVID-19, which could
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adversely impact our ability to perform critical functions, such as the research and development of new products, the
manufacture of our products, and the distribution and sale of our products. Moreover, while each of our operations has
prepared business continuity plans to address COVID-19 concerns, in an effort to ensure that we are protecting our
employees, continuing to operate our business and service our customers’ needs, there is no guarantee that such plans
will anticipate or fully mitigate the various impacts the pandemic may have, much of which is still uncertain. While it
is not possible at this time to estimate the scope and severity of the impact that COVID-19 will have on our operations,
the continued spread of COVID-19, the measures taken by the governments of countries affected, actions taken to
protect employees, actions taken to shut down or temporarily discontinue operations in certain locations, and the impact
of the pandemic on various business activities in affected countries and the economy generally, could adversely affect
our financial condition, results of operations and cash flows. The ultimate extent to which COVID-19 impacts our
business will depend on the severity, location and duration of the spread of COVID-19, the actions undertaken by local
and world governments and health officials to contain the virus or treat its effects, and the success of ongoing efforts to
create and distribute a successful vaccine.
A deterioration in the domestic and international economic environment could adversely affect our operating
results, cash flow and financial condition.
Recessionary economic conditions, with or without a tightening of credit, could adversely impact major markets served
by our businesses, including cyclical markets such as automotive, aviation, energy and power, heavy construction
vehicle, general industrial, consumer appliances and food service. An economic recession could adversely affect our
business by:
•
•
•
•
•
•
•
•
•
reducing demand for our products and services, particularly in markets where demand for our products
and services is cyclical;
causing delays or cancellations of orders for our products or services;
reducing capital spending by our customers;
increasing price competition in our markets;
increasing difficulty in collecting accounts receivable;
increasing the risk of excess or obsolete inventories;
increasing the risk of impairment to long-lived assets due to reduced use of manufacturing facilities;
increasing the risk of supply interruptions that would be disruptive to our manufacturing processes; and
reducing the availability of credit and spending power for our customers.
We rely on our credit facility to provide us with sufficient capital to operate our businesses and to fund acquisitions.
We rely on our revolving credit facility, in part along with operating cash flow, to provide us with sufficient capital to
operate our businesses and to fund acquisitions. The availability of borrowings under our revolving credit facility is
dependent upon our compliance with the covenants set forth in the facility, including the maintenance of certain
financial ratios. Our ability to comply with these covenants is dependent upon our future performance, which is subject
to economic conditions in our markets along with factors that are beyond our control. Violation of those covenants
could result in our lenders restricting or terminating our borrowing ability under our credit facility, cause us to be liable
for covenant waiver fees or other obligations, or trigger an event of default under the terms of our credit facility, which
could result in acceleration of the debt under the facility and require prepayment of the debt before its due date. Even
if new financing is available, in the event of a default under our current credit facility, the interest rate charged on any
new borrowing could be substantially higher than under the current credit facility, thus adversely affecting our overall
financial condition. If our lenders reduce or terminate our access to amounts under our credit facility, we may not have
sufficient capital to fund our working capital needs and/or acquisitions or we may need to secure additional capital or
financing to fund our working capital requirements or to repay outstanding debt under our credit facility or to fund
acquisitions.
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;
11
•
•
pay cash dividends to shareholders unless we are compliant with the financial covenants set forth in the
credit facility; and
sell material assets.
Our global operations subject us to international business risks.
We operate in 66 locations outside of the United States in Europe, Canada, China, Japan, India, Singapore,
Korea, Mexico, Brazil, Turkey, Malaysia, and South Africa. If we are unable to successfully manage the risks inherent
to the operation and expansion of our global businesses, those risks could have a material adverse effect on our results
of operations, cash flow 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,
improving working capital management, developing new and enhanced products, consolidating factories where
appropriate, automating manufacturing processes, diversification efforts and completing acquisitions which deliver
synergies to stimulate sales and growth. If we are unable to successfully execute these programs, such failure could
adversely affect our operating profits and cash flows. In addition, actions we may take to consolidate manufacturing
operations to achieve cost savings or adjust to market developments may result in restructuring charges that adversely
affect our profits.
Violation of anti-bribery or similar laws by our employees, business partners or agents could result in fines, penalties,
damage to our reputation or other adverse consequences.
We cannot assure that our internal controls, code of conduct and training of our employees will provide complete
protection from reckless or criminal acts of our employees, business partners or agents that might violate United States
or international laws relating to anti-bribery or similar topics. A violation of these laws could subject us to civil or
criminal investigations that could result in substantial civil or criminal fines and penalties and which could damage our
reputation.
We face significant competition in our markets and, if we are not able to respond to competition in our markets,
our net sales, profits and cash flows could decline.
Our businesses operate in highly competitive markets. To compete effectively, we must retain long standing
relationships with significant customers, offer attractive pricing, maintain product quality, meet customer delivery
requirements, develop enhancements to products that offer performance features that are superior to our competitors
and which maintain our brand recognition, continue to automate our manufacturing capabilities, continue to grow our
business by establishing relationships with new customers, diversify into emerging markets and penetrate new markets.
In addition, many of our businesses experience sales churn as customers seek lower cost suppliers. We attempt to offset
this churn through our continual pursuit of new business opportunities. However, if we are unable to compete
effectively or succeed in our pursuit of new business opportunities, our net sales, profitability and cash flows could
decline. Pricing pressures resulting from competition may adversely affect our net sales and profitability.
If we are unable to successfully introduce new products and product enhancements, our future growth could be
impaired.
12
Our ability to develop new products and innovations to satisfy customer needs or demands in the markets we serve can
affect our competitive position and often requires significant investment of resources. Difficulties or delays in research,
development or production of new products and services or failure to gain market acceptance of new products and
technologies may significantly reduce future net sales and adversely affect our competitive position.
Increased prices or significant shortages of the commodities that we use in our businesses could result in lower net
sales, profits and cash flows.
We purchase large quantities of steel, aluminum, refrigeration components, freight services, and other metal
commodities for the manufacture of our products. We also purchase significant quantities of relatively rare elements
used in the manufacture of certain of our electronics products. Historically, prices for commodities and rare elements
have fluctuated, and we are unable to enter into long-term contracts or other arrangements to hedge the risk of price
increases in many of these commodities. Significant price increases for these commodities and rare elements could
adversely affect our operating profits if we cannot timely mitigate the price increases by successfully sourcing lower
cost commodities or rare elements or by passing the increased costs on to customers. Shortages or other disruptions in
the supply of these commodities or rare elements could delay sales or increase costs.
Current and threatened tariffs on components and finished goods from China and other countries could result in
lower net sales, 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
certain components and finished goods from our own facilities and third-party suppliers in China. Many of the
components and finished goods we import from China are subject to tariffs recently enacted by the United States
government as well as additional 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 price increases and, as a result, may adversely impact our net sales, profits and cash flows. The
maintenance of such tariffs over the long-term also could impair the value of our investments in our Chinese operations.
In addition, the imposition of tariffs may influence the sourcing habits of certain end users of our products and services
which, in turn, could have a direct impact on the requirements of our direct customers for our products and services.
Such an impact could adversely affect our net sales, profits and cash flows.
13
An inability to identify or complete future acquisitions could adversely affect our future growth.
As part of our growth strategy, we intend to pursue acquisitions that provide opportunities for profitable growth for our
businesses and enable us to leverage our competitive strengths. While we continue to evaluate potential acquisitions,
we may not be able to identify and successfully negotiate suitable acquisitions, obtain financing for future acquisitions
on satisfactory terms, obtain regulatory approval for certain acquisitions or otherwise complete acquisitions in the
future. An inability to identify or complete future acquisitions could limit our future growth.
We may experience difficulties in integrating acquisitions.
Integration of acquired companies involves 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
as a function of acquisitions.
Additionally, our level of indebtedness may increase in the future if we finance acquisitions with debt, which would
cause us to incur additional interest expense and could increase our vulnerability to general adverse economic and
industry conditions and limit our ability to service our debt or obtain additional financing. We cannot assure that future
acquisitions will not have a material adverse effect on our financial condition, results of operations and cash flows.
Impairment charges could reduce our profitability.
We test goodwill and our other intangible assets with indefinite useful lives for impairment on an annual basis or on an
interim basis if a potential impairment factor arises that indicates the fair value of the reporting unit may fall below its
carrying value. Various uncertainties, including continued adverse conditions in the capital markets or changes in
general economic conditions, could impact the future operating performance at one or more of our businesses which
could significantly affect our valuations and could result in additional future impairments. The recognition of an
impairment of a significant portion of goodwill would negatively affect our results of operations.
Materially adverse or unforeseen legal judgments, fines, penalties or settlements could have an adverse impact on
our profits and cash flows.
We are and may, from time to time, become a party to legal proceedings incidental to our businesses, including, but not
limited to, alleged claims relating to product liability, environmental compliance, patent infringement, commercial
disputes and employment and regulatory matters. In accordance with United States generally accepted accounting
principles, we establish reserves based on our assessment of contingent liabilities. Subsequent developments in legal
proceedings may affect our assessment and estimates of loss contingencies, recorded as reserves, which could require
us to record additional reserves or make material payments which could adversely affect our profits and cash flows.
Even the successful defense of legal proceedings may cause us to incur substantial legal costs and may divert
management's time and resources away from our businesses.
The costs of complying with existing or future environmental regulations, and of correcting any violations of these
regulations, could impact our profitability.
We are subject to a variety of environmental laws relating to the storage, discharge, handling, emission, generation, use
and disposal of chemicals, hazardous waste and other toxic and hazardous materials used to manufacture, or resulting
from the process of manufacturing, our products and providing our services. We cannot predict the nature, scope or
effect of regulatory requirements to which our operations might be subject or the manner in which existing or future
laws will be administered or interpreted. We are also exposed to potential legacy environmental risks relating to
businesses we no longer own or operate. Future regulations could be applied to materials, products or activities that
have not been subject to regulation previously. The costs of complying with new or more stringent regulations, or with
more vigorous enforcement of these or existing regulations, could be significant.
In addition, properly permitted waste disposal facilities used by us as a legal and legitimate repository for hazardous
waste may in the future become mismanaged or abandoned without our knowledge or involvement. In such event,
14
legacy landfill liability could attach to or be imposed upon us in proportion to the waste deposited at any disposal
facility.
Environmental laws require us to maintain and comply with a number of permits, authorizations and approvals and to
maintain and update training programs and safety data regarding materials used in our processes. Violations of these
requirements could result in financial penalties and other enforcement actions. We could be required to halt one or more
portions of our operations until a violation is cured. Although we attempt to operate in compliance with these
environmental laws, we may not succeed in this effort at all times. The costs of curing violations or resolving
enforcement actions that might be initiated by government authorities could be substantial.
The costs of complying with existing or future regulations applicable to our products, and of correcting any violations
of such 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 other matters, specify requirements regarding energy efficiency and product safety. Regulatory violations could
result in financial penalties and other enforcement actions. We could be required to halt production of one or more
products until a violation is cured. Although we attempt to produce our products in compliance with these requirements,
the costs of curing violations or resolving enforcement actions that might be initiated by administrative agencies could
be substantial.
Our results could be adversely affected by natural disasters, political crises, or other catastrophic events.
Natural disasters, such as hurricanes, tornadoes, floods, earthquakes, and other adverse weather and climate conditions;
political crises, such as terrorist attacks, war, labor unrest, and other political instability; or other catastrophic events,
such as disasters occurring at our suppliers' manufacturing facilities, whether occurring in the United States or
internationally, could disrupt our operations or the operations of one or more of our suppliers. Certain of our key
manufacturing facilities are located in geographic areas with a higher than nominal risk of earthquake and flood and
others are in areas of higher than nominal political risk (such as China). To the extent any of these events occur, our
operations and financial results could be adversely affected.
We depend on our key personnel and the loss of their services may adversely affect our business.
We believe that our success depends on our ability to hire new talent and the continued employment of our senior
management team and other key personnel. If one or more members of our senior management team or other key
personnel were unable or unwilling to continue in their present positions, our business could be seriously harmed. In
addition, if any of our key personnel joins a competitor or forms a competing company, some of our customers might
choose to use the services of that competitor or those of a new company instead of our own. Other companies seeking
to develop capabilities and products or services similar to ours may hire away some of our key personnel. If we are
unable to maintain our key personnel and attract new employees, the execution of our business strategy may be hindered
and our growth limited.
Strategic divestitures and contingent liabilities from businesses that we sell could adversely affect our results of
operations and financial condition.
From time to time, we have sold and may continue to sell business that we consider to be either underperforming or no
longer part of our strategic vision. The sale of any such business could result in a financial loss and/or write-down of
goodwill which could have a material adverse effect on our results for the financial reporting period during which such
sale occurs. In addition, in connection with such divestitures, we have retained, and may in the future retain
responsibility for some of the known and unknown contingent liabilities related to certain divestitures such as lawsuits,
tax liabilities, product liability claims, and environmental matters.
15
The trading price of our common stock has been volatile, and investors in our common stock may experience
substantial losses.
The trading price of our common stock has been volatile and may become volatile again in the future. The trading price
of our common stock could decline or fluctuate in response to a variety of factors, including:
•
•
•
•
•
•
•
our failure to meet the performance estimates of securities analysts;
changes in financial estimates of our net sales and operating results or buy/sell recommendations by
securities analysts;
fluctuations in our quarterly operating results;
substantial sales of our common stock;
changes in the amount or frequency of our payment of dividends or repurchases of our common stock;
general stock market conditions; or
other economic or external factors.
Decreases in discount rates and actual rates of return could require an increase in future pension contributions to
our pension 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 actuarially
calculated pension plan obligations and pension plan expense. If discount rates and actual rates of return on invested
plan assets were to decrease significantly, our pension plan obligations could increase materially. Although our pension
plans have been frozen, the size of future required pension contributions could require us to dedicate a greater portion
of our cash flow from operations to making contributions, which could negatively impact our financial flexibility.
Our business could be negatively impacted by cybersecurity threats, information systems and network interruptions,
and other security threats or disruptions.
Our information technology networks and related systems are critical to the operation of our business and essential to
our ability to successfully perform day-to-day operations. Cybersecurity threats are persistent, evolve quickly, and
include, but are not limited to, computer viruses, ransomware, attempts to access information, denial of service and
other electronic security breaches. These events could disrupt our operations or customers and other third-party IT
systems in which we are involved and could negatively impact our reputation among our customers and the public
which could have a negative impact on our financial conditions, results of operations, or liquidity.
We are subject to increasing regulation associated with data privacy and processing, the violation of which could
result in significant penalties and harm our reputation.
Regulatory scrutiny of privacy, data protection, collection, use and sharing of data is increasing on a global basis. Like
all global companies, we are subject to a number of laws, rules and directives (“privacy laws”) relating to the collection,
use, retention, security, processing and transfer (“processing”) of personally identifiable information about our
employees, customers and suppliers (“personal data”) in the countries where we operate. The most notable of these
privacy laws is the EU’s General Data Protection Regulation (“GDPR”), which came into effect in 2018. GDPR extends
the scope of the EU data protection law to all foreign companies processing data of EU residents and imposes a strict
data protection compliance regime with severe penalties for non-compliance of up to the greater of 4% of worldwide
turnover and €20 million. While we continue to strengthen our data privacy and protection policies and to train our
personnel accordingly, a determination that there have been violations of GDPR or other privacy or data protection laws
could expose us to significant damage awards, fines and other penalties that could, individually or in the aggregate,
materially harm our results of operations and reputation.
Various restrictions in our charter documents, Delaware law and our credit agreement could prevent or delay a
change in control 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,
delay or prevent a merger, acquisition or change of control that a stockholder may consider favorable. These anti-
takeover provisions include:
16
•
•
•
•
•
maintaining a classified board and imposing advance notice procedures for nominations of candidates for
election as directors and for stockholder proposals to be considered at stockholders' meetings;
a provision in our certificate of incorporation that requires the approval of the holders of 80% of the
outstanding shares of our common stock to adopt any agreement of merger, the sale of substantially all of
the assets of the Company to a third party or the issuance or transfer by the Company of voting securities
having a fair market value of $1 million or more to a third party, if in any such case such third party is the
beneficial owner of 10% or more of the outstanding shares of our common stock, unless the transaction
has been approved prior to its consummation by all of our directors;
requiring the affirmative vote of the holders of at least 80% of the outstanding shares of our common stock
for stockholders to amend our amended and restated by-laws;
covenants in our credit facility restricting mergers, asset sales and similar transactions; and
the Delaware anti-takeover statute contained in Section 203 of the Delaware General Corporation Law.
Section 203 of the Delaware General Corporation Law prohibits a merger, consolidation, asset sale or other similar
business combination between the Company and any stockholder of 15% or more of our voting stock for a period of
three years after the stockholder acquires 15% or more of our voting stock, unless (1) the transaction is approved by
our board of directors before the stockholder acquires 15% or more of our voting stock, (2) upon completing the
transaction the stockholder owns at least 85% of our voting stock outstanding at the commencement of the transaction,
or (3) the transaction is approved by our board of directors and the holders of 66 2/3% of our voting stock, excluding
shares of our voting stock owned by the stockholder.
Item 1B. Unresolved Staff Comments
None.
17
Item 2. Properties
We have a total of 100 facilities, of which we operate 88 manufacturing plants and warehouses located throughout the
United States, Europe, Canada, Southeast Asia, Korea, Japan, China, India, Brazil, South Africa, and Mexico. The
Company owns 20 of the facilities and the balance are leased. For the year ended June 30, 2020 the approximate
building space utilized by each segment is as follows:
Segment location
Asia Pacific
EMEA(1)
Other Americas
United States
Electronics
Asia Pacific
EMEA(1)
Other Americas
United States
Engraving
United States
Scientific
EMEA(1)
United States
Engineering Technologies
Asia Pacific
EMEA(1)
Other Americas
United States
Specialty Solutions
United States
Corporate & Other
Total
Area in Square Feet (in thousands)
Number of
Facilities
9
5
1
4
19
16
22
6
11
55
4
4
3
6
9
2
1
1
8
12
1
1
100
Leased
77
34
-
60
171
426
414
89
142
1,071
174
174
80
243
323
76
13
1
50
140
17
17
1,896
Owned
29
66
56
89
240
-
57
-
135
192
-
-
-
171
171
-
-
-
198
198
-
-
801
Total
106
100
56
149
411
426
471
89
277
1,263
174
174
80
414
494
76
13
1
248
338
17
17
2,697
(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
and current uses.
We own substantially all of the machinery and equipment utilized in our businesses.
Item 3. Legal Proceedings
Discussion of legal matters is incorporated by reference to Part II, Item 8, Note 12, “COMMITMENTS AND
CONTINGENCIES,” in the Notes to the Consolidated Financial Statements.
Item 4. Mine Safety Disclosures
Not Applicable
18
PART II
Item 5. Market for Standex Common Stock
Related Stockholder Matters and Issuer Purchases of Equity Securities
The principal market in which the Common Stock of Standex is traded is the New York Stock Exchange under the ticker
symbol “SXI”. The high and low sales prices for the Common Stock on the New York Stock Exchange and the
dividends paid per Common Share for each quarter in the last two fiscal years are as follows:
Common Stock Price Range
2019
2020
Dividends Per Share
Year Ended
June 30
High
Low
High
Low
First quarter
Second quarter
Third quarter
Fourth quarter
$78.16
80.92
79.39
64.46
$59.93
69.2
38.39
43.08
$114.20
109.77
83.18
76.78
$99.95
62.02
66.02
62.79
2020
$0.20
0.22
0.22
0.22
2019
$0.18
0.20
0.20
0.20
The approximate number of stockholders of record on July 31, 2020 was 1,421.
Additional information regarding our equity compensation plans is presented in the Notes to Consolidated Financial
Statements under the caption “Stock-Based Compensation and Purchase Plans” and Item 12 “Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder Matters.”
Issuer Purchases of Equity Securities (1)
Quarter Ended June 30, 2020
(d)
Maximum
Number (or
Appropriate
Dollar
Value) of
Shares (or
units) that
May Yet Be
Purchased
Under the
Plans or
Programs
(c) Total
Number of
Shares (or
units)
Purchased
as Part of
Publicly
Announced
Plans or
Programs
(a) Total
Number of
Shares (or
units)
Purchased
(b)
Average
Price Paid
per Share
(or unit)
- $
30,000
-
30,000 $
-
47.63
-
47.63
- $ 44,671,573
30,000 43,242,563
- 43,242,563
30,000 $ 43,242,563
Period
April 1 - April 30, 2020
May 1 - May 31, 2020
June 1 - June 30, 2020
TOTAL
(1) The Company has a Stock Buyback Program (the “Program”) which was originally announced on January 30, 1985
and most recently amended on April 26, 2016. Under the Program, the Company 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 privately negotiated transactions, block transactions, or other
techniques in accordance with prevailing market conditions and the requirements of the Securities and Exchange
Commission. The Board’s authorization is open-ended and does not establish a timeframe for the purchases. The
Company is not obligated to acquire a particular number of shares, and the program may be discontinued at any time at
the Company’s discretion.
19
The following graph compares the cumulative total stockholder return on the Company’s Common Stock as of the end
of each of the last five fiscal years, with the cumulative total stockholder return on the Standard & Poor’s Small Cap
600 (Industrial Segment) Index and on the Russell 2000 Index, assuming an investment of $100 in each at their closing
prices on June 30, 2014 and the reinvestment of all dividends.
20
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.
2020
2019
2018
2017
2016
SUMMARY OF OPERATIONS (in
thousands)
Net sales
Electronics
Engraving
Scientific
Engineering Technologies
Specialty Solutions
Total
Gross profit
Operating income (loss)
Electronics
Engraving
Scientific
Engineering Technologies
Specialty Solutions
Restructuring (1)
Acquisition related expenses
Other operating income (expense), net
Corporate and Other
Total
Interest expense
Other non-operating (loss) income
Provision for income taxes
Income from continuing operations
Income/(loss) from discontinued operations
Net income
143,736
57,523
104,047
113,935
$ 185,294 $ 204,073 $ 196,291 $ 136,689 $ 118,319
124,120
0
82,235
108,664
$ 604,535 $ 639,931 $ 595,515 $ 463,474 $ 433,338
$ 215,455 $ 234,667 $ 225,999 $ 167,307 $ 153,380
105,943
23,442
90,506
106,894
149,693
57,621
105,270
123,274
136,275
52,086
90,781
120,082
29,749
20,493
13,740
14,027
18,546
(4,669 )
(1,759 )
-
(29,599 )
60,528 $
(7,475 )
1,021
(13,060 )
41,014
(20,826 )
20,188 $
41,227
23,996
13,676
11,169
19,000
(1,289 )
(3,075 )
(500 )
(24,728 )
79,476 $
(10,760 )
(1,742 )
(18,688 )
48,286
19,628
67,914 $
45,501
29,618
11,436
6,506
18,688
(3,428 )
(3,749 )
-
(26,430 )
78,142 $
(8,029 )
(1,720 )
(38,026 )
30,367
6,237
36,604 $
27,855
26,139
4,269
9,758
17,719
(4,987 )
(7,843 )
-
(23,664 )
49,246 $
(4,043 )
(1,905 )
(9,370 )
33,928
12,617
46,545 $
21,323
30,214
0
8,328
19,294
(1,304 )
-
(7,067 )
(23,829 )
46,959
(2,871 )
(2,105 )
(8,406 )
33,577
18,479
52,056
$
$
(1) See discussion of restructuring activities in Note 15 of the consolidated financial statements.
2020
2019
2018
2017
2016
PER SHARE DATA
Basic
Income from continuing operations
Income/(loss) from discontinued operations
Total
Diluted
Income from continuing operations
Income/(loss) from discontinued operations
Total
Dividends declared
$
$
$
$
$
3.33 $
(1.69 )
1.64 $
3.84
1.56
5.40 $
2.39 $
0.49
2.88 $
2.68 $
1.00
3.68 $
3.31 $
(1.68 )
1.63 $
3.83 $
1.55
5.38 $
2.37 $
0.49
2.86 $
2.66 $
0.99
3.65 $
2.65
1.46
4.11
2.63
1.45
4.08
0.86 $
0.78 $
0.70 $
0.62 $
0.54
21
BALANCE SHEET (in thousands)
Total assets
$ 930,878 $ 921,889 $ 916,937 $ 867,676 $ 690,457
2020
2019
2018
2017
2016
Accounts receivable
Inventories
Accounts payable
Goodwill
Long-term debt
Total debt
Less cash
Net debt (cash)
98,157
85,031
54,910
271,221
103,374
76,302
54,201
273,843
103,081
80,937
55,975
204,091
91,906
69,913
56,147
195,019
69,796
56,600
40,881
109,683
$ 199,150 $ 197,610 $ 193,772 $ 191,976 $
191,976
88,566
84,170 $ 103,410 $
197,610
93,145
80,341 $ 104,465 $
193,772
109,602
199,150
118,809
$
92,114
92,114
121,988
(29,874 )
Stockholders' equity
$ 461,632 $ 464,313 $ 450,795 $ 408,664 $ 369,959
KEY STATISTICS
Gross profit margin
Operating income margin
2020
2019
2018
2017
2016
35.6 %
10.0 %
36.7 %
12.4 %
38.0 %
13.1 %
36.1 %
10.6 %
35.4 %
10.8 %
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
We are a diversified industrial manufacturer with leading positions in a variety of products and services that are used in
diverse commercial and industrial markets. As of the end of the fiscal third quarter 2020, we had nine operating
segments aggregated into five reportable segments. During the third quarter of 2020, we announced the divestiture of
our Refrigerated Solutions Group (an accumulation of our Master-Bilt and Nor-Lake operating segments) consistent
with our strategy to focus our financial assets and managerial resources on our higher growth and operating margin
businesses. The divestiture of the Refrigerated Solutions Group was completed and consideration was exchanged in
April of fiscal year 2020. Subsequent to the disposition of the Refrigeration Solutions Group, we reviewed the
quantitative and qualitative characteristics of our remaining businesses and determined that we now have seven
operating segments that aggregate to five reportable segments. All periods presented have been revised accordingly to
reflect the new reportable segments.
Our new reportable segment structure is as follows:
●
●
●
●
●
Electronics operating segment
Engraving operating segment
Scientific operating segment
Engineering Technologies Group operating segment
Specialty Solutions – an aggregation of our Federal, Procon, and Hydraulics operating segments.
Our segments differentiate themselves by collaborating with our customers in order to develop and deliver custom
solutions or engineered components that solve problems for our customers or otherwise meet their needs (a business
model we refer to as “Customer Intimacy”).
Overall management, strategic development and financial control are led by the executive staff at our corporate
headquarters located in Salem, New Hampshire.
Our long-term strategy is to enhance shareholder value by building larger, more profitable “Customer Intimacy” focused
industrial platforms through a value creation system that assists management in meeting specific corporate and business
unit financial and strategic performance goals in order to create, improve, and enhance shareholder value. In so doing,
we expect to focus our financial assets and managerial resources on our higher growth and operating margin businesses
22
while considering divestiture of those businesses that we feel are not strategic or do not meet our growth and return
expectations.
The Standex Value Creation System is a methodology which provides standard work and consistent tools used
throughout the company in order to achieve our organization’s goals. The Standex Value Creation System employs
four components: Balanced Performance Plan, Growth Disciplines, Operational Excellence, and Talent Management.
The Balanced Performance Plan process aligns annual goals throughout the company and provides a standard reporting,
management and review process. It is focused on setting, tracking and reviewing annual and quarterly targets that
support our short and long-term goals. The Growth Disciplines use a standard work playbook of tools and processes
including market maps, market tests and growth laneways to identify explore and execute on opportunities that expand
the business organically and through acquisitions. Operational Excellence also employs a standard work playbook of
tools and processes, based on LEAN, to improve operating execution (effectiveness), eliminate waste (efficiency) and
thereby improve profitability, cash flow and customer satisfaction. Finally, Talent Management is an organizational
development process that provides training, development, and succession planning for employees throughout our
worldwide organization. The Standex Value Creation System ties all disciplines together under a common umbrella by
providing standard playbook of tools and processes to deliver our business objectives. Through the use of our Standex
Value Creation System, we have developed a balanced approach to value creation. While we intend to continue
investing acquisition capital in high margin and growth segments such as Electronics and Engraving, we will continue
to support all of our businesses as they enhance 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, geographic expansion,
and the introduction of products and technologies into new markets, key accounts and strategic sales channel partners.
Also, we have a long-term objective to create sizable business platforms by adding strategically aligned or “bolt on”
acquisitions to strengthen the individual businesses, create both sales and cost synergies with our core business
platforms, and accelerate their growth and margin improvement. We look to create 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 increase the global presence and capabilities of our
businesses. From time to time, we have divested, and likely will continue to divest, businesses that we feel are not
strategic or do not meet our growth and return expectations.
As part of our ongoing strategy:
o
o
Subsequent to the end of the fiscal year, during July of 2020, we acquired Renco Electronics, a designer
and manufacturer of customized standard magnetics components and products including transformers,
inductors, chokes and coils for power and RF applications. Renco’s end markets and customer base in
areas such as consumer and industrial applications are highly complementary to our existing business
with the potential to further expand key account relationships and capitalize on cross selling
opportunities between the two companies. Renco operates one manufacturing facility in Florida and is
supported by contract manufacturers in Asia. Renco’s results will be reported within our
Electronics segment beginning in fiscal year 2021.
During the third quarter of fiscal year 2020, we initiated a program and signed an agreement to divest
our Master-Bilt and Nor-Lake businesses (together our Refrigerated Solutions Group or RSG). This
divestiture allows us to continue the simplification of our portfolio and enables us to focus more clearly
on those of our businesses that sell differentiated products and which have higher growth and margin
profiles. The divestiture was finalized and consideration was exchanged in the fourth quarter of 2020.
Results of RSG in current and prior periods have been classified as discontinued operations in the
Consolidated Financial Statements. The divestiture impacts the consolidated company results as
follows:
23
Year Ended June 30, 2020
Year Ended June 30, 2019
Continuing
Ops Prior Divested
to Divested RSG
RSG
Businesses
$ 719,606 $ 115,071
(20,985 )
(20,278 )
39,543
(20,278 )
Continuing
Restated Ops Prior Divested
Continuing to Divested RSG
Ops
Businesses
RSG
$ 604,535 $ 791,579 $ 151,648
Restated
Continuing
Ops
$ 639,931
60,528
-
-
-
-
59,821
8.3 %
(707 )
(0.6 )%
60,528
10.0 %
78,117
9.9 %
(1,359 )
79,476
(0.9 )%
12.4 %
$000’s
Net Sales
Operating Income/(Loss)
Asset Impairment Charge
Operating Income/(Loss) after
impairment charge
%
o
o
o
o
o
During the first quarter of 2019, the Company decided to divest its Cooking Solutions Group, which
consisted of three operating segments, Associated American Industries, BKI, and Ultrafryer, along with
a minority interest investment. We completed this divestiture during the third quarter of 2019 and
received proceeds for the sale on the first day of the fourth quarter of 2019. In connection with the
divestiture efforts, we also sold our minority interest in a European oven manufacturer back to the
majority owners. Results of the Cooking Solutions Group in current and prior periods have been
classified as discontinued operations in the Consolidated Financial Statements.
In April 2019, we acquired Ohio-based Genius Solutions Engineering Company (d/b/a GS
Engineering), a provider of specialized “soft surface” skin texturized tooling, primarily serving the
automotive end market. GS Engineering brings us critical proprietary technologies that offer significant
advantages in creating tools for “soft surface” components which are used increasingly in vehicle
interiors. The tooling for soft surface products offered by GS is highly complementary to our current
industry-leading capabilities in texturing molds and tools used to create “hard surface” components.
This technology also complements and enables us to improve our existing nickel shell technology that
produces soft surface tooling. GS operates one facility in Ohio and its results are reported within our
Engraving segment.
In September 2018, we acquired New Hampshire-based Regional Mfg. Specialists, Inc. (now named
Agile Magnetics, Inc.), a provider of high-reliability magnetics. The addition of Agile Magnetics is an
important step forward in building out the high reliability magnetics business of Standex Electronics.
As a result of this combination, we have broadened our exposure to several attractive end-markets and
added a valuable manufacturing and sales base in the northeast. Additionally, we can now offer
complementary products from Standex’s broader portfolio to Agile’s customer base. Agile Magnetics
products include transformers, inductors and coils for mission critical applications for blue chip OEMs
in the semiconductor, military, aerospace, healthcare, and industrial markets. Agile operates one
manufacturing facility in New Hampshire and its results are reported within our Electronics segment.
In August 2018, we acquired Michigan-based Tenibac-Graphion, Inc., a provider of chemical and laser
texturing services. The combination of Tenibac and Standex Engraving expands services available to
customers, increases responsiveness to customer demands, and drives innovative approaches to solving
customer needs. The combined customer base now has access to the full line of mold and tool services,
such as the Architexture design consultancy, chemical and laser engraving, tool finishing, and tool
enhancements. Tenibac serves automotive, packaging, medical and consumer products customers, and
operates three facilities, two in Michigan and one in China. The Tenibac results are reported within
our Engraving segment.
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 the automotive and consumer
products markets. The combination of these competencies with Standex Engraving's worldwide
presence and texturizing capabilities creates a global tool finishing service leader and provides
additional opportunities in the broader surface engineering market. The Piazza Rosa Group’s results
are reported within our Engraving segment.
24
As a result of these portfolio moves, we have transformed Standex to a company with end market exposure that is no
longer dependent on sales of standard products to the food service industry and into a more focused group of businesses
selling customized solutions to high value end markets via a compelling customer value proposition. The narrowing of
the portfolio allows for greater management focus on driving operational disciplines and positions us well to withstand
the COVID-19 crisis and invest selectively in our ongoing pipeline of organic and inorganic opportunities.
We develop “Customer Intimacy” by utilizing the Standex Growth Disciplines to partner with our customers in order
to develop and deliver custom solutions or engineered components. By partnering with our customers during long-term
product development cycles, we become an extension of their development teams. Through this Partner, Solve,
Deliver® approach, we are able to secure our position as a preferred long-term solution provider for our products and
components. This strategy results in increased sales and operating margins that enhance shareholder returns.
Standex Operational Excellence drives continuous improvement in the efficiency of our businesses, both on the shop
floor and in the office environment. We recognize that our businesses are competing in a global economy that requires
us to improve our competitive position. We have deployed a number of management competencies to drive
improvements in the cost structure of our business units including operational excellence through lean enterprise, the
use of low cost manufacturing facilities, the consolidation of manufacturing facilities to achieve economies of scale and
leveraging of fixed infrastructure costs, alternate sourcing to achieve procurement cost reductions, and capital
improvements to increase productivity.
The Company’s strong historical cash flow has been a cornerstone for funding our capital allocation strategy. We use
cash flow generated from operations to fund the strategic growth programs described above, including acquisitions and
investments for organic growth, investments in capital assets to upgrade our facilities, improve productivity and lower
costs, 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
efficiency and expanding globally in order to remain competitive in our end-user markets. We incur costs for actions
to size our businesses to a level appropriate for current economic conditions, improve our cost structure, enhance our
competitive position and increase operating margins. Such expenses include costs for moving facilities to locations that
allow for lower fixed and variable costs, external consultants who provide additional expertise starting up plants after
relocation, downsizing operations because of changing economic conditions, and other costs resulting from asset
redeployment decisions. Shutdown costs include severance, benefits, stay bonuses, lease and contract terminations,
asset write-downs, costs of moving fixed assets, and moving and relocation costs. Vacant facility costs include
maintenance, utilities, property taxes and other costs.
Because of the diversity of the Company’s businesses, end user markets and geographic locations, management does
not use specific external indices to predict the future performance of the Company, other than general information about
broad macroeconomic trends. Each of our individual business units serves niche markets and attempts to identify trends
other than general business and economic conditions which are specific to its business and which could impact their
performance. Those units report pertinent information to senior management, which uses it to the extent relevant to
assess the future performance of the Company. A description of any such material trends is described below in the
applicable segment analysis.
We monitor a number of key performance indicators (“KPIs”) including net sales, income from operations, backlog,
effective income tax rate, gross profit margin, and operating cash flow. A discussion of these KPIs is included below.
We may also supplement the discussion of these KPIs by identifying the impact of foreign exchange rates, acquisitions,
and other significant items when they have a material impact on a specific KPI.
We believe the discussion of these items provides enhanced information to investors by disclosing their impact on the
overall trend which provides a clearer comparative view of the KPI, as applicable. For discussion of the impact of
foreign exchange rates on KPIs, the Company calculates the impact as the difference between the current period KPI
calculated at the current period exchange rate as compared to the KPI calculated at the historical exchange rate for the
prior period. For discussion of the impact of acquisitions, we isolate the effect on the KPI amount that would have
existed regardless of our acquisition. Sales resulting from synergies between the acquisition and existing operations of
the Company are considered organic growth for the purposes of our discussion.
Unless otherwise noted, references to years are to fiscal years.
25
Impact of COVID-19 Pandemic on the Company
Given the global nature of our business and the number of our facilities in China, we were impacted by COVID-19
related issues beginning in February of our third quarter. We took immediate, and effective action to protect our health
and safety, continue to serve our customers, support our communities and manage our cash flows. Our priority was and
remains the health and safety of all of our employees. Each of our facilities is following safe practices as defined in
their local jurisdictions as well as sharing experiences and innovative ways of overcoming challenges brought on by the
crisis during updates with global site leaders. We are rigorously following health protocols in our plants, including
changing work cell configurations and revising shift schedules when appropriate, in order to do our best to continue
operations. We were deemed an essential business in most plants and had limited shutdowns in our facilities.
Shutdowns that have occurred have been primarily centered around our sites in China, India, Italy, and Mexico. Despite
most businesses remaining operational, we have experienced revenue losses due to the impact that the pandemic has
had on our customers.
Given the impact that the pandemic created on our backlog and incoming order rate, we took actions to identify and
implement cost savings and restructuring actions with each of our operating units as well as our corporate headquarters.
Actions identified include reducing outside discretionary spend, the natural elimination of travel and trade show
expenses that were a result of COVID-19 related curtailments, implementation of rolling furloughs in several businesses
where appropriate, and the elimination of certain salaried and hourly positions. The costs, including restructuring
charges, for many of these items occurred in our fourth quarter of fiscal year 2020. As we look forward into fiscal year
2021 and beyond, the impact of the pandemic on our businesses remains uncertain, however, we have identified further
cost reduction actions and stand ready to implement these plans as circumstances in individual businesses or countries
require.
We exited the fourth quarter with $118.8 million in cash and $200.0 million of borrowings under our revolving credit
facility. Our leverage ratio covenant, as defined in our revolving credit agreement, was 1.47 to 1 and allowed us the
capacity to borrow an additional $203.6 million at June 30, 2020. As interest rates declined during the third quarter, we
took the opportunity to revisit our fixed to floating debt ratio and entered into $125 million of new interest rate swaps
to lock in additional fixed rate debt financing. We also extended an expiring $25 million swap for another five years.
The cumulative impact of these items is a reduction in our effective interest rate by approximately 50 basis points or
$1 million per year going forward.
Finally, we are reviewing our ability to participate in any governmental assistance programs available to us in each of
our global locations, and we will participate in these programs as available and appropriate. For instance, we have
elected to take advantage of provisions in the United States Coronavirus Aid, Relief, and Economic Security (“CARES”)
Act, which allows for deferral until December 31, 2020 of defined benefit pension plan contributions due during
calendar year 2020. Prior to passage of the CARES Act, we were required to make payments of $1.5 million in the
fourth quarter of fiscal year 2020 and an additional $3.2 million in the first two quarters of fiscal year 2021, which we
will now defer until December of fiscal year 2021. We believe that the we have sufficient liquidity around the world
and access to financing to execute on our short and long-term strategic plans.
Consolidated Results from Continuing Operations (in thousands):
2020
2019
2018
Net sales
Gross profit margin
Restructuring costs
Acquisition related expenses
Income from operations
$
604,535 $
35.6 %
4,669
1,759
60,528
639,931 $
36.7 %
1,289
3,075
79,476
595,515
38.0 %
3,428
3,749
78,142
Backlog (realizable within 1 year)
$
152,304 $
183,100 $
185,488
Net sales
Components of change in sales:
Effect of acquisitions
Effect of exchange rates
Organic sales change
2020
2019
2018
$
604,535 $
639,931 $
595,515
11,635
(6,089 )
(40,942 )
29,122
(12,041 )
27,335
59,855
14,394
57,792
26
Net sales for the fiscal year 2020 decreased by $35.4 million, or 5.5%, when compared to the prior year. Incremental
sales from our recent acquisitions accounted for $11.6 million or 1.8% of the increase, while organic sales accounted
for a decrease of $40.9 million or 6.4%. Changes in foreign exchange rates contributed to sales declines of $6.1 million
or 1.0%. The organic sales decreases occurred in all of our segments and was primarily a result of both direct and
indirect impacts of the pandemic driven economic slowdown.
Net sales for the fiscal year 2019 increased by $44.4 million, or 7.5%, when compared to the prior year. Incremental
sales from our recent acquisitions accounted for $29.1 million or 4.9% of the increase, while organic sales gains
accounted for $27.3 million or 4.6%. Changes in foreign exchange rates contributed to sales declines of $12.0 million
or 2.0%. The organic sales increases occurred in all of our segments except the Specialty Solutions Group.
Gross Profit Margin
Gross margin in fiscal year 2020 declined to 35.6% as compared to 36.7% in 2019 primarily due to the pandemic related
organic sales decline during the second half of the year. Gross Margins are anticipated to improve in the coming fiscal
year as cost reduction activities identified in the second half of fiscal year 2020 have now been implemented.
Gross margin in fiscal year 2019 declined to 36.7% as compared to 38.0% in 2018 as a result of incremental purchase
accounting, material and wage inflation, manufacturing inefficiencies, country specific site performance and an asset
impairment charge all recorded in 2019.
Restructuring Charges and Acquisition Related Expenses
During fiscal year 2020, we incurred restructuring expenses of $4.7 million primarily related to restructuring efforts that
are intended to improve profitability, streamline production and reduce our cost base to a level commensurate with a
post-pandemic operating environment. These efforts include approximately $1.1 million related to the announced
closure of a Specialty Solutions pump rotor production facility in Ireland.
Acquisition related expenses in fiscal year 2020 were $1.8 million. These expenses were comprised primarily of
$1.2 million for deferred compensation payments earned by the Horizon Scientific seller during the year. Because these
payments are contingent on the seller remaining an employee of the Company, they are treated as compensation expense.
We made the third and final scheduled payment to the seller during the first quarter of fiscal year 2020 and this
arrangement has now been settled. Other acquisition related expenses consist of due diligence, integration, and valuation
expenses incurred in connection with both completed and terminated acquisitions during the year.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses, (“SG&A”) for the fiscal year 2020 were $148.5 million, or 24.6% of sales
compared to $150.3 million, or 23.5% of sales during the prior year. SG&A expenses were impacted by on-going
expenses related to our recent acquisitions of $1.7 million offset by a decrease in variable distribution and selling
expenses primarily as a result of organic sales declines.
Selling, general, and administrative expenses, (“SG&A”) for the fiscal year 2019 were $150.3 million, or 23.5% of sales
compared to $140.7 million, or 23.6% of sales during the prior year. SG&A expenses were impacted by on-going
expenses related to our fiscal year 2019 acquisitions of $7.4 million and an increase in distribution and selling expenses
due to sales mix.
Income from Operations
Income from operations for the fiscal year 2020 was $60.5 million, compared to $79.5 million during the prior year.
The $19.0 million decrease, or 23.8%, is primarily due to the impact of volume related losses triggered by the COVID-
19 pandemic along with material inflation, partially offset by cost reduction activities and productivity improvement
initiatives implemented in all of our businesses.
Income from operations for the fiscal year 2019 was $79.5 million, compared to $78.1 million during the prior year.
The $1.4 million increase, or 1.7%, is primarily due to organic sales increases, business mix and lower restructuring
costs, which more than offset by material and wage inflation pressures.
27
Discussion of the performance of each of our reportable segments is fully explained in the segment analysis that
follows.
Interest Expense
Interest expense for the fiscal year 2020 was $7.5 million, a decrease of $3.3 million as compared to the prior year.
Decreased interest expense was a result of lower borrowings and a lower effective interest rate. Our effective interest
rate of 2.59% was 129 basis points or 33% lower than the 2019 effective interest rate of 3.88%.
Interest expense for the fiscal year 2019 was $10.8 million, an increase of $2.8 million as compared to the prior year.
Increased interest expense was a result of higher borrowing costs and an increase in average outstanding borrowings for
the year, primarily to fund acquisition activity.
Income Taxes
On December 22, 2017, the Tax Cuts and Jobs Act (the “Act” or “TCJA”) was passed which, among other things,
reduces the federal corporate tax rate to 21.0% effective for taxable years starting on or after January 1, 2018. For the
years ended June 30, 2020 and 2019, the Company recorded federal taxes using a federal rate of 21.0%.
The provision for fiscal year ending June 30, 2020 and 2019 was impacted by several law changes implemented by the
Act such as the, interest deduction limitation and Global Intangible Low Taxed Income (GILTI). As allowed under US
GAAP, the Company has elected to treat any taxes due on future U.S. inclusions in taxable income under the GILTI
provision as a current-period expense when incurred. The Company will continue to monitor guidance regarding these
changes for how it will impact the financial statements in later periods.
The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2020 was
$13.1 million, or an effective rate of 24.3% compared to $18.7 million, or an effective rate of 27.9% for the year ended
June 30, 2019, and $38.1 million, or an effective rate of 55.4% for the year 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 not limited
to, the amount of the Company's income or loss, the mix of income earned in the US versus outside the US, the effective
tax rate in each of the countries in which we earn income, and any one-time tax issues which occur during the period.
The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2020 was impacted
by the following items: (i) a tax benefit of $1.2 million related to the Federal R&D credit, (ii) a tax provision of
$1.4 million due to the mix of income in various jurisdictions, (iii) a tax benefit of $0.7 million related to the release of
uncertain tax provision reserves, and (iv) a tax provision of $0.8 million related to GILTI.
The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2019 was impacted
by the following items: (i) a tax benefit related to the impact of the Sec. 965 toll tax of $0.8 million, (ii) a tax provision
of $0.3 million related to the elimination of the performance based compensation exception for executive compensation
under Sec. 162(m) of the Internal Revenue Code, and (iii) a tax provision related to expected foreign withholding taxes
on cash repatriation of $2.1 million.
The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2018 was impacted
by the following items: (i) a tax provision related to the impact of the Sec. 965 toll tax of $11.7 million, (ii) a tax
provision related to a revaluation of deferred taxes due to the federal rate reduction of $1.3 million, and (iii) a tax
provision related to expected foreign withholding taxes on cash repatriation of $7.8 million.
Capital Expenditures
Our capital spending is focused on growth initiatives, cost reduction activities, and upgrades to extend the capabilities
of our capital assets. In general, we anticipate our capital expenditures over the long-term will be approximately 3%
to 4% of net sales.
During 2020, capital expenditures decreased to $19.3 million or 3.2% of net sales, as compared to $32.5 million, or
5.1%, of net sales in the prior year. In response to reduced activity levels brought on by the COVID-19 pandemic,
beginning in the third quarter, we reduced our capital expenditures to only necessary maintenance, safety and the highest
priority growth initiatives. Capital spending in 2019 included $5.8 million for a new Electronics facility in Cincinnati
which replaced a legacy facility sold for $1.4 million in fiscal year 2018. We expect 2021 capital spending to be between
28
$28 million and $30 million which includes $3.7 million allocated to begin construction for a new Electronics facility
in Germany to replace a legacy facility sold in fiscal year 2019.
Backlog
Backlog includes all active or open orders for goods and services. Backlog also includes any future deliveries based on
executed customer contracts, so long as such deliveries are based on agreed upon delivery schedules. With the exception
of our Engineering Technologies group, backlog has limited value as an indicator for the Company’s businesses because
of our relatively short delivery periods and rapid inventory turnover. Due to the nature of long-term agreements in the
Engineering Technologies group, the timing of orders and delivery dates can vary considerably resulting in significant
backlog changes from one period to another. Backlog orders are not necessarily an indicator of future sales levels
because of variations in lead times and customer production demand pull systems. Customers may delay delivery of
products or cancel orders prior to shipment, subject to possible cancellation penalties. In general, the majority of net
realizable backlog beyond one year comes from the Engineering Technologies group.
Backlog orders in place at June 30, 2020 and 2019 are as follows (in thousands):
Electronics
Engraving
Scientific
Engineering Technologies
Specialty Solutions
Total
As of June 30, 2020
As of June 30, 2019
Total
Backlog
Backlog
under
1 year
Total
Backlog
Backlog
under
1 year
$
$
56,170 $
16,076
3,341
97,682
17,071
190,340 $
55,991 $
13,719
3,341
66,493
12,760
152,304 $
62,381 $
22,160
5,372
113,714
23,701
227,328 $
56,243
22,160
5,372
79,062
20,263
183,100
Backlog realizable within one year decreased $30.8 million, or 16.8% to $152.3 million at June 30, 2020 from $183.1
million at June 30, 2019. We experienced backlog declines in all segments as a result of the general, global economic
slowdown brought about by the COVID-19 pandemic.
Segment Analysis (in thousands)
Electronics
(in thousands except
percentages)
Net sales
Income from operations
Operating income margin
2020 compared to 2019
2019 compared to 2018
2020
$185,294
29,749
16.1%
2019
$204,073
41,227
20.2%
%
Change
-9.2%
-27.8%
2019
2018
$204,073 $196,291
41,227
20.2%
45,501
23.2%
%
Change
4.0%
-9.4%
Net sales in fiscal year 2020 decreased $18.8 million, or 9.2%, when compared to the prior year as organic sales declined
$20.3 million, or 9.9%. Sales were slightly down in North America while down significantly in Europe and Asia. New
sensor, switch and relay applications continued to offset some of the core business loss due to economic conditions and
current COVID-19 impact. The incremental sales impact of the Agile Magnetics acquisition, which was acquired in
September of fiscal year 2019, was $3.1 million during the year and foreign exchange rates unfavorably affected sales
by $1.6 million or 0.8%. Given the diversity of markets and geographies served by the Electronics business, the COVID-
19 pandemic could have differing impact on our future incoming order rate and sales performance in various regions.
Income from operations in the fiscal year 2020 decreased $11.5 million, or 27.8%, when compared to the prior year.
The operating income decline was due to the margin loss on the lower organic sales, inflationary cost increases,
particularly rhodium costs, and incremental costs related to the current COVID-19 environment, which more than offset
cost saving initiatives implemented throughout the year. Looking forward, we have fixed our most significant material
cost for the first six months of fiscal year 2021, and, for this portion of the year, we expect material costs in line with
those experienced in the fourth quarter of 2020.
29
Net sales in fiscal year 2019 increased $7.8 million, or 4.0%, when compared to the prior year with organic sales growth
contributing $2.6 million, or 1.3%. The sales impact of the Agile Magnetics acquisition was $9.3 million and foreign
exchange rates unfavorably affected sales by $4.2 million or 2.1%.
Income from operations in the fiscal year 2019 decreased $4.3 million, or 9.4%, when compared to the prior year. The
operating income decline was due to government mandated wage increases in our Mexico operation, material cost
increases, acquisition purchase accounting of $0.3 million, and India facility start-up costs, partially offset by cost saving
initiatives.
Engraving
(in thousands except
percentages)
Net sales
Income from operations
Operating income margin
2020 compared to 2019
2019 compared to 2018
2020
2019
2019
2018
$143,736 $149,693
20,493
14.3%
23,996
16.0%
$149,693 $136,275
23,996
16.0%
29,618
21.7%
%
Change
-4.0%
-14.6%
%
Change
9.8%
-19.0%
Net sales in fiscal year 2020 decreased by $6.0 million or 4.0% compared to the prior year. The effect of acquisitions
generated $8.5 million or 5.7% of additional sales for fiscal year 2020 which have been partially offset by foreign
exchange declines of $3.6 million for the year. Organic sales declines of $10.9 million, or 7.3%, were a result of the
timing of automotive projects, slower incoming workloads as a result of pandemic related delays, and the closure of
unprofitable sites as part of our previously announced restructuring. We expect sales growth in fiscal year 2021 due to
an increase in the number of new automotive launches along with the continued introduction of our soft skin and tool
finishing offerings throughout our global sales network.
Income from operations in fiscal year 2020 decreased by $3.5 million, or 14.6%, when compared to the prior year. The
decrease was primarily a result of organic sales declines for the year. In response to the global economic slowdown,
we have implemented cost savings and restructuring actions that we expect to generate approximately $3.0 million of
annual savings beginning in fiscal year 2021.
Net sales in fiscal year 2019 increased by $13.4 million or 9.8% compared to the prior year. Growth was driven by two
acquisitions which contributed $19.8 million or 14.5%. Organic sales were nearly flat as compared to prior year while
currency negatively impacted sales by 4.8%.
Income from operations in fiscal year 2019 decreased by $5.6 million, or 19.0%, when compared to the prior year. The
decrease was primarily due to an unfavorable geographic mix, lower automotive sales in North America, reduced
demand at our higher profit China facilities due to concerns regarding trade conflicts, and purchase accounting costs
associated with the Tenibac and GS acquisitions.
Scientific
(in thousands except
percentages)
Net sales
Income from operations
Operating income margin
2020 compared to 2019
2019 compared to 2018
2020
2019
$57,523 $57,621
13,740
23.9%
13,676
23.7%
%
Change
-0.2%
0.5%
2019
2018
%
Change
$57,621 $52,086 10.6%
11,436
13,676
19.6%
22.0%
23.7%
Net sales in fiscal year 2020 remained relatively flat when compared to the prior year. We experienced decreased sales
volume in our clinical laboratories, physicians’ offices, hospitals and academic laboratories markets, primarily due to
impacts of the COVID-19 pandemic and the economic downturn. This was largely offset by sales in the pharmaceutical
market. Moving forward we anticipate higher sales volume in our pharmaceutical market, partially offset by declines
in the clinical laboratories, physicians’ offices, hospitals and academic laboratories markets. We have and will continue
to enact measures to prepare for any anticipated increase in demand for medication and vaccine storage, working with
channel partners as well as Federal, State and Local governments as applicable.
30
Income from operations in fiscal 2020 increased by $0.1 million, or 0.5% when compared to the prior year as modest
sales declines were overcome with cost controls of labor and discretionary spending as well as stronger sales in our
pharmaceutical market.
Net sales in fiscal year 2019 increased by $5.5 million, or 10.6% compared to the prior year as volume increased for
sales to pharmaceutical customers and national clinical distributors.
Income from operations in fiscal year 2019 increased $2.2 million or 19.6% when compared to the prior year. Operating
income margins in fiscal 2019 were impacted by increased sales volume and price increases which were partially offset
by an increase in tariffs enacted on product imported from Asia.
Engineering Technologies
(in thousands except
percentages)
Net sales
Income from operations
Operating income margin
2020 compared to 2019
2019 compared to 2018
2020
2019
$104,047 $105,270
14,027
13.5%
11,169
10.6%
%
Change
-1.2%
25.6%
2019
2018
%
Change
$105,270 $90,781 16.0%
71.7%
6,506
11,169
7.2%
10.6%
Net sales in fiscal year 2020 decreased $1.2 million or 1.2% when compared to the prior year. Sales distribution by
market in 2020 was as follows: 43% aviation, 30% space, 12% energy, 9% defense, and 6% other markets. The decline
in aviation sales of 8% from the prior year was primarily in the aircraft engine segment, as a result of both the grounding
of the Boeing MAX 737 aircraft and impacts of the COVID-19 pandemic on the aviation industry in general. Space
market sales increased 13.4% from the prior year driven by higher sales in the unmanned and manned space segment
on production and new development programs while defense sales increased by 12.5% from the prior year driven by
higher volume in the missile segment. In fiscal year 2021, we anticipate aviation and energy markets to see year over
year declines as these industries continue to be impacted by the global pandemic, while the defense market should
increase through higher volume in production and development work. Additionally, we anticipate the space market to
see a year over year decline due to project timing and the cyclical nature of the market.
Income from operations in fiscal year 2020 increased $2.8 million or 25.6% when compared to the prior year. The
increase in operating income was driven by improved manufacturing efficiencies, cost reduction programs implemented
during the year, and a favorable product mix. The focus in fiscal year 2021, will be to drive productivity initiatives to
improve margin levels in the key sectors despite the forecasted volume declines.
Net sales in fiscal year 2019 increased $14.5 million or 16.0% when compared to the prior year. Sales distribution by
market in 2019 was as follows: 46% aviation, 26% space, 13% energy, 8% defense, 5% medical, and 2% other markets.
Aviation sales grew 9.0% from the prior year due to sales on new aircraft and engine platforms. Space market sales
increased 13.5% from the prior year driven by higher sales in the manned space segment on new development programs.
Growth in 2019 was also driven by increased sales in the oil and gas and defense markets.
Income from operations in fiscal year 2019 increased $4.7 million or 71.7% when compared to the prior year. The
increase in operating income was driven by higher sales volume, improved manufacturing efficiencies on production
programs, and price increases in the Aviation segment, partially offset by an asset impairment charge of $1.2 million
due to a customer contract termination.
31
Specialty Solutions
(in thousands except
percentages)
Net sales
Income from operations
Operating income margin
2020 compared to 2019
2019 compared to 2018
2020
2019
2019
2018
$113,935 $123,274
18,546
16.3%
19,000
15.4%
$123,274 $120,082
19,000
15.4%
18,688
15.6%
%
Change
-7.6%
-2.4%
%
Change
2.7%
1.7%
Net sales for fiscal year 2020 decreased $9.3 million, or 7.6% when compared to the prior year as organic sales declined
by $8.8 million or 7.1% and foreign exchange rates unfavorably affected sales by $0.6 million or 0.5%. Decreased sales
volume are primarily due to impacts of the COVID-19 pandemic which created market downturns in the beverage,
convenience store and dump markets.
Income from operations for fiscal year 2020 decreased $0.5 million, or 2.4%, when compared to the prior year, primarily
due to decreased sales volume in each of our groups. The sales volume decrease was offset in our Hydraulics and
Display Merchandising groups by favorable mix, cost control of labor, and the implementation of identified
manufacturing efficiencies. Moving forward we anticipate a continued reduction in sales volume over the first half of
the fiscal year as customers continue to curtail spending in order to overcome the impact of the pandemic, but that our
cost reduction and footprint consolidation activities implemented in the fourth quarter of 2020 will partially offset the
impact of volume declines on operating income.
Net sales for fiscal year 2019 increased $3.2 million, or 2.7% when compared to the prior year due organic sales
increases of $4.0 million, or 3.4%. Foreign exchange rates unfavorably affected sales in fiscal year 2019 compared to
the prior year by $0.8 million or 0.7%. The increase in organic sales is primarily due to new product introductions in
the Hydraulics business during the year and market share gains in the refuse OEM marketplace.
Income from operations for fiscal year 2019 increased $0.3 million, or 1.7%, when compared to the prior year. The
operating income increase was driven by the revenue growth in the refuse market of our Hydraulics market partially
offset by higher material costs and higher manufacturing overhead as a result of sales volume in our display
merchandising and pump businesses.
Corporate, Restructuring and Other
(in thousands except
percentages)
Corporate
Restructuring
Other Operating Expenses
2020 compared to 2019
2019 compared to 2018
2020
2019
%
Change
2019
2018
$ (29,599) $ (24,728) 19.7%
262.2%
(1,289)
-50.8%
(3,575)
(4,669)
(1,759)
$ (24,728) $ (26,430)
(1,289)
(3,575)
(3,428)
(3,749)
%
Change
-6.4%
-62.4%
-4.6%
Corporate expenses increased by 19.7% in fiscal year 2020 primarily due to increased stock-based compensation,
management transition, and benefit expenses in the first two quarters of fiscal year 2020.
Corporate expenses declined by 6.4% in fiscal year 2019 primarily due to reduced incentive compensation expenses
and cost containment activities.
The restructuring and acquisition-related costs have been discussed above in the Company Overview.
32
Discontinued Operations
In pursuing our business strategy, the Company continues to divest certain businesses and record activities of these
businesses as discontinued operations. Results of the Cooking Solutions Group and Refrigerated Solutions Group in
current and prior periods have been classified as discontinued operations in the Consolidated Financial Statements and
excluded from the results from continuing operations. Activity related to discontinued operations for twelve months
ended June 30, 2020, 2019 and 2018 is as follows (in thousands):
Net Sales
Gain (Loss) on Sale of Business
Transaction Fees
Income (loss) from Discontinued
Operations
Non-operating Income (Expense)
Profit (loss) Before Taxes
Benefit (Provision) for Taxes
Net income (loss) from Discontinued
Operations
$
$
$
$
$
Liquidity and Capital Resources
2020
Year Ended June 30,
2019
2018
111,841 $
223,067 $
272,867
(19,996 ) $
(1,933 )
(23,553 ) $
-
(23,439 ) $
2,613
20,539 $
(4,397 )
17,541 $
(366 )
17,175 $
2,453
-
-
8,006
809
8,815
(2,578 )
(20,826 ) $
19,628 $
6,237
At June 30, 2020, our total cash balance was $118.8 million, of which $77.6 million was held outside of the United
States. Due to changes in the U.S. tax law, we began repatriating foreign earnings in fiscal year 2019, and, during fiscal
years 2020 and 2019, we returned $39.2 million and $51.5 million of our cash previously held outside of the United
States, respectively. During fiscal year 2021, we anticipate returning an additional $35.0 million of foreign cash
however, the amount and timing of cash repatriation during 2021 will be dependent upon each business unit’s
operational needs including requirements to fund working capital, capital expenditure, and jurisdictional tax payments.
The repatriation of cash balances from certain of our subsidiaries could have adverse tax consequences or be subject to
capital controls; however, those balances are generally available without legal restrictions to fund ordinary business
operations.
Cash Flow
Net cash provided by continuing operating activities for the year ended June 30, 2020 was $56.5 million compared to
net cash provided by continuing operating activities of $72.9 million in the prior year. We generated $88.6 million from
income statement activities and used $32.1 million of cash to fund working capital increases. Cash flow used in
investing activities for the year ended June 30, 2020 totaled $20.6 million. Uses of investing cash consisted primarily
of capital expenditures of $21.5 million. Cash used by financing activities for the year ended June 30, 2020 were $19.0
million and included cash paid for dividends of $10.6 million and stock repurchases of $10.4 million offset by net
borrowings of $1.2 million.
Net cash provided by continuing operating activities for the year ended June 30, 2019 was $72.9 million compared to
net cash provided by continuing operating activities of $48.6 million in the prior year. We generated $78.1 million from
income statement activities and used $5.2 million of cash to fund working capital increases. Cash flow used in investing
activities for the year ended June 30, 2019 totaled $157.6 million. Uses of investing cash consisted primarily of capital
expenditures of $32.5 million along with $127.9 million for the acquisition of Tenibac, Agile Magnetics, and GS
Engineering. Cash used by financing activities for the year ended June 30, 2019 were $38.2 million and included cash
paid for dividends of $9.8 million and stock repurchases of $33.4 million offset by net borrowings of $4.8 million.
We sponsor a number of defined benefit and defined contribution retirement plans. The U.S. pension plan is frozen for
all participants. We have evaluated the current and long-term cash requirements of these plans, and our existing sources
of liquidity are expected to be sufficient to cover required contributions under ERISA and other governing regulations.
33
The fair value of the Company's U.S. defined benefit pension plan assets was $194.8 million at June 30, 2020, as
compared to $186.2 million as of June 30, 2019. We participate in two multi-employer pension plans and sponsor six
defined benefit plans including two in the U.S. and one in the U.K., Germany, Ireland, and Japan. The Company’s
pension plan is frozen for U.S. employees and participants in the plan ceased accruing future benefits. Our primary
U.S. defined benefit plan is not expected to be 100% funded under ERISA rules at June 30, 2020. The Company has
elected to take advantage of provisions in the United States Coronavirus Aid, Relief, and Economic Security (“CARES”)
Act which allows for deferral until December 31, 2020 of defined benefit pension plan contributions due during calendar
year 2020. Prior to passage of the CARES Act, the Company was required to make U.S. defined benefit pension
payments of $1.5 million in the fourth quarter of fiscal year 2020 which will now be deferred until December. Including
deferred payments, we expect to contribute $10.0 million to all of our Company sponsored defined benefit plans during
fiscal year 2021.
We have evaluated the current and long-term cash requirements of our defined benefit and defined contribution plans
as of June 30, 2020 and determined our operating cash flows from continuing operations and available liquidity are
expected to be sufficient to cover the required contributions under ERISA and other governing regulations.
We have an insurance program in place to fund supplemental retirement income benefits for five retired executives.
Current executives and new hires are not eligible for this program. At June 30, 2020, the underlying policies had a cash
surrender value of $18.4 million and are reported net of loans of $8.9 million for which we have the legal right of offset.
These amounts are reported net on our balance sheet.
Capital Structure
During the second quarter of fiscal year 2019, the Company entered into a five-year Amended and Restated Credit
Agreement (“credit agreement”, or “facility”). The facility has a borrowing limit of $500 million and can be increased
by an amount of up to $250 million, in accordance with specified conditions contained in the agreement. The facility
also includes a $10 million sublimit for swing line loans and a $35 million sublimit for letters of credit.
Under the terms of the Credit Facility, we will pay a variable rate of interest and a fee on borrowed amounts as well as
a commitment fee on unused amounts under the facility. The amount of the commitment fee will depend upon both the
undrawn amount remaining available under the facility and the Company’s funded debt to EBITDA (as defined in the
agreement) ratio at the last day of each quarter.
Funds borrowed under the facility may be used for the repayment of debt, working capital, capital expenditures,
acquisitions (so long as certain conditions, including a specified funded debt to EBITDA leverage ratio is maintained),
and other general corporate purposes. As of June 30, 2020, the Company has used $7.3 million against the letter of
credit sub-facility and had the ability to borrow $203.6 million under the facility based on our current trailing twelve-
month EBITDA. The facility contains customary representations, warranties and restrictive covenants, as well as
specific financial covenants. The Company’s current financial covenants under the facility are as follows:
Interest Coverage Ratio - The Company is required to maintain a ratio of Earnings Before Interest and Taxes, as
Adjusted (“Adjusted EBIT per the Credit Facility”), to interest expense for the trailing twelve months of at least 2.75:1.
Adjusted EBIT per the Credit Facility specifically excludes extraordinary and certain other defined items such as cash
restructuring and acquisition-related charges up to the lower of $20.0 million or 10% of EBITDA. The facility allows
for unlimited non-cash charges including purchase accounting and goodwill adjustments. At June 30, 2020, the
Company’s Interest Coverage Ratio was 9.09:1.
Leverage Ratio- The Company’s ratio of funded debt to trailing twelve month Adjusted EBITDA per the Credit Facility,
calculated as Adjusted EBIT per the Credit Facility plus depreciation and amortization, may not exceed 3.5:1. Under
certain circumstances in connection with a Material Acquisition (as defined in the Facility), the Facility allows for the
leverage ratio to go as high as 4.0:1 for a four-fiscal quarter period. At June 30, 2020, the Company’s Leverage Ratio
was 1.47:1.
As of June 30, 2020, we had borrowings under our facility of $200.0 million. In order to manage our interest rate
exposure on these borrowings, we are party to $200.0 million of active floating to fixed rate swaps. These swaps convert
our interest payments from LIBOR to a weighted average rate of 1.27%. The effective rate of interest for our outstanding
borrowings, including the impact of the interest rate swaps, was 2.59%. Our primary cash requirements in addition to
34
day-to-day operating needs include interest payments, capital expenditures, acquisitions, share repurchases, and
dividends.
Our primary sources of cash for these requirements are cash flows from continuing operations and borrowings under
the facility. We expect that fiscal year 2021 depreciation and amortization expense will be between $20.0 and $22.0
million and $11.0 and $12.0 million, respectively.
The following table sets forth our capitalization at June 30:
Long-term debt
Less cash and cash equivalents
Net debt
Stockholders' equity
Total capitalization
2020
2019
199,150 $
118,809
80,341
461,632
541,973 $
197,610
93,145
104,465
464,313
568,778
$
$
Stockholders’ equity decreased year over year by $2.7 million, primarily as a result of $21.2 million of cash returned to
shareholders in the form of dividends and stock repurchases offset by current year net income of $20.2 million. The
Company's net debt to capital percentage changed to 14.8% as of June 30, 2020 from 18.4% in the prior year.
Contractual obligations of the Company as of June 30,2020 are as follows (in thousands):
Contractual Obligations
Total
Payments Due by Period
Less
than 1
Year
1-3
3-5
Years
Years
More
than 5
Years
Long-term debt obligations
Operating lease obligations
Estimated interest payments (1)
Post-retirement benefit payments (2)
Total
$ 200,000 $
44,696
25,994
46,362
$ 317,052 $
- $
9,520
6,001
9,969
25,490 $
- $ 200,000 $
9,002
13,369
8,467
11,526
17,967
15,510
42,862 $ 232,979 $
-
12,805
-
2,916
15,721
(1) Estimated interest payments are based upon effective interest rates as of June 30, 2020, and
exclude any interest rate swaps which are assets to us. See Item 7A for further discussions
surrounding interest rate exposure on our variable rate borrowings.
(2) Post-retirement benefits and pension plan contribution payments represents’ future pension
payments to comply with local funding requirements. Our policy is to fund domestic pension
liabilities in accordance with the minimum and maximum limits imposed by the Employee
Retirement Income Security Act of 1974 (“ERISA”), federal income tax laws and the funding
requirements of the Pension Protection Act of 2006.
At June 30, 2020, we had $8.6 million of non-current liabilities for uncertain tax positions. We are not able to provide
a reasonable estimate of the timing of future payments related to these obligations.
Off Balance Sheet Items
At June 30, 2020, and 2019, the Company had standby letters of credit outstanding, primarily for insurance and trade
financing purposes, of $7.3 million and $7.6 million, respectively.
We had no other material off balance sheet items at June 30, 2020.
35
Other Matters
Inflation – Certain of our expenses, such as wages and benefits, occupancy costs and equipment repair and replacement,
are subject to normal inflationary pressures. Inflation for medical costs can impact both our employee benefit costs as
well as our reserves for workers' compensation claims. We monitor the inflationary rate and make adjustments to
reserves whenever it is deemed necessary. Our ability to control worker compensation insurance medical cost inflation
is dependent upon our ability to manage claims and purchase insurance coverage to limit the maximum exposure for us.
Each of our segments is subject to the effects of changing raw material costs caused by the underlying commodity price
movements. In general, we do not enter into purchase contracts that extend beyond one operating cycle. While Standex
considers our relationship with our suppliers to be good, there can be no assurances that we will not experience any
supply shortage.
Foreign Currency Translation – Our primary functional currencies used by our non-U.S. subsidiaries are the Euro,
British Pound Sterling (Pound), Japanese (Yen), and Chinese (Yuan).
Defined Benefit Pension Plans – We record expenses related to these plans based upon various actuarial assumptions
such as discount rates and assumed rates of returns. The Company’s pension plan is frozen for substantially all eligible
U.S. employees and participants in the plan ceased accruing future benefits.
Environmental Matters – To the best of our knowledge, we believe that we are presently in substantial compliance with
all existing applicable environmental laws and regulations and do not anticipate any instances of non-compliance that
will have a material effect on our future capital expenditures, earnings or competitive position.
Seasonality – We are a diversified business with generally low levels of seasonality.
Employee Relations – The Company has labor agreements with several union locals in the United States and several
European employees belong to European trade unions.
Critical Accounting Policies
The Consolidated Financial Statements include accounts of the Company and all of our subsidiaries. The preparation
of financial statements in conformity with accounting principles generally accepted in the United States of America
requires us to make estimates and assumptions in certain circumstances that affect amounts reported in the
accompanying Consolidated Financial Statements. Although, we believe that materially different amounts would not
be reported due to the accounting policies described below, the application of these accounting policies involves the
exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from
these estimates. We have listed a number of accounting policies which we believe to be the most critical.
Revenue Recognition – Effective July 1, 2018, the Company adopted accounting standard ASU No. 2014-09, “Revenue
from Contracts with Customers" (ASC 606) using the modified retrospective method to contracts that were not
completed as of June 30, 2018. We recognized the cumulative effect of initially applying the new revenue standard as
an adjustment to the opening balance of retained earnings, whereby the cumulative impact of all prior periods is recorded
in retained earnings or other impacted balance sheet line items upon adoption. The comparative information has not
been adjusted and continues to be reported under ASC 605. The impact on the Company’s consolidated income
statements, balance sheets, equity or cash flows as of the adoption date as a result of applying ASC 606 have been
reflected within those respective financial statements. The Company’s accounting policy has been updated to align with
ASC 606.
The adoption of ASC 606 represents a change in accounting principle that provides enhanced revenue recognition
disclosures. Revenue is recognized when the control of the promised goods or services are transferred to our customers,
in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. The
Company recognizes all revenues on a gross basis based on consideration of the criteria set forth in ASC Topic 606-10-
55, Principal versus Agent Considerations.
Most of the Company’s contracts have a single performance obligation which represents, the product or service being
sold to the customer. Some contracts include multiple performance obligations such as a product and the related
installation and/or extended warranty. Additionally, most of the Company’s contracts offer assurance type warranties
in connection with the sale of a product to customers. Assurance type warranties provide a customer with assurance
36
that the product complies with agreed-upon specifications. Assurance type warranties do not represent a separate
performance obligation.
In general, the Company recognizes revenue at the point in time control transfers to their customer based on
predetermined shipping terms. Revenue recognized under long-term contracts within the Engineering Technologies
and Engraving groups for highly customized customer products that have no alternative use and in which the contract
specifies the Company has a right to payment for its costs, plus a reasonable margin are recognized over time. For
products recognized over time, the transfer of control is measured pro rata, based upon current estimates of costs to
complete such contracts. Losses on contracts are fully recognized in the period in which the losses become
determinable. Revisions in profit estimates are reflected on a cumulative basis in the period in which the basis for such
revision becomes known.
Collectability of Accounts Receivable – Accounts Receivable are reduced by an allowance for amounts that may become
uncollectible in the future. Our estimate for the allowance for doubtful accounts related to trade receivables includes
evaluation of specific accounts where we have information that the customer may have an inability to meet its financial
obligation together with a general provision for unknown but existing doubtful accounts.
Realizability of Inventories – Inventories are valued at the lower of cost or market. The Company regularly reviews
inventory values on hand using specific aging categories and records a write down for obsolete and excess inventory
based on historical usage and estimated future usage. As actual future demand or market conditions may vary from
those projected by management, adjustments to inventory valuations may be required.
Realization of Goodwill – Goodwill and certain indefinite-lived intangible assets are not amortized, but instead are tested
for impairment at least annually and more frequently whenever events or changes in circumstances indicate that the fair
value of the asset may be less than its carrying amount of the asset. The Company’s annual test for impairment is
performed using a May 31st measurement date. We have identified our reporting units for impairment testing as our
seven operating segments, which are aggregated into our 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
determined using a discounted cash flow model (income approach). This method uses various assumptions that are
specific to each individual reporting unit in order to determine the fair value. In addition, the Company compares the
estimated aggregate fair value of its reporting units to its overall market capitalization.
Our annual impairment testing at each reporting unit relied on assumptions surrounding general market conditions,
short-term growth rates, a terminal growth rate of 2.5%, and detailed management forecasts of future cash flows
prepared by the relevant reporting unit. Fair values were determined primarily by discounting estimated future cash
flows at a weighted average cost of capital of 9.12%. During our annual impairment testing, we evaluated the sensitivity
of our most critical assumption, the discount rate, and determined that a 150-basis point change in the discount rate
selected would not have impacted the test results. Additionally, the Company could reduce the terminal growth rate
from its current 2.5% to 1.0% and the fair value of all reporting units would still exceed their carrying value.
While we believe that our estimates of future cash flows are reasonable, changes in assumptions could significantly
affect our valuations and result in impairments in the future. The most significant assumption involved in the
Company’s determination of fair value is the cash flow projections of each reporting unit.
As a result of our annual assessment in the fourth quarter of fiscal year 2020, the Company determined that the fair
value of the seven reporting units substantially exceeded their respective carrying values. Therefore, no impairment
charges were recorded in connection with our annual assessment during the fourth quarter of fiscal year 2020.
In connection with the planned divestiture of the Refrigerated Solutions Group, we performed an interim assessment of
our goodwill balances and compared the fair value of each reporting unit, Master-Bilt and Nor-Lake, to its carrying
value in the third quarter of fiscal year 2020. This resulted in an asset impairment charge of $7.7 million in discontinued
operations, which represented the full amount of goodwill associated with both reporting units. In addition, due to the
impact that the COVID-19 pandemic has on our projected operating results, cash flow, and market capitalization, we
completed an interim goodwill impairment assessment for our remaining reporting units. As a result of our assessment
in the third quarter, the Company determined that the fair value of its reporting units, with the exception of RSG,
substantially exceeded their respective carrying values. Therefore, no additional impairment charges were recorded in
connection with our third quarter 2020 assessment.
37
Cost of Employee Benefit Plans – We provide a range of benefits to certain retirees, including pensions and some
postretirement benefits. We record expenses relating to these plans based upon various actuarial assumptions such as
discount rates, assumed rates of return, compensation increases and turnover rates. The expected return on plan assets
assumption of 7.0% in the U.S. is based on our expectation of the long-term average rate of return on assets in the
pension funds and is reflective of the current and projected asset mix of the funds and considers the historical returns
earned on the funds. We have analyzed the rates of return on assets used and determined that these rates are reasonable
based on the plans’ historical performance relative to the overall markets as well as our current expectations for long-
term rates of returns for our pension assets. The U.S. discount rate of 2.9% reflects the current rate at which pension
liabilities could be effectively settled at the end of the year. The discount rate is determined by matching our expected
benefit payments from a stream of AA- or higher bonds available in the marketplace, adjusted to eliminate the effects
of call provisions. We review our actuarial assumptions, including discount rate and expected long-term rate of return
on plan assets, on at least an annual basis and make modifications to the assumptions based on current rates and trends
when appropriate. Based on information provided by our actuaries and other relevant sources, we believe that our
assumptions are reasonable.
The cost of employee benefit plans includes the selection of assumptions noted above. A twenty-five-basis point change
in the U.S. expected return on plan assets assumptions, holding our discount rate and other assumptions constant, would
increase or decrease pension expense by approximately $0.5 million per year. A twenty-five-basis point change in our
discount rate, holding all other assumptions constant, would have no impact on 2020 pension expense as changes to
amortization of net losses would be offset by changes to interest cost. In future years, the impact of discount rate
changes could yield different sensitivities. See the Notes to the Consolidated Financial Statements for further
information regarding pension plans.
Business Combinations - The accounting for business combinations requires estimates and judgments as to expectations
for future cash flows of the acquired business and the allocation of those cash flows to identifiable intangible assets in
determining the estimated fair values for assets acquired and liabilities assumed. The fair values assigned to tangible
and intangible assets acquired and liabilities assumed, are based on management’s estimates and assumptions, as well
as other information compiled by management, including valuations that utilize customary valuation procedures and
techniques. If the actual results differ from the estimates and judgments used in these fair values, the amounts recorded
in the consolidated financial statements could result in a possible impairment of the intangible assets and goodwill, or
require acceleration of the amortization expense of finite-lived intangible assets.
Allocations of the purchase price for acquisitions are based on estimates of the fair value of the net assets acquired and
are subject to adjustment upon finalization of the purchase price allocation. During this measurement period, the
Company will adjust assets or liabilities if new information is obtained about facts and circumstances that existed as of
the acquisition date that, if known, would have resulted in the recognition of those assets and liabilities as of that date.
All changes that do not qualify as measurement period adjustments are included in current period earnings.
Leases – Effective July 1, 2019, we adopted ASU 2016-02, Leases (Topic 842), using the modified retrospective
approach and utilizing the effective date as its date of initial application. As a result, prior periods are presented in
accordance with the previous guidance in ASC 840, Leases (“ASC 840”). We have elected to apply the ‘package of
practical expedients’ which allow us to not reassess (i) whether existing or expired arrangements contain a lease, (ii) the
lease classification of existing or expired leases, or (iii) whether previous initial direct costs would qualify for
capitalization under the new lease standard.
At the inception of an arrangement, we determined whether the arrangement is or contains a lease based on the unique
facts and circumstances present in the arrangement. Leases with a term greater than one year are recognized on the
balance sheet as right-of-use assets and short-term and long-term lease liabilities, as applicable. We do not have material
financing leases.
Operating lease liabilities and their corresponding right-of-use assets are initially recorded based on the present value
of lease payments over the expected remaining lease term. The interest rate implicit in lease contracts is typically not
readily determinable. As a result, we utilize our incremental borrowing rate to discount lease payments, which reflects
the fixed rate at which we could borrow on a collateralized basis the amount of the lease payments in the same currency,
for a similar term, in a similar economic environment. To estimate our incremental borrowing rate, a credit rating
applicable to the Company is estimated using a synthetic credit rating analysis since we do not currently have a rating
agency-based credit rating
38
We have elected not to recognize leases with an original term of one year or less on the balance sheet. We typically
only include an initial lease term in our assessment of a lease arrangement. Options to renew a lease are not included
in the Company’s assessment unless there is reasonable certainty that the Company will renew.
Recently Issued Accounting Pronouncements
See "Item 8. Financial Statements and Supplementary Data, Note 1. Summary of Accounting Policies” for information
regarding the effect of recently issued accounting pronouncements on our consolidated statements of operations,
comprehensive income, stockholders’ equity, cash flows, and notes for the year ended June 30, 2020.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Risk Management
We are exposed to market risks from changes in interest rates, commodity prices and changes in foreign currency
exchange. To reduce these risks, we selectively use, from time to time, financial instruments and other proactive
management techniques. We have internal policies and procedures that place financial instruments under the direction
of the Treasurer and restrict all derivative transactions to those intended for hedging purposes only. The use of financial
instruments for trading purposes (except for certain investments in connection with the non-qualified defined
contribution plan) or speculation is strictly prohibited. The Company has no majority-owned subsidiaries that are
excluded from the consolidated financial statements. Further, we have no interests in or relationships with any special
purpose entities.
Exchange Risk
We are exposed to both transactional risk and translation risk associated with exchange rates. The transactional risk is
mitigated, in large part, by natural hedges developed with locally denominated debt service on intercompany accounts.
We also mitigate certain of our foreign currency exchange rate risks by entering into forward foreign currency contracts
from time to time. The contracts are used as a hedge against anticipated foreign cash flows, such as loan payments,
customer remittances, and materials purchases, and are not used for trading or speculative purposes. The fair values of
the forward foreign currency exchange contracts are sensitive to changes in foreign currency exchange rates, as an
adverse change in foreign currency exchange rates from market rates would decrease the fair value of the contracts.
However, any such losses or gains would generally be offset by corresponding gains and losses, respectively, on the
related hedged asset or liability. At June 30, 2020 and 2019, the fair value, in the aggregate, of the Company’s open
foreign exchange contracts was a liability of $2.5 million and $3.1 million respectively.
Our primary translation risk is with the Euro, British Pound Sterling, Peso, Japanese Yen and Chinese Yuan. A
hypothetical 10% appreciation or depreciation of the value of any these foreign currencies to the U.S. Dollar at June 30,
2020, would not result in a material change in our operations, financial position, or cash flows. We hedge our most
significant foreign currency translation risks primarily through cross currency swaps and other instruments, as
appropriate.
Interest Rate
The Company’s effective interest rate on borrowings was 2.59% and 3.88% at June 30, 2020 and 2019, respectively.
Our interest rate exposure is limited primarily to interest rate changes on our variable rate borrowings, and is mitigated
by our use of interest rate swap agreements to modify our exposure to interest rate movements. At June 30, 2020, we
have $200.0 million of active floating to fixed rate swaps with terms ranging from two to five years. These swaps
convert our interest payments from LIBOR to a weighted average rate of 1.27%. At June 30, 2020 and 2019, the fair
value, in the aggregate, of the Company’s interest rate swaps were liabilities of $6.7 million and $1.4 million
respectively. A 25-basis point increase in interest rates would not change our annual interest expense as all of our
outstanding debt is currently converted to fixed rate debts by means of interest rate swaps.
39
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, 2020, 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
our segments is subject to the effects of changing raw material costs caused by the underlying commodity price
movements. In general, we do not enter into purchase contracts that extend beyond one operating cycle. While Standex
considers our relationship with our suppliers to be good, there can be no assurances that we will not experience any
supply shortage.
The Engineering Technologies, Specialty Solutions, and Electronics segments are all sensitive to price increases for
steel products, other metal commodities and petroleum based products. In the past year, we have experienced price
fluctuations for a number of materials including rhodium, steel, and other metal commodities. These materials are some
of the key elements in the products manufactured in these segments. Wherever possible, we will implement price
increases to offset the impact of changing prices. The ultimate acceptance of these price increases, if implemented, will
be impacted by our affected divisions’ respective competitors and the timing of their price increases.
Item 8. Financial Statements and Supplementary Data
As of June 30 (in thousands, except share data)
2020
2019
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, net
Inventories
Prepaid expenses and other current assets
Income taxes receivable
Current assets-Discontinued Operations
Total current assets
Property, plant and equipment, net
Intangible assets, net
Goodwill
Deferred tax asset
Operating lease right-of-use asset
Other non-current assets
Long-term assets-Discontinued Operations
Total non-current assets
$
118,809 $
98,157
85,031
18,870
8,194
2,936
331,997
132,533
106,412
271,221
17,322
44,788
26,605
-
598,881
93,145
103,374
76,302
21,820
1,622
37,610
333,873
134,239
118,660
273,843
14,140
-
25,105
22,029
588,016
Total assets
$
930,878 $
921,889
40
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
Accrued liabilities
Income taxes payable
Current liabilities-Discontinued Operations
Total current liabilities
Long-term debt
Operating lease long-term liabilities
Accrued pension and other non-current liabilities
Non-current liabilities-Discontinued Operations
Total non-current liabilities
Commitments and Contingencies (Note 12)
Stockholders' equity:
$
54,910 $
59,929
7,428
610
122,877
199,150
36,293
110,926
-
346,369
54,201
50,176
5,735
31,503
141,615
197,610
-
116,128
2,223
315,961
Common stock, par value $1.50 per share - 60,000,000 shares authorized,
27,984,278 issued, 12,235,786 and 12,334,607 shares outstanding in 2020 and
2019
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury shares (15,748,492 shares in 2020 and 15,649,671 shares in 2019)
Total stockholders' equity
41,976
72,752
827,656
(147,659 )
(333,093 )
461,632
41,976
65,515
818,282
(137,278 )
(324,182 )
464,313
Total liabilities and stockholders' equity
$
930,878 $
921,889
See notes to consolidated financial statements.
41
Consolidated Statements of Operations
Standex International Corporation and Subsidiaries
For the Years Ended June 30
(in thousands, except per share data)
Net sales
Cost of sales
Gross profit
Selling, general and administrative
Restructuring costs
Acquisition related expenses
Other operating (income) expense, net
Income from operations
Interest expense
Other non-operating (income) expense, net
Total
Income from continuing operations before income taxes
Provision for income taxes
Income from continuing operations
2020
2019
2018
$
604,535 $
(389,080 )
215,455
639,931 $
(405,264 )
234,667
595,515
(369,516 )
225,999
148,499
4,669
1,759
-
60,528
7,475
(1,021 )
6,454
54,074
(13,060 )
41,014
150,327
1,289
3,075
500
79,476
10,760
1,742
12,502
66,974
(18,688 )
48,286
140,680
3,428
3,749
-
78,142
8,029
1,720
9,749
68,393
(38,026 )
30,367
Income (loss) from discontinued operations, net of tax
(20,826 )
19,628
6,237
Net income
$
20,188 $
67,914 $
36,604
Basic earnings per share:
Income (loss) from continuing operations
Income (loss) from discontinued operations
Total
Diluted earnings per share:
Income (loss) from continuing operations
Income (loss) from discontinued operations
Total
See notes to consolidated financial statements.
$
$
$
$
3.33 $
(1.69 )
1.64 $
3.31 $
(1.68 )
1.63 $
3.84 $
1.56
5.40 $
3.83 $
1.55
5.38 $
2.39
0.49
2.88
2.37
0.49
2.86
42
Consolidated Statements of Comprehensive Income
Standex International Corporation and Subsidiaries
For the Years Ended June 30 (in thousands)
2020
2019
2018
Net income
Other comprehensive income (loss):
Defined benefit pension plans:
$
20,188 $
67,914 $
36,604
Actuarial gains (losses) and other changes in unrecognized
costs
Amortization of unrecognized costs
$
Derivative instruments:
Change in unrealized gains and (losses)
Amortization of unrealized gains and (losses) into interest
expense
Foreign currency translation gains (losses)
Other comprehensive income (loss) before tax
Income tax (provision) benefit:
Defined benefit pension plans:
Actuarial gains (losses) and other changes in unrecognized
costs
Amortization of unrecognized costs
Derivative instruments:
Change in unrealized gains and (losses)
Amortization of unrealized gains and (losses) into interest
expense
Income tax (provision) benefit to other comprehensive income
(loss)
$
$
(9,179 ) $
5,750
(20,382 ) $
4,461
6,159
5,485
(5,247 )
(1,576 )
2,541
(856 )
(3,388 )
(12,920 ) $
1,410
(2,645 )
(18,732 ) $
292
94
14,571
2,315 $
(1,387 )
4,742 $
(1,089 )
(1,436 )
(1,461 )
1,746
(419 )
(135 )
79
(339 )
(43 )
$
2,539 $
3,313 $
(3,279 )
Other comprehensive income (loss), net of tax
Comprehensive income
(10,381 )
9,807 $
(15,419 )
52,495 $
11,292
47,896
$
See notes to consolidated financial statements.
43
Consolidated Statements of Stockholders' Equity
Standex International
Corporation and
Subsidiaries
Additional
Accumulated
Other
Comprehensive
Total
For the Years Ended June
30
(in thousands, except as
specified)
Balance, June 30, 2017
Stock issued for employee
stock option and purchase
plans, including related
income tax benefit and other
Stock-based compensation
Treasury stock acquired
Adoption of ASU 2018-02
Comprehensive income:
Net Income
Foreign currency translation
adjustment
Pension and OPEB
adjustments, net of tax of
$2.9 million
Change in fair value of
derivatives, net of tax of
$0.4 million
Dividends declared ($0.70
per share)
Balance, June 30, 2018
Stock issued for employee
stock option and purchase
plans and other
Stock-based compensation
Treasury stock acquired
Adoption of ASC 606
Comprehensive income:
Net Income
Foreign currency translation
adjustment
Pension and OPEB
adjustments, net of tax of
$3.7 million
Change in fair value of
derivatives, net of tax of
$0.7 million
Dividends declared ($0.78
per share)
Balance, June 30, 2019
Stock issued for employee
stock option and purchase
plans and other
Stock-based compensation
Treasury stock acquired
Adoption of ASC 606
Common Paid-in
Retained
Income
Treasury Stock Stockholders’
Stock
$ 41,976 $
Capital Earnings
(Loss)
Shares Amount Equity
56,783 $ 716,605 $
(115,938 ) 15,322 $ (290,762 ) $
408,664
-
-
-
-
-
-
-
-
(417 )
-
4,962
-
-
- 17,215
-
-
- 36,604
-
-
-
(17,215 )
-
-
(70 )
-
27
-
-
-
1,334
-
(2,652 )
-
-
-
917
4,962
(2,652 )
-
-
36,604
-
-
94
-
-
94
-
-
-
8,748
-
-
8,748
-
-
-
2,452
-
-
2,452
-
(8,994 )
61,328 $ 761,430 $
-
(163 )
-
4,350
-
-
(1,107 )
-
-
-
- 67,914
-
-
(121,859 ) 15,279 $ (292,080 ) $
-
-
-
-
-
-
-
(67 )
-
1,292
-
438 (33,394 )
-
-
-
-
-
-
(8,994 )
450,795
1,129
4,350
(33,394 )
(1,107 )
-
67,914
-
-
(2,645 )
-
-
(2,645 )
-
-
(12,268 )
-
-
(12,268 )
-
-
-
-
-
-
-
-
-
$ 41,976 $
-
-
-
(506 )
-
-
(506 )
-
$ 41,976 $
-
(9,955 )
65,515 $ 818,282 $
-
-
(137,278 ) 15,650 $ (324,182 ) $
-
-
-
-
-
211
7,026
-
-
-
-
-
(55 )
-
-
-
-
44
(74 )
-
1,526
-
172 (10,437 )
-
-
(9,955 )
464,313
1,737
7,026
(10,437 )
(55 )
Comprehensive income:
Net Income
Foreign currency translation
adjustment
Pension and OPEB
adjustments, net of tax of
$0.9 million
Change in fair value of
derivatives, net of tax of
$1.6 million
Dividends declared ($0.86
per share)
Balance, June 30, 2020
-
-
-
-
-
- 20,188
-
-
-
-
(3,388 )
-
-
-
-
-
-
-
20,188
(3,388 )
-
-
(2,500 )
-
-
(2,500 )
-
-
-
(4,493 )
-
-
(4,493 )
-
$ 41,976 $
- (10,759 )
72,752 $ 827,656 $
-
-
(147,659 ) 15,748 $ (333,093 ) $
-
(10,759 )
461,632
See notes to consolidated financial statements.
Consolidated Statements of Cash Flows
For the Years Ended June 30 (in thousands)
Cash Flows from Operating Activities
Net income
Income (loss) from discontinued operations
Income (loss) from continuing operations
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
$
Depreciation and amortization
Stock-based compensation
Non-cash portion of restructuring charge
(Gain) loss on disposal of real estate and equipment
Deferred Income Taxes
Life Insurance Benefit
Increase/(decrease) in cash from changes in assets and liabilities,
net of effects from discontinued operations and business
acquisitions:
Accounts receivables, net
Inventories
Contributions to defined benefit plans
Prepaid expenses and other
Accounts payable
Accrued payroll, employee benefits and other liabilities
Income taxes payable
Net cash provided by operating activities from continuing
operations
Net cash used for operating activities from discontinued operations
Net cash provided by operating activities
2020
2019
2018
20,188 $
(20,826 )
41,014
67,914 $
19,628
48,286
32,294
7,026
386
-
5,635
(1,302 )
2,325
(9,050 )
(4,040 )
(10,960 )
174
2,342
(11,167 )
54,677
(7,435 )
47,242
29,288
4,350
(329 )
-
(3,509 )
-
7,181
7,203
(1,359 )
(14,271 )
(2,074 )
6,105
(7,942 )
72,929
417
73,346
36,604
6,237
30,367
25,035
4,962
(1,264 )
(655 )
7,391
-
(7,352 )
(10,016 )
(6,966 )
752
(4,874 )
13,872
735
51,987
12,938
64,925
45
Cash Flows from Investing Activities
Expenditures for capital assets
Expenditures for acquisitions, net of cash acquired
Expenditures for executive life insurance policies
Proceeds from sale of real estate and equipment
Other investing activity
Net cash (used for) investing activities from continuing operations
Net cash provided by investing activities from discontinued
operations
Net cash provided by (used for) investing activities
Cash Flows from Financing Activities
Proceeds from borrowings
Payments of debt
Contingent consideration payment
Stock issued under employee stock option and purchase plans
Purchase of treasury stock
Cash dividends paid
Net cash provided by (used for) financing activities
Effect of exchange rate changes on cash
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest
Income taxes, net of refunds
See notes to consolidated financial statements.
$
$
$
(21,521 )
(622 )
(281 )
180
1,624
(20,620 )
(32,507 )
(127,924 )
(377 )
3,164
-
(157,644 )
20,003
(617 )
107,973
(49,671 )
106,500
(105,300 )
(872 )
1,738
(10,437 )
(10,606 )
(18,977 )
(1,984 )
25,664
93,145
118,809 $
241,950
(237,150 )
(910 )
1,129
(33,394 )
(9,826 )
(38,201 )
(1,931 )
(16,457 )
109,602
93,145 $
(23,567 )
(10,397 )
(310 )
2,852
2,130
(29,292 )
(2,973 )
(32,265 )
163,500
(164,788 )
-
915
(2,652 )
(8,888 )
(11,913 )
289
21,036
88,566
109,602
6,324 $
18,737 $
9,471 $
23,969 $
6,178
22,145
46
STANDEX INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING POLICIES
Basis of Presentation and Consolidation
Standex International Corporation (“Standex” or the “Company”) is a diversified manufacturing company with
operations in the United States, Europe, Asia, Africa, and Latin America. The accompanying consolidated financial
statements include the accounts of Standex International Corporation and its subsidiaries and are prepared in accordance
with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany accounts
and transactions have been eliminated in consolidation.
The Company considers events or transactions that occur after the balance sheet date, but before the financial statements
are issued to provide additional evidence relative to certain estimates or to identify matters that require additional
disclosure. We evaluated subsequent events through the date and time our consolidated financial statements were
issued.
Accounting Estimates
The preparation of consolidated financial statements in conformity with GAAP requires the use of estimates, judgments
and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities at the date of the financial statements and for the period then ended. Estimates are based
on historical experience, actuarial estimates, current conditions and various other assumptions that are believed to be
reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of
assets and liabilities when they are not readily apparent from other sources. These estimates assist in the identification
and assessment of the accounting treatment necessary with respect to commitments and contingencies. Actual results
may differ from these estimates under different assumptions or conditions. The estimates and assumptions used in the
preparation of the consolidated financial statements have considered the implications on the Company as a result of the
onset of the COVID-19 pandemic and its related economic impacts. As a result of the COVID 19 pandemic, there is
heightened volatility and uncertainty in customer demand and the worldwide economy. However, the magnitude of
such impact on the Company’s business and its duration is uncertain. The Company is not aware of any specific event
or circumstance that would require an update to its estimates or adjustments to the carrying value of its assets and
liabilities as of June 30, 2020 and the issuance date of this Annual Report on Form 10-K
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments purchased with a maturity of three months or less. These
investments are carried at cost, which approximates fair value. At June 30, 2020 and 2019 the Company’s cash was
comprised solely of cash on deposit.
Trading Securities
The Company purchases investments for its non-qualified defined contribution plan for employees who exceed certain
thresholds under our traditional 401(k) plan. These investments are classified as trading and reported at fair value. The
investments generally consisting of mutual funds, are included in other non-current assets and amounted to $2.1 million
at June 30, 2020 and $2.4 million at June 30, 2019. Gains and losses on these investments are recorded as other non-
operating income (expense), net in the Consolidated Statements of Operations.
Accounts Receivable Allowances
The Company has provided an allowance for doubtful accounts reserve which represents the best estimate of probable
loss inherent in the Company’s account receivables portfolio. This estimate is derived from the Company’s knowledge
of its end markets, customer base, products, and historical experience.
47
The changes in the allowances for uncollectible accounts during 2020, 2019, and 2018 were as follows (in thousands):
Balance at beginning of year
Acquisitions and other
Provision charged to expense
Write-offs, net of recoveries
Balance at end of year
Inventories
2020
2019
2018
$
$
1,250 $
192
824
(153 )
2,113 $
1,590 $
66
(48 )
(358 )
1,250 $
1,131
(193 )
671
(19 )
1,590
Inventories are stated at the lower of (first-in, first-out) cost or market. Inventory quantities on hand are reviewed
regularly, and write downs are made for obsolete, slow moving, and non-saleable inventory, based primarily on
management’s forecast of customer 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 for
recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.
Recognition and measurement of a potential impairment loss is performed on assets grouped with other assets and
liabilities at the lowest level where identifiable cash flows are largely independent of the cash flows of other assets and
liabilities. An impairment loss is the amount by which the carrying amount of a long-lived asset (asset group) exceeds
its estimated fair value. Fair value is determined based on discounted cash flows or appraised values, depending upon
the nature of the assets.
Property, Plant and Equipment
Property, plant and equipment are reported at cost less accumulated depreciation. Depreciation is recorded on assets
over their estimated useful lives, generally using the straight-line method. Lives for property, plant and equipment are
as follows:
Buildings (years)
Leasehold improvements
Machinery and equipment (years)
Furniture and Fixtures (years)
Computer hardware and software (years)
to 50
40
Lesser of useful life or
term, unless renewals are
deemed to be reasonably
assured
8
3
3
to 15
to 10
to 7
Routine maintenance costs are expensed as incurred. Major improvements, including those made to leased facilities,
are capitalized.
Goodwill and Identifiable Intangible Assets
All business combinations are accounted for using the acquisition method. Goodwill and identifiable intangible assets
with indefinite lives, are not amortized, but are reviewed annually for impairment or more frequently if impairment
indicators arise. Identifiable intangible assets that are not deemed to have indefinite lives are amortized over the
following useful lives:
Customer relationships (years)
Patents (years)
Non-compete agreements (years)
Other (years)
Developed technology (years)
Trade names
5 to 15
12
5
10
10 to 20
Indefinite life
See discussion of the Company’s assessment of impairment in Note 6 – Goodwill and Note 7 – Intangible Assets.
48
Fair Value of Financial Instruments
The financial instruments, shown below, are presented at fair value. Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. Where available, fair value is based on observable market prices or parameters or derived from such
prices or parameters. When observable prices or inputs are not available, valuation models may be applied.
Assets and liabilities recorded at fair value in the consolidated balance sheet are categorized based upon the level of
judgment associated with the inputs used to measure their fair values. Hierarchical levels directly related to the amount
of subjectivity associated with the inputs to fair valuation of these assets and liabilities and the methodologies used in
valuation are as follows:
Level 1 – Quoted prices in active markets for identical assets and liabilities. The Company’s deferred compensation
plan assets consist of shares in various mutual funds (for the deferred compensation plan, investments are
participant-directed) which invest in a broad portfolio of debt and equity securities. These assets are valued based
on publicly quoted market prices for the funds’ shares as of the balance sheet dates. For pension assets (see Note
16 – Employee Benefit Plans), securities are valued based on quoted market prices for securities held directly by
the trust.
Level 2 – Inputs, other than quoted prices in an active market, that are observable either directly or indirectly
through correlation with market data. For foreign exchange forward contracts and interest rate swaps, the Company
values the instruments based on the market price of instruments with similar terms, which are based on spot and
forward rates as of the balance sheet dates. For pension assets held in commingled funds (see Note 16 – Employee
Benefit Plans), the Company values investments based on the net asset value of the funds, which are derived from
the quoted market prices of the underlying fund holdings. The Company has considered the creditworthiness of
counterparties in valuing all assets and liabilities.
Level 3 – Unobservable inputs based upon the Company’s best estimate of what market participants would use in
pricing the asset or liability.
The Company did not have any transfers of assets and liabilities among levels of the fair value measurement hierarchy
during the years ended June 30, 2020 or 2019.
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, 2020 and 2019 were (in thousands):
Financial Assets
Marketable securities - deferred compensation plan
Interest rate swaps
Financial Liabilities
Foreign exchange contracts
Interest rate swaps
Contingent acquisition payments (a)
Financial Assets
Marketable securities - deferred compensation plan
Interest rate swaps
Financial Liabilities
Foreign exchange contracts
Interest rate swaps
Contingent acquisition payments(a)
49
Total
Level 1
Level 2
Level 3
2020
$
$
2,065 $
-
2,065 $
-
- $
-
-
-
2,477 $
6,667
1,343
- $
-
-
2019
2,477 $
6,667
-
-
-
1,343
Total
Level 1
Level 2
Level 3
$
$
2,354 $
52
2,354 $
-
- $
52
-
-
3,052 $
1,432
6,418
- $
-
-
3,052 $
1,432
-
-
-
6,418
(a) The fair value of our contingent consideration arrangement is determined based on our evaluation as to the
probability and amount of any deferred compensation that has been earned to date.
The Company’s financial liabilities based upon Level 3 inputs include contingent consideration arrangements relating
to its acquisition of Horizon Scientific, Piazza Rosa and GS Engineering. The Company is contractually obligated to
pay contingent consideration payments to the Sellers of these businesses based on the achievement of certain criteria.
Contingent consideration payable to the Horizon seller is based on continued employment of the seller on the second
and third anniversary of the closing date of the acquisition. The Company is contractually obligated to pay contingent
consideration payments in connection with the Horizon Scientific acquisition based on the criteria of continued
employment of the seller on the second and third anniversary of the closing date of the acquisition. The seller of Horizon
remained employed on the second and third anniversaries of the closing date and payments were made to the seller in
the second quarters of fiscal year 2019 and 2020. This obligation is considered settled as of June 30, 2020.
The Company is contractually obligated to pay contingent consideration payments in connection with the Piazza Rosa
acquisition based on the achievement of certain revenue targets during each of the first three years following acquisition.
Contingent acquisition payments are payable in euros and can be paid in periods through fiscal year 2021. Piazza Rosa
exceeded the defined revenue targets during the first and second years and payments were made to the Piazza Rosa
sellers during the first quarter of fiscal year 2019 and the second quarter of fiscal year 2020. As of June 30, 2020, the
Company could be required to pay up to $0.8 million for contingent consideration arrangements if the revenue targets
are met.
The Company is also obligated to pay contingent consideration to the sellers of GS Engineering in the event that certain
revenue and gross margin targets are achieved during the five years following acquisition. The targets set in the GS
stock purchase agreement were not met for the first year, which concluded in the fourth quarter of fiscal year 2020. As
of June 30, 2020, the Company could be required to pay up to $12.8 million for contingent consideration arrangements
if the revenue and gross margin targets are met in fiscal years 2021 through 2024.
The Company has determined the fair value of the liabilities for the contingent consideration based on a probability-
weighted discounted cash flow analysis. This fair value measurement is based on significant inputs not observable in
the market and thus represents a Level 3 measurement within the fair value hierarchy. The fair value of the contingent
consideration liability associated with future payments was based on several factors, the most significant of which are
continued employment of the seller and the risk-adjusted discount rate for the fair value measurement. As of June 30,
2020, the range of outcomes nor the assumptions used to develop the estimates had changed.
Concentration of Credit Risk
The Company is subject to credit risk through trade receivables. Concentration of risk with respect to trade receivables
is minimized because of the diversification of our operations, as well as our large customer base and our geographical
dispersion. No individual customer accounts for more than 5% of revenues or accounts receivable in the periods
presented.
Revenue Recognition
In general, the Company recognizes revenue at the point in time control transfers to their customer based on
predetermined shipping terms. Revenue recognized under long-term contracts within the Engineering Technologies
group for highly customized customer products that have no alternative use and in which the contract specifies the
Company has a right to payment for its costs, plus a reasonable margin are recognized over time. For products
recognized over time, the transfer of control is measured pro rata, based upon current estimates of costs to complete
such contracts. Losses on contracts are fully recognized in the period in which the losses become determinable.
Revisions in profit estimates are reflected on a cumulative basis in the period in which the basis for such revision
becomes known.
Cost of Goods Sold and Selling, General and Administrative Expenses
The Company includes expenses in either cost of goods sold or selling, general and administrative categories based
upon the natural classification of the expenses. Cost of goods sold includes expenses associated with the acquisition,
inspection, manufacturing and receiving of materials for use in the manufacturing process. These costs include inbound
50
freight charges, purchasing and receiving costs, inspection costs, internal transfer costs as well as depreciation,
amortization, wages, benefits and other costs that are incurred directly or indirectly to support the manufacturing
process. Selling, general and administrative includes expenses associated with the distribution of our products, sales
effort, administration costs and other costs that are not incurred to support the manufacturing process. The Company
records distribution costs associated with the sale of inventory as a component of selling, general and administrative
expenses in the Consolidated Statements of Operations. These expenses include warehousing costs, outbound freight
charges and costs associated with salaried distribution personnel. Our gross profit margins may not be comparable to
those of other entities due to different classifications of costs and expenses.
Our total advertising expenses, which are classified under selling, general, and administrative expenses are primarily
related to trade shows, and totaled $1.3 million, $2.5 million, and $2.4 million for the years ended June 30, 2020, 2019,
and 2018, respectively.
Research and Development
Research and development expenditures are expensed as incurred. Total research and development costs, which are
classified under selling, general, and administrative expenses, were $6.9 million, $6.3 million, and $3.9 million for the
years ended June 30, 2020, 2019, and 2018, respectively.
Warranties
The expected cost associated with warranty obligations on our products is recorded when the revenue is recognized.
The Company’s estimate of warranty cost is based on contract terms and historical warranty loss experience that is
periodically adjusted for recent actual experience. Since warranty estimates are forecasts based on the best available
information, claims costs may differ from amounts provided. Adjustments to initial obligations for warranties are made
as changes in the obligations become reasonably estimable.
The changes in continuing operations warranty reserve, which are recorded as accrued liabilities, during 2020, 2019,
and 2018 were as follows (in thousands):
Balance at beginning of year
Acquisitions and other charges
Warranty expense
Warranty claims
Balance at end of year
2020
2019
2018
$
$
1,911 $
(86 )
1,783
(1,827 )
1,781 $
1,849 $
(85 )
2,346
(2,199 )
1,911 $
1,580
(138 )
1,826
(1,419 )
1,849
The decrease in warranty expense during 2020 compared to 2019 is primarily due to better warranty claim experience
in the Specialty Solutions Group.
Stock-Based Compensation Plans
Restricted stock awards, including performance based awards, generally vest over a three-year period. Compensation
expense associated with these awards is recorded based on their grant-date fair value and is generally recognized on a
straight-line basis over the vesting period. Compensation cost for an award with a performance condition is based on
the probable outcome of that performance condition. The stated vesting period is considered non-substantive for
retirement eligible participants. Accordingly, the Company recognizes any remaining unrecognized compensation
expense upon participant reaching retirement eligibility.
Foreign Currency Translation
The functional currency of our non-U.S. operations is the local currency. Assets and liabilities of non-U.S. operations
are translated into U.S. Dollars on a monthly basis using period-end exchange rates. Revenues and expenses of these
operations are translated using monthly average exchange rates. The resulting translation adjustment is reported as a
component of comprehensive income (loss) in the consolidated statements of stockholders’ equity and comprehensive
income. Gains and losses from foreign currency transactions are included in results of operations and were not material
for any period presented.
51
Derivative Instruments and Hedging Activities
The Company recognizes all derivatives on its balance sheet at fair value.
Forward foreign currency exchange contracts are periodically used to limit the impact of currency fluctuations on certain
anticipated foreign cash flows, such as foreign purchases of materials and loan payments from subsidiaries. The
Company enters into such contracts for hedging purposes only. The Company has designated certain of these currency
contracts as hedges, and changes in the fair value of these contracts are recognized in other comprehensive income until
the hedged items are recognized in earnings. Hedge ineffectiveness, if any, associated with these contracts will be
reported in net income.
The Company also uses interest rate swaps to manage exposure to interest rates on the Company’s variable rate
indebtedness. The Company values the swaps based on contract prices in the derivatives market for similar instruments.
The Company has designated its interest rate swap agreements, including any that may be forward-dated, as cash flow
hedges, and changes in the fair value of the swaps are recognized in other comprehensive income until the hedged items
are recognized in earnings. Hedge ineffectiveness, if any, associated with the swaps will be reported by the Company
in interest expense.
The Company does not hold or issue derivative instruments for trading purposes.
Income Taxes
On December 22, 2017, the Tax Cuts and Jobs Act (the “Act” or “TCJA”) was passed which, among other things,
reduces the federal corporate tax rate to 21.0% effective for taxable years starting on or after January 1, 2018. For the
years ended June 30, 2020 and 2019, the Company recorded federal taxes using a federal rate of 21.0%.
The provision for fiscal year ending June 30, 2020 and 2019 was impacted by several law changes implemented by the
Act such as the interest deduction limitation and Global Intangible Low Taxed Income (GILTI). As allowed under US
GAAP, the Company has elected to treat any taxes due on future U.S. inclusions in taxable income under the GILTI
provision as a current-period expense when incurred. The Company will continue to monitor guidance regarding these
changes and their impact on the financial statements in later periods.
The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2020 was $13.1
million, or an effective rate of 24.3% compared to $18.7 million, or an effective rate of 27.9% for the year ended June 30,
2019, and $38.0 million, or an effective rate of 55.5% for the year 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 not limited to, the amount
of the Company's income or loss, the mix of income earned in the US versus outside the US, the effective tax rate in
each of the countries in which we earn income, and any one-time tax issues which occur during the period.
The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2020 was impacted
by the following items: (i) a tax benefit of $1.2 million related to the Federal R&D credit, (ii) a tax provision of $1.4
million due to the mix of income in various jurisdictions, (iii) a tax benefit of $0.7 million related to the release of
uncertain tax provision reserves, and (iv) a tax provision of $0.8 million related to GILTI.
The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2019 was impacted
by the following items: (i) a tax benefit related to the impact of the Sec. 965 toll tax of $0.8 million, (ii) a tax provision
of $0.3 million related to the elimination of the performance based compensation exception for executive compensation
under Sec. 162(m) of the Internal Revenue Code, and (iii) a tax provision related to expected foreign withholding taxes
on cash repatriation of $2.1 million.
The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2018 was impacted
by the following items: (i) a tax provision related to the impact of the Sec. 965 toll tax of $11.7 million, (ii) a tax
provision related to a revaluation of deferred taxes due to the federal rate reduction of $1.3 million, and (iii) a tax
provision related to expected foreign withholding taxes on cash repatriation of $7.8 million.
52
Earnings Per Share
(share amounts in thousands)
Basic – Average Shares Outstanding
Effect of Dilutive Securities – Stock Options
and Restricted Stock Awards
Diluted – Average Shares Outstanding
2020
2019
2018
12,324
12,574
12,698
63
12,387
59
12,633
90
12,788
Both basic and diluted income is the same for computing earnings per share. There were 32,000 outstanding instruments
that had an anti-dilutive effect at June 30, 2020. There were no outstanding instruments that had an anti-dilutive effect
at June 30, 2019 and 2018.
Recently Issued Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04 Facilitation of the Effects of Reference Rate Reform on Financial
Reporting. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles
to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another
reference rate expected to be discontinued. ASU 2020-04 is effective for all entities as of March 12, 2020 through
December 31, 2022. The Company is currently assessing the potential impact of the adoption of ASU 2020-04 on our
consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments, which modifies the measurement approach for credit losses on financial assets
measured on an amortized cost basis from an “incurred loss” method to “an expected loss” method. In November 2019,
the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments – Credit Losses.
ASU 2019-11 is an accounting pronouncement that amends ASU 2016-10. This amendment provides clarity and
improves the codification to ASU 2016-03. The pronouncements are concurrently effective for fiscal years beginning
after December 15, 2019 and interim periods therein. The Company is currently assessing the potential impact of the
adoption of ASU 2016-13 and ASU 2019-11 on its consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the
accounting for goodwill impairments by eliminating step two from the goodwill impairment test. Instead, if the carrying
amount 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 for excluding and allocating foreign currency translation adjustments to reporting units related to an
entity's testing of reporting units for goodwill impairment. It further clarifies that an entity should consider income tax
effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill
impairment loss, if applicable. ASU 2017-04 is effective for annual or any interim goodwill impairment tests in fiscal
years beginning after December 15, 2019. The Company adopted ASU 2017-04 in fiscal year 2020.
In August 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans -
General (Subtopic 715-20). The amendments in ASU-14 remove, modify and add various disclosure requirements
around the topic in order to clarify and improve the cost-benefit nature of disclosures. This ASU is effective for annual
reporting periods, and interim periods with those reporting periods, beginning after December 15, 2020 with early
adoption permitted. The amendments must be applied on a retrospective basis for all periods presented. The company
is currently evaluating the impacts the adoption of this ASU will have on its Consolidated Financial Statements.
2.
ACQUISITIONS
The Company’s recent acquisitions are strategically significant to the future growth prospects of the Company. At the
time of the acquisition and June 30, 2020, the Company evaluated the significance of each acquisition on a standalone
basis and in aggregate, considering both qualitative and quantitative factors.
Subsequent to the end of the fiscal year, during July of 2020, the Company acquired Renco Electronics, a designer and
manufacturer of customized standard magnetics components and products including transformers, inductors, chokes
53
and coils for power and RF applications. Renco’s results will be reported within the Electronics segment beginning in
fiscal year 2021.
GS Engineering
During the fourth quarter of fiscal year 2019, the Company acquired Ohio-based Genius Solutions Engineering
Company (d/b/a GS Engineering). The privately held company is a provider of specialized “soft surface” skin texturized
tooling. GS Engineering primarily serves the automotive end market and its' operating results are included in the
Company’s Engraving segment.
The Company paid $30.5 million in cash for all of the issued and outstanding equity interests of GS Engineering. The
purchase price was allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based
on the fair values on the closing date. Goodwill from the transaction is attributable to the combined organization
utilizing the GS technology across its global production footprint to enable customers worldwide to benefit from a
combined offering for harmonized designs across a variety of surfaces and materials.
Intangible assets of $9.1 million are recorded, consisting of $5.6 million for developed technology to be amortized over
a period of 15 years, $0.9 million for indefinite lived trademarks, and $2.6 million of customer relationships to be
amortized over 12 years. The goodwill of $15.5 million created by the transaction is deductible for income tax purposes.
The components of the fair value of the GS Engineering acquisition, including the final allocation of the purchase price
at June 30, 2020, are as follows (in thousands):
Preliminary
Allocation
June 30, 2019 Adjustments
Final
Allocation
Fair value of business combination:
Cash payments
Less, cash acquired
Fair value of contingent consideration
Total
Identifiable assets acquired and liabilities
assumed:
Other acquired assets
Inventories
Customer Backlog
Property, plant, and equipment
Identifiable intangible assets
Goodwill
Liabilities assumed
Total
$
$
$
$
Agile Magnetics
30,002
(622 )
500
29,880 $
780 $
(158 )
-
622 $
30,782
(780 )
500
30,502
2,197 $
228
180
1,391
8,910
17,976
(1,002 )
29,880 $
(679 ) $
168
(180 )
3,179
200
(2,518 )
452
622 $
1,518
396
-
4,570
9,110
15,458
(550 )
30,502
On the last business day of the first quarter of fiscal year 2019, the Company acquired Regional Mfg. Specialists, Inc.
(now named Agile Magnetics). The New Hampshire based, privately held company is a provider of high-reliability
magnetics to customers in the semiconductor, military, aerospace, healthcare, and general industrial industries. The
Company has included the results of Agile in its Electronics segment in the consolidated financial statements.
The Company paid $39.2 million in cash for all of the issued and outstanding equity interests of Agile. The purchase
price was allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on the
fair values on the closing date. Goodwill recorded from this transaction is attributable to expanded capabilities of the
54
combined organization which will allow for improved responsiveness to customer demands via a larger pool of
engineering resources and local manufacturing.
Intangible assets of $17.4 million are recorded, consisting of $13.5 million of customer relationships to be amortized
over a period of 13 years, $3.8 million for indefinite lived trademarks, and $0.1 million for a non-compete arrangement
to be amortized over 5 years. The goodwill of $16.4 million recorded in connection with the transaction is deductible
for income tax purposes.
The components of the fair value of the Agile acquisition, including the final allocation of the purchase price are as
follows (in thousands):
Fair value of business combination:
Cash payments
Less, cash acquired
Total
Identifiable assets acquired and liabilities assumed:
Other acquired assets
Inventories
Customer Backlog
Property, plant, & equipment
Identifiable intangible assets
Goodwill
Liabilities assumed
Total
Tenibac-Graphion Inc.
Preliminary
Allocation
September 30,
2019 Adjustments
Final
Allocation
$
$
39,194 $
(1 )
39,193 $
- $
-
- $
39,194
(1 )
39,193
Preliminary
Allocation
September 30,
2019 Adjustments
$
$
1,928 $
2,506
-
1,318
13,718
20,142
(419 )
39,193 $
(35 ) $
268 $
200 $
(348 ) $
3,632 $
(3,708 ) $
(9 ) $
- $
Final
Allocation
1,893
2,774
200
970
17,350
16,434
(428 )
39,193
During August of fiscal year 2019, the Company acquired Tenibac-Graphion Inc. (“Tenibac”). The Michigan based
privately held company is a provider of chemical and laser texturing services for the automotive, medical, packaging,
and consumer products markets. The Company has included the results of Tenibac in its Engraving segment in the
condensed consolidated financial statements.
The Company paid $57.3 million in cash for all of the issued and outstanding equity interests of Tenibac. The purchase
price was allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on their
fair values on the closing date. Goodwill recorded from this transaction is attributable to the complimentary services
that the combined business can now offer to customers, through increased responsiveness to customer demands, and
providing innovative approaches to solving customer needs by offering a full line of mold and tool services to
customers.
Intangible assets of $16.9 million are recorded, consisting of $11.3 million of customer relationships to be amortized
over a period of 15 years, $4.2 million for indefinite lived trademarks, and $1.4 million of other intangibles assets to be
amortized over 5 years. The Company’s assigned fair values are final as of June 30, 2019. The goodwill of $34.4 million
created by the transaction is deductible for income tax purposes.
55
The components of the fair value of the Tenibac acquisition, including the final allocation of the purchase price are as
follows (in thousands):
Preliminary
Allocation
September 30,
2019 Adjustments
Final
Allocation
$
$
57,284 $
(558 )
56,726 $
- $
-
- $
57,284
(558 )
56,726
Preliminary
Allocation
September 30,
2019 Adjustments
$
$
5,023 $
324
1,000
2,490
15,960
32,949
(1,020 )
56,726 $
(1,253 ) $
-
(800 )
(19 )
900
1,411
(239 )
- $
Final
Allocation
3,770
324
200
2,471
16,860
34,360
(1,259 )
56,726
Fair value of business combination:
Cash payments
Less cash acquired
Total
Identifiable assets acquired and liabilities assumed:
Other acquired assets
Inventories
Customer backlog
Property, plant, & equipment
Identifiable intangible assets
Goodwill
Liabilities assumed
Total
Piazza Rosa Group
During the first quarter of fiscal year 2018, the Company acquired the Piazza Rosa Group. The Italy-based privately
held company is a leading provider of mold and tool treatment and finishing services for the automotive and consumer
products markets. We have included the results of the Piazza Rosa Group in our Engraving segment.
The Company paid $10.1 million in cash for all of the issued and outstanding equity interests of the Piazza Rosa Group
and also paid $2.8 million subsequent to closing in order to satisfy assumed debt of the entity at the time of acquisition.
The Company has estimated that total cash consideration will be adjusted by $2.6 million based upon achievement of
certain revenue metrics over the three years following acquisition. The Company made the first payment of $0.9 million
during the first quarter of 2019 based on achievement of the revenue metrics during the first year.
The purchase price was allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed
based on their fair values on the closing date. Goodwill recorded from this transaction is attributable to potential revenue
increases from the combined competencies with Standex Engraving’s worldwide presence and Piazza Rosa Group’s
texturizing capabilities. The combined companies create a global tool finishing service leader and open additional
opportunities in the broader surface engineering market.
Intangible assets of $4.1 million were preliminarily recorded, consisting of $2.3 million of customer relationships to be
amortized over a period of eight years, $1.6 million for trademarks, and $0.2 million of other intangibles assets. The
Company finalized its purchase accounting for this acquisition in the first quarter of fiscal year 2019 and reduced the
identifiable intangible asset estimate by $0.6 million at that time. The goodwill of $7.1 million created by the transaction
is not deductible for income tax purposes.
56
The components of the fair value of the Piazza Rosa Group acquisition, including the final allocation of the purchase
price are as follows (in thousands):
Fair value of business combination:
Total cash consideration
Fair value of contingent consideration
Total
Identifiable assets acquired and liabilities assumed:
Other acquired assets
Inventories
Property, plant, and equipment
Identifiable intangible assets
Goodwill
Liabilities assumed
Deferred taxes
Total
Acquisition-Related Costs
Preliminary
Allocation
September 30,
2018 Adjustments
Final
Allocation
$
$
10,056 $
-
10,056 $
- $
2,617
2,617 $
10,056
2,617
12,673
Preliminary
Allocation
September 30,
2018 Adjustments
$
$
2,678 $
637
5,005
4,087
6,218
(7,387 )
(1,182 )
10,056 $
1,664 $
(2 )
558
(615 )
858
-
154
2,617 $
Final
Allocation
4,342
635
5,563
3,472
7,076
(7,387 )
(1,028 )
12,673
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 related to acquired entities. These costs do not include purchase accounting expenses, which we
define as acquired backlog and the step-up of inventory to fair value, or the amortization of the acquired intangible
assets.
Deferred compensation costs relate to payments due to the Horizon Scientific seller of $2.8 million on the second
anniversary and $5.6 million on the third anniversary of the closing date of the purchase. For the fiscal years ended
June 30, 2020 and 2019, we recorded deferred compensation costs of $1.2 million and $2.8 million, respectively, related
to estimated deferred compensation earned by the Horizon Scientific seller to date. The payments were contingent on
the seller remaining an employee of the Company, with limited exceptions, at each anniversary date. The final payment
due to the seller was made during the second quarter of fiscal year 2020, and this liability is now considered settled.
Acquisition related costs consist of miscellaneous professional service fees and expenses for our recent acquisitions.
The components of acquisition-related costs are as follows (in thousands):
Deferred compensation arrangements
Acquisition-related costs
Total
June 30,
2020
June 30,
2019
$
$
1,170 $
589
1,759 $
2,810
265
3,075
57
3.
REVENUE FROM CONTRACTS WITH CUSTOMERS
Effective July 1, 2018, the Company adopted the new accounting standard, ASU No. 2014-09, “Revenue from Contracts
with Customers” (ASC 606) using the modified retrospective method to contracts that were not completed as of June 30,
2018. We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the
opening balance of retained earnings, whereby the cumulative impact of all prior periods is recorded in retained earnings
or other impacted balance sheet line items upon adoption. The comparative information has not been adjusted and
continues to be reported under ASC 605. The impact on the Company’s consolidated income statements, balance sheets,
equity or cash flows as of the adoption date as a result of applying ASC 606 have been reflected within those respective
financial statements.
Disaggregation of Revenue from Contracts with Customers
Financial information for fiscal year 2017 has not been restated and continued to be reported under the guidance in
effect prior to the adoption of ASC 606.
The following table presents revenue disaggregated by product line and segment (in thousands):
Revenue by Product Line
Electronics
Engraving Services
Engraving Products
Total Engraving
Scientific
Year Ended
June 30, 2020 June 30, 2019 June 30, 2018
196,291
185,294
204,073
132,586
11,150
143,736
139,769
9,924
149,693
123,822
12,453
136,275
57,523
57,621
52,086
Engineering Technologies
104,047
105,270
90,781
Hydraulics Cylinders and System
Merchandising & Display
Pumps
Total Specialty Solutions
51,722
31,488
30,725
113,935
53,943
34,532
34,799
123,274
48,169
34,932
36,981
120,082
Total Revenue by Product Line
$
604,535 $
639,931 $
595,515
The following table presents revenue from continuing operations disaggregated by geography based on company’s
locations (in thousands):
Net sales
United States
Asia Pacific
EMEA (1)
Other Americas
Total
Year Ended
June 30, 2020 June 30, 2019 June 30, 2018
321,284
$
108,569
149,249
16,413
595,515
364,188 $
98,665
128,037
13,645
604,535 $
370,235 $
108,667
144,636
16,393
639,931 $
$
(1) EMEA consists primarily of Europe, Middle East and S. Africa.
58
The following table presents revenue from continuing operations disaggregated by timing of recognition (in
thousands):
Timing of Revenue Recognition
Products and services transferred at a point in time
Products transferred over time
Net Sales
Contract Balances
Year Ended
June 30, 2020 June 30, 2019
607,980
$
31,951
639,931
569,426 $
35,109
604,535 $
$
Contract assets represent sales recognized in excess of billings related to work completed but not yet shipped for which
revenue is recognized over time. Contract assets are recorded as accounts receivable.
Contract liabilities are customer deposits for which revenue has not been recognized. Current contract liabilities are
recorded as accrued expenses.
The following table provides information about contract assets and liability balances as of June 30, 2020 and 2019 (in
thousands):
Year ended June 30, 2020
Contract assets:
Prepaid and other current assets
Contract liabilities:
Customer deposits
Year ended June 30, 2019
Contract assets:
Prepaid and other current assets
Contract liabilities:
Customer deposits
Balance at
Beginning
of Period Additions Deductions
Balance at
End of
Period
8,418
41,462
40,740
9,140
1,358
11,939
10,999
2,298
Balance at
Beginning
of Period Additions Deductions
Balance at
End of
Period
5,904
24,380
21,866
8,418
2,552
6,336
7,530
1,358
During the years ended June 30, 2020 and 2019, we recognized the following revenue as a result of changes in the
contract liability balances (in thousands):
Revenue recognized in the period from:
Amounts included in the contract liability balance at the beginning of the
period
Revenue recognized in the period from:
Amounts included in the contract liability balance at the beginning of the
period
Year ended
June 30, 2020
$
1,358
Year ended
June 30, 2019
$
2,552
The timing of revenue recognition, invoicing and cash collections results in billed receivables, contract assets and
contract liabilities on the consolidated balance sheets.
59
When consideration is received from a customer prior to transferring goods or services to the customer under the terms
of a contract, a contract liability is recorded. Contract liabilities are recognized as revenue after control of the goods
and services are transferred to the customer and all revenue recognition criteria have been met.
4.
INVENTORIES
Inventories are comprised of (in thousands):
June 30
Raw materials
Work in process
Finished goods
Total
2020
2019
$
$
37,257 $
25,527
22,247
85,031 $
34,902
26,213
15,187
76,302
Distribution costs associated with the sale of inventory are recorded as a component of selling, general and
administrative expenses and were $9.0 million, $9.7 million, and $8.7 million in 2020, 2019 and 2018, respectively.
5.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following (in thousands):
June 30
Land, buildings and leasehold improvements
Machinery, equipment and other
Total
Less accumulated depreciation
Property, plant and equipment - net
2020
2019
69,869 $
203,258
273,127
(140,594 )
132,533 $
67,296
200,017
267,313
(133,074 )
134,239
$
$
Depreciation expense for the years ended June 30, 2020, 2019, and 2018 totaled $19.2 million, $17.5 million, and $15.9
million, respectively.
6.
GOODWILL
Goodwill and certain indefinite-lived intangible assets are not amortized, but instead are tested for impairment at least
annually and more frequently whenever events or changes in circumstances indicate that the fair value of the asset may
be less than its carrying amount. The Company’s annual test for impairment is performed using a May 31st
measurement date.
The Company has identified its reporting units for impairment testing as its seven operating segments, which are
aggregated into 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
determined using a discounted cash flow model (income approach). This method uses various assumptions that are
specific to each individual reporting unit in order to determine the fair value. In addition, the Company compares the
estimated aggregate fair value of its reporting units to its overall market capitalization.
While the Company believes that estimates of future cash flows are reasonable, changes in assumptions could
significantly affect valuations and result in impairments in the future. The most significant assumption involved in the
Company’s determination of fair value is the cash flow projections of each reporting unit. If the estimates of future
cash flows for each reporting unit may be insufficient to support the carrying value of the reporting units, the Company
will reassess its conclusions related to fair value and the recoverability of goodwill.
60
In connection with the planned divestiture of the Refrigerated Solutions Group, the Company compared the fair value
of each reporting unit, Master-Bilt and Nor-Lake, to its carrying value as of March 31, 2020. This resulted in an asset
impairment charge in the third quarter of fiscal year 2020 of $7.7 million in discontinued operations, which represented
the full amount of goodwill associated with both reporting units. In addition, due to the impact that the COVID-19
pandemic had on projected operating results, cash flow, and market capitalization, the Company completed an interim
goodwill impairment assessment for its remaining reporting units in the third quarter of fiscal year 2020. As a result of
the assessment in the third quarter, the Company determined that the fair value of its reporting units, with the exception
of RSG, substantially exceeded their respective carrying values. Therefore, no additional impairment charges were
recorded in connection with the third quarter 2020 assessment.
The Company completed its annual impairment testing as of May 31, 2020, and determined that the fair value of each
of its reporting units substantially exceeded each unit’s respective carrying value, therefore, no impairment charges
were recorded in connection with the testing and assessment during the fourth quarter of 2020. The Company completed
its annual impairment testing as of May 31, 2019, and determined that the fair value of each reporting unit substantially
exceeded each unit’s respective carrying value, therefore, no impairment charges were recorded in connection with the
testing and assessment during 2019.
Changes to goodwill associated with continuing operations during the years ended June 30, 2020 and 2019 are as follows
(in thousands):
Balance at beginning of year
Acquisitions
Foreign currency translation
Balance at end of year
2020
2019
$
$
273,843 $
(1,699 )
(923 )
271,221 $
204,091
68,392
1,360
273,843
7.
INTANGIBLE ASSETS
Intangible assets consist of the following (in thousands):
Tradenames
(Indefinite- Developed
Customer
Relationships
lived)
Technology Other
Total
June 30, 2020
Cost
Accumulated amortization
Balance, June 30, 2020
June 30, 2019
Cost
Accumulated amortization
Balance, June 30, 2019
$
$
$
$
74,104 $
(31,003 )
43,101 $
19,916 $
-
19,916 $
55,164 $
(13,006 )
42,158 $
3,980 $ 153,164
(2,743 )
(46,752 )
1,237 $ 106,412
75,018 $
(24,476 )
50,542 $
19,977 $
-
19,977 $
55,164 $
(8,765 )
46,399 $
5,492 $ 155,651
(3,750 )
(36,991 )
1,742 $ 118,660
Amortization expense from continuing operations for the years ended June 30, 2020, 2019, and 2018, totaled
$11.6 million, $10.5 million, and $8.1 million, respectively. At June 30, 2020, aggregate amortization expense is
estimated to be $11.0 million in fiscal 2021, $10.4 million in fiscal 2022, $9.6 million in fiscal 2023, $8.7 million in
fiscal 2024, $8.2 million in fiscal 2025, and $38.6 million thereafter.
61
8.
DEBT
Long-term debt is comprised of the following at June 30 (in thousands):
2020
2019
Bank credit agreements
Other
Total funded debt
Issuance Cost
Total long-term debt
$
$
200,000 $
-
200,000
(850 )
199,150 $
Long-term debt is due as follows (in thousands):
2021
2022
2023
2024 (matures December 2023)
2025
Thereafter
Funded Debt
Issuance costs
Debt, net issuance cost
Bank Credit Agreements
$
$
198,800
-
198,800
(1,190 )
197,610
-
-
-
200,000
-
-
200,000
(850 )
199,150
During the second quarter of fiscal year 2019, the Company entered into an Amended and Restated Credit Agreement
(“Credit Facility”, or “facility”). This five-year Credit Facility expires in December 2023 and has a borrowing limit of
$500 million, which can be increased by an amount of up to $250 million, in accordance with specified conditions
contained in the agreement. The facility also includes a $10 million sublimit for swing line loans and a $35 million
sublimit for letters of credit. The facility amends and restates a previously existing $400 million revolving credit
agreement, which was scheduled to expire in December 2019.
Under the terms of the Credit Agreement, we pay a variable rate of interest and a commitment fee on borrowed amounts
as well as a commitment fee on unused amounts under the facility. The amount of the commitment fee depends upon
both the undrawn amount remaining available under the facility and the Company’s funded debt to EBITDA (as defined
in the agreement) ratio at the last day of each quarter. As our funded debt to EBITDA ratio increases, the commitment
fee increases.
Funds borrowed under the facility may be used for the repayment of debt, working capital, capital expenditures,
acquisitions (so long as certain conditions, including a specified funded debt to EBITDA leverage ratio is maintained),
and other general corporate purposes. As of June 30, 2020, the Company had the ability to borrow $203.6 million under
the facility based on our current EBITDA. The facility contains customary representations, warranties and restrictive
covenants, as well as specific financial covenants which the Company was compliant with as of June 30, 2020. The
Company’s current financial covenants under the facility are as follows:
Interest Coverage Ratio - The Company is required to maintain a ratio of Earnings Before Interest and Taxes, as
Adjusted (“Adjusted EBIT per the Credit Agreement”), to interest expense for the trailing twelve months of at least
2.75:1. Adjusted EBIT per the Credit Agreement specifically excludes extraordinary and certain other defined items
such as cash restructuring and acquisition-related charges up to the lower of $20 million or 10% of EBITDA, an increase
from the prior agreement’s $7.5 million cap on restructuring expenses. The new facility continues to allow unlimited
non-cash charges including purchase accounting and goodwill adjustments. At June 30, 2020, the Company’s Interest
Coverage Ratio was 9.09:1.
Leverage Ratio - The Company’s ratio of funded debt to trailing twelve month Adjusted EBITDA per the credit
agreement, calculated as Adjusted EBIT per the Credit Agreement plus depreciation and amortization, may not exceed
3.5:1. Under certain circumstances in connection with a Material Acquisitions (as defined in the Facility), the Facility
62
allows for the leverage ratio to go as high as 4.0:1 for a four-fiscal quarter period. At June 30, 2020 the Company’s
Leverage Ratio was 1.47:1.
As of June 30, 2020, we had borrowings under our facility of $200.0 million and the effective rate of interest for
outstanding borrowings under the facility was 2.59%. During the fourth quarter of fiscal 2020, we collected $10.6
million in connection with the sale of our Refrigerated Solutions and substantially all of these proceeds were used to
repay borrowings under our facility. Our primary cash requirements in addition to day-to-day operating needs include
interest payments, capital expenditures, and dividends. Our primary sources of cash for these requirements are cash
flows from continuing operations and borrowings under the facility.
In order to manage our interest rate exposure, we are party to $200.0 million of active floating to fixed rate swaps.
These swaps convert our interest payments from LIBOR to a weighted average rate of 1.27%.
Other Long-Term Borrowings
At June 30, 2020 and 2019, the Company had standby letter of credit sub-facility outstanding, primarily for insurance
and trade financing purposes of $7.3 million and $7.6 million, respectively.
9.
ACCRUED LIABILITIES
Accrued expenses from continuing operations recorded in our Consolidated Balance Sheets at June 30, 2020 and 2019
consist of the following (in thousands):
Payroll and employee benefits
Workers' compensation
Warranty
Fair value of derivatives
Other
Total
2020
2019
$
$
24,084 $
2,743
1,781
9,144
22,177
59,929 $
24,925
2,858
1,664
4,484
16,245
50,176
10. DERIVATIVE FINANCIAL INSTRUMENTS
Interest Rate Swaps
The Company’s effective swap agreements convert the base borrowing rate on $200 million of debt due under our
revolving credit agreement from a variable rate equal to LIBOR to a weighted average fixed rate of 1.27% at June 30,
2020.
The fair value of the swaps recognized in accrued liabilities and in other comprehensive income (loss) at June 30, 2020
and 2019 is as follows (in thousands):
Effective Date
December 19, 2015
May 24, 2017
May 24, 2017
August 6, 2018
March 23, 2020
April 24, 2020
May 24, 2020
Notional Fixed
Interest
Rate
Amount
2.01%
10,000
1.88%
25,000
1.67%
25,000
25,000
2.83%
100,000 0.91%
0.88%
25,000
0.91%
25,000
Maturity
Fair Value at June 30,
December 19, 2019
April 24, 2022
May 24, 2020
August 6, 2023
March 23, 2025
April 24, 2025
March 24, 2025
2020
2019
$
$
- $
(815 )
-
(2,167 )
(2,485 )
(585 )
(615 )
(6,667 ) $
3
(190 )
49
(1,242 )
-
-
-
(1,380 )
63
The Company reported no losses for the years ended June 30, 2020, 2019, and 2018, as a result of hedge ineffectiveness.
Future changes in these swap arrangements, including termination of the agreements, may result in a reclassification of
any gain or loss reported in accumulated other comprehensive income (loss) into earnings as an adjustment to interest
expense. Accumulated other comprehensive income (loss) related to these instruments is being amortized into interest
expense concurrent with the hedged exposure.
Foreign Exchange Contracts
Forward foreign currency exchange contracts are used to limit the impact of currency fluctuations on certain anticipated
foreign cash flows, such as foreign purchases of materials and loan payments between subsidiaries. The Company
enters into such contracts for hedging purposes only. The Company has designated certain of these currency contracts
as hedges, and changes in the fair value of these contracts are recognized in other comprehensive income until the
hedged items are recognized in earnings. Hedge ineffectiveness, if any, associated with these contracts will be reported
in net income. At June 30, 2020 and 2019, the Company had outstanding forward contracts related to hedges of
intercompany loans with net losses of $2.5 million and $3.1 million, respectively, which approximate the unrealized
gains or losses on the related loans. The contracts have maturity dates ranging from 2021 to 2024, which correspond to
the related intercompany loans. The notional amounts of these instruments, by currency in thousands, are as follows:
Currency
2020
2019
USD
Euro
SGD
Canadian
287
5,750
64,696
20,600
55,015
5,750
-
20,600
The table below presents the fair value of derivative financial instruments as well as their classification on the balance
sheet at June 30, (in thousands):
Asset Derivatives
2020
2019
Derivative designated as
hedging instruments
Interest rate swaps
Balance
Sheet
Line Item
Other Assets
Fair Value
$
-
Balance
Sheet
Line Item
Other Assets
Fair Value
$
52
Derivative designated as
hedging instruments
Interest rate swaps
Foreign exchange contracts
Liability Derivatives
2020
Balance
Sheet
Line Item
Fair Value
Accrued Liabilities $
Accrued Liabilities
$
6,667
2,477
9,144
2019
Balance
Sheet
Line Item
Accrued Liabilities
Accrued Liabilities
Fair Value
$
1,432
3,052
4,484
$
The table below presents the amount of gain (loss) recognized in comprehensive income on our derivative financial
instruments (effective portion) designated as hedging instruments and their classification within comprehensive income
for the periods ended (in thousands):
Interest rate swaps
Foreign exchange contracts
2020
2019
2018
$
$
(7,098 ) $
1,851
(5,247 ) $
1,703 $
(3,279 )
(1,576 ) $
1,367
1,174
2,541
64
The table below presents the amount reclassified from accumulated other comprehensive income (loss) to net income
for the periods ended (in thousands):
Details about Accumulated
Other Comprehensive
Income (Loss) Components
Interest rate swaps
Foreign exchange contracts
Net investment hedge
11.
INCOME TAXES
2020
2019
2018
Affected line item
in the Statements
of Operations
$
$
547 $
(1,403 )
-
(856 ) $
(321 ) $
1,730
(285 )
1,124 $
Interest expense
171
121 Other non-operating income
- Other non-operating income
292
On December 22, 2017, the Tax Cuts and Jobs Act (the “Act” or “TCJA”) was passed which, among other things,
reduces the federal corporate tax rate to 21.0% effective for taxable years starting on or after January 1, 2018. For the
years ended June 30, 2020 and 2019, the Company recorded federal taxes using a federal rate of 21.0%.
The provision for fiscal year ending June 30, 2020 and 2019 was impacted by several law changes implemented by the
Act such as the interest deduction limitation and Global Intangible Low Taxed Income (GILTI). As allowed under US
GAAP, the Company has elected to treat any taxes due on future U.S. inclusions in taxable income under the GILTI
provision as a current-period expense when incurred. The Company will continue to monitor guidance regarding these
changes for how it will impact the financial statements in later periods.
US tax law allows a one-hundred percent dividend received deduction for foreign dividends and the Company has begun
to bring back cash from foreign subsidiaries. However, the permanent reinvestment assertion must still be assessed and
made regarding potential liabilities for foreign withholding taxes. As of June 30, 2020, we maintained the assessment
that previously undistributed earnings of certain foreign subsidiaries no longer meet the requirements for indefinite
reinvestment under applicable accounting guidance. Therefore, we recognized deferred tax liabilities of approximately
$1.2 million that relate to withholding taxes on the current earnings of various foreign subsidiaries. It is expected
deferred tax liabilities will continue to be recorded on current earnings in future periods from these subsidiaries. The
Company maintains the permanent reinvestment assertion on earnings in certain foreign jurisdictions. It is not
practicable to estimate the amount of tax that might be payable on the remaining undistributed earnings.
The components of income from continuing operations before income taxes are as follows (in thousands):
U.S. Operations
Non-U.S. Operations
Total
2020
2019
2018
$
$
11,890 $
42,184
54,074 $
6,794 $
60,180
66,974 $
(1,334 )
69,727
68,393
The Company utilizes the asset and liability method of accounting for income taxes. Deferred income taxes are
determined based on the estimated future tax effects of differences between the financial and tax bases of assets and
liabilities given the provisions of the enacted tax laws. The components of the provision for income taxes on continuing
operations (in thousands) were as shown below:
2020
2019
2018
Current:
Federal
State
Non-U.S.
Total Current
Deferred:
Federal
State
Non-U.S.
Total Deferred
Total
648 $
190
21,288
22,126 $
277 $
207
(3,922 )
(3,438 )
18,688 $
8,710
251
21,674
30,635
2,012
1,091
4,288
7,391
38,026
$
$
$
$
(870 ) $
70
13,963
13,163 $
2,743 $
885
(3,731 )
(103 )
13,060 $
65
A reconciliation from the U.S. Federal income tax rate on continuing operations to the total tax provision is as follows:
Provision at statutory tax rate
State taxes
Impact of foreign operations
Federal tax credits
Tax Reform
Cash repatriation
SubF/GILTI
Uncertain Tax Positions
Other
Effective income tax provision
2020
2019
2018
21.0 %
1.1 %
0.7 %
(3.5 %)
0.0 %
2.2 %
1.4 %
(1.3 %)
2.7 %
24.3 %
21.0 %
0.5 %
4.9 %
(1.5 %)
(1.2 %)
3.2 %
0.4 %
0.0 %
0.6 %
27.9 %
28.0 %
1.5 %
(1.1 %)
(1.4 %)
18.8 %
10.7 %
0.0 %
0.0 %
(1.0 %)
55.5 %
Changes in the effective tax rates from period to period may be significant as they depend on many factors including,
but not limited to, size of the Company’s income or loss and any one-time activities occurring during the period.
The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2020 was impacted
by the following items: (i) a tax benefit of $1.2 million related to the Federal R&D credit, (ii) a tax provision of $1.4
million due to the mix of income in various jurisdictions, (iii) a tax benefit of $0.7 million related to the release of
uncertain tax provision reserves, and (iv) a tax provision of $0.8 million related to GILTI.
The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2019 was impacted
by the following items: (i) a tax benefit related to the impact of the Sec. 965 toll tax of $0.8 million, (ii) a tax provision
of $0.3 million related to the elimination of the performance based compensation exception for executive compensation
under Sec. 162(m) of the Internal Revenue Code, and (iii) a tax provision related to expected foreign withholding taxes
on cash repatriation of $2.1 million.
The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2018 was impacted
by the following items: (i) a tax provision related to the impact of the Sec. 965 toll tax of $11.7 million, (ii) a tax
provision related to a revaluation of deferred taxes due to the federal rate reduction of $1.3 million, and (iii) a tax
provision related to expected foreign withholding taxes on cash repatriation of $7.8 million.
Significant components of the Company’s deferred income taxes are as follows (in thousands):
Deferred tax liabilities:
Depreciation and amortization
Withholding Taxes
ROU Asset
Total deferred tax liability
Deferred tax assets:
Accrued compensation
Accrued expenses and reserves
Pension
Inventory
Lease Liability
Other
Net operating loss and credit carry forwards
Total deferred tax asset
Less: Valuation allowance
Net deferred tax asset (liability)
2020
2019
(34,422 ) $
(4,295 )
(11,384 )
(50,101 ) $
(35,420 )
(5,606 )
-
(41,026 )
2,410 $
4,117
19,847
588
11,446
127
22,676
61,211 $
2,280
3,967
18,228
927
-
355
17,939
43,696
(15,172 )
(4,062 ) $
(11,355 )
(8,685 )
$
$
$
$
$
66
The Company estimates the degree to which deferred tax assets, including net operating loss and credit carry forwards
will result in a benefit based on expected profitability by tax jurisdiction and provides a valuation allowance for tax
assets and loss carry forwards that it believes will more likely than not go unrealized. The valuation allowance at
June 30, 2020 applies to state and foreign loss carry forwards, which management has concluded that it is more likely
than not that these tax benefits will not be realized. The increase (decrease) in the valuation allowance from the prior
year was due to the current year activity in those same state and foreign loss jurisdictions.
In addition, the sale of the RSG Group in the fiscal year generated a capital loss for tax purposes. As of June 30, 2020,
the Company expects that it is more likely than not that this loss will not be realizable in future years. As such, the
valuation allowance increased by $1.8 million.
As of June 30, 2020, the Company had gross state net operating loss ("NOL") and credit carry forwards of approximately
$79.5 million and $3.4 million, respectively, which may be available to offset future state income tax liabilities and
expire at various dates from 2020 through 2039. In addition, the Company had foreign NOL carry forwards of
approximately $4.4 million, $3.5 million of which carry forward indefinitely and $0.9 million that carry forward for 10
years.
Under ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, all excess tax benefits and tax
deficiencies are recognized as income tax expense or benefit in the income statement. Accordingly, we recorded a
discrete income tax provision in the consolidated statements of income of $0.2 million during the fiscal year ended
June 30, 2020, for the shortfall of tax benefits related to equity compensation.
The total provision (benefit) for income taxes included in the consolidated financial statements was as follows (in
thousands):
Continuing operations
Discontinued operations
Total Provision
2020
2019
2018
$
$
13,060 $
(2,613 )
10,447 $
18,688 $
(2,453 )
16,235 $
38,026
2,578
40,604
The tax benefit for discontinued operations relates mostly to the write-off of deferred tax liabilities from the sale of the
RSG Group, and the sale of the assets of Master-Bilt.
The changes in the amount of gross unrecognized tax benefits during 2020, 2019 and 2018 were as follows (in
thousands):
Beginning Balance
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements
Ending Balance
$
$
11,251 $
4
-
(1,641 )
(328 )
9,286 $
3,003 $
4
8,281
(37 )
-
11,251 $
2,991
12
-
-
-
3,003
2020
2019
2018
The Company decreased its uncertain tax position in the third quarter due to an IRS settlement related to the deduction
for charitable contributions.
If the unrecognized tax benefits in the table above were recognized in a future period, $8.4 million of the unrecognized
tax benefit would impact the Company’s effective tax rate.
Within the next twelve months, the statute of limitations will close in various U.S., state and non-U.S. jurisdictions. As
a result, it is reasonably expected that net unrecognized tax benefits from these various jurisdictions would be recognized
within the next twelve months. The recognition of these tax benefits is not expected to have a material impact to the
Company's financial statements. The Company does not reasonably expect any other significant changes in the next
twelve months. The following tax years, in the major tax jurisdictions noted, are open for assessment or refund:
67
Country
United States
Canada
Germany
Ireland
Portugal
United Kingdom
Years Ending
June 30,
2017 to 2020
2016 to 2020
2017 to 2020
2020
2019 to 2020
2016 to 2020
The Company’s policy is to include interest expense and penalties related to unrecognized tax benefits within the
provision for income taxes on the consolidated statements of operations. At June 30, 2020 and June 30, 2019, the
company had $0.1 million and $0.1 million for accrued interest expense on unrecognized tax benefits.
12. COMMITMENTS AND CONTINGENCIES
From time to time, the Company is subject to various claims and legal proceedings, including claims related to
environmental remediation, either asserted or unasserted, that arise in the ordinary course of business. While the
outcome of these proceedings and claims cannot be predicted with certainty, the Company’s management does not
believe that the outcome of any of the currently existing legal matters will have a material impact on the Company’s
consolidated financial position, results of operations or cash flow. The Company accrues for losses related to a claim
or litigation when the Company’s management considers a potential loss probable and can reasonably estimate such
potential loss.
13.
STOCK-BASED COMPENSATION AND PURCHASE PLANS
Stock-Based Compensation Plans
Under incentive compensation plans, the Company is authorized to make grants of stock options, restricted stock and
performance share units to provide equity incentive compensation to key employees and directors. The stock award
program offers employees and directors the opportunity to earn shares of our stock over time, rather than options that
give the employees and directors the right to purchase stock at a set price. The Company has stock plans for directors,
officers and certain key employees.
Total compensation cost recognized in income for equity based compensation awards was $7.0 million, $4.4 million,
and $5.0 million for the years ended June 30, 2020, 2019, and 2018, respectively, primarily within Selling, General, and
Administrative Expenses. The total income tax benefit recognized in the consolidated statement of operations for
equity-based compensation plans was $1.9 million, $1.1 million, and $1.2 million for the years ended June 30, 2020,
2019 and 2018, respectively.
There were 365,330 shares of common stock reserved for issuance under various compensation plans at June 30, 2020.
Restricted Stock Awards
The Company may award shares of restricted stock to eligible employees and non-employee directors of the Company
at no cost, giving them, in most instances, all of the rights of stockholders, except that they may not sell, assign, pledge
or otherwise encumber such shares and rights during the restriction period. Such shares and rights are subject to
forfeiture if certain employment conditions are not met. During the restriction period, recipients of the shares are entitled
to dividend equivalents on such shares, providing that such shares are not forfeited. Dividends are accumulated and
paid out at the end of the restriction period. During 2020, 2019, and 2018, the Company granted 75,505, 70,085, and
51,792 shares respectively of restricted stock to eligible participants. Restrictions on the stock awards generally lapse
between fiscal 2021 and fiscal 2023. For the years ended June 30, 2020, 2019, and 2018, $4.2 million, $3.7 million,
and $3.7 million, respectively, was recognized as compensation expense related to restricted stock awards. Substantially
all awards are expected to vest.
68
A summary of restricted stock awards activity during the year ended June 30, 2020 is as follows:
Outstanding, June 30, 2019
Granted
Exercised / vested
Canceled
Outstanding, June 30, 2020
Restricted Stock Awards
Number
of
Shares
Aggregate
Intrinsic
Value
128,042 $
75,505
(32,953 ) $
(24,579 )
146,015 $
9,365,632
(528,957 )
8,403,221
Restricted stock awards granted during 2020, 2019 and 2018 had a weighted average grant date fair value of $71.38,
$102.74, and $93.73, respectively. The grant date fair value of restricted stock awards is determined based on the
closing price of the Company’s common stock on the date of grant. The total intrinsic value of awards exercised during
the years ended June 30, 2020, 2019, and 2018 was ($0.5) million, $0.9 million, and $0.8 million, respectively.
As of June 30, 2020, there was $5.2 million of unrecognized compensation costs related to awards expected to be
recognized over a weighted-average period of 1.48 years.
Executive Compensation Program
The Company operates a compensation program for key employees. The plan contains both an annual component as
well as a long-term component. Under the annual component, participants may elect to defer up to 50% of their annual
incentive compensation in restricted stock which is purchased at a discount to the market. Additionally, non-employee
directors of the Company may defer a portion of their director’s fees in restricted stock units which is purchased at a
discount to the market. During the restriction period, recipients of the shares are entitled to dividend equivalents on
such units, providing that such shares are not forfeited.
Dividend equivalents are accumulated and paid out at the end of the restriction period. The restrictions on the units
expire after three years. At June 30, 2020 and 2019, respectively, 32,387 and 34,950 shares of restricted stock units are
outstanding and subject to restrictions that lapse between fiscal 2021 and fiscal 2023. The compensation expense
associated with this incentive program is charged to income over the restriction period. The Company recorded
compensation expense related to this program of $0.3 million, $0.3 million, and $0.3 million for the years ended June 30,
2020, 2019 and 2018, respectively.
As of June 30, 2020, there was $0.4 million of unrecognized compensation costs related to awards expected to be
recognized over a weighted-average period of 1.3 years.
The fair value of the awards under the annual component of this incentive program is measured using the Black-Scholes
option-pricing model. Key assumptions used to apply this pricing model are as follows:
Risk-free interest rates
Expected life of option grants (in years)
Expected volatility of underlying stock
Expected quarterly dividends (per share)
2020
2019
2018
1.42 %
3
32.0 %
0.20 $
2.63 %
3
25.1 %
0.18 $
1.55 %
3
25.6 %
0.16
$
Under the long-term component, grants of performance share units (“PSUs”) are made annually to key employees and
the share units are earned based on the achievement of certain overall corporate financial performance targets over the
performance period. At the end of the performance period, the number of shares of common stock issued will be
determined by adjusting upward or downward from the target in a range between 50% and 200%. No shares will be
issued if the minimum performance threshold is not achieved. The final performance percentage, on which the payout
will be based considering the performance metrics established for the performance period, will be certified by the
Compensation Committee of the Board of Directors.
69
A participant’s right to any shares that are earned will cliff vest in three years. An executive whose employment
terminates prior to the vesting of any award for a reason other than death, disability, retirement, or following a change
in control, will forfeit the shares represented by that award. In certain circumstances, such as death, disability, or
retirement, PSUs are paid on a pro-rata basis. In the event of a change in control, vesting of the awards granted is
accelerated.
A summary of the awards activity under the executive compensation program during the year ended June 30, 2020 is as
follows:
Annual Component
Weighted
Performance Stock Units
Number Average Aggregate Number Aggregate
Intrinsic
Value
Exercise Intrinsic
Shares
Value
Shares
Price
of
of
Non-vested, June 30, 2019
Granted
Vested
Forfeited
Non-vested, June 30, 2020
34,950 $
14,883
(17,108 )
(338 )
32,387 $
69.07 $ (496,674 )
51.56
62.86 $
66.10
64.33 $ (685,647 )
7,471
69,052 $ 6,529,012
42,976
(12,225 ) $ 1,025,922
(20,491 )
79,312 $ 6,731,430
Restricted stock awards granted under the annual component of this program in fiscal 2020, 2019, and 2018 had a grant
date fair value of $74.37, $110.22, and $96.56, respectively. The PSUs granted in fiscal 2020, 2019 and 2018 had a
grant date fair value of $70.37, $106.65, and $91.75, respectively. The total intrinsic value of awards vested under the
executive compensation program during the years ended June 30, 2020, 2019, and 2018 was ($1.0) million, $0.9 million,
and $1.6 million respectively.
The Company recognized compensation expense related to the PSUs of $2.9 million, $0.3 million, and $0.9 million for
the years ended June 30, 2020, 2019 and 2018 respectively based on the probability of the performance targets being
met. The total unrecognized compensation costs related to non-vested performance share units was $2.9 million at
June 30, 2020, 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 the
Company at a discount from the market each quarter. The ESPP plan, which was effective as of July 1, 2005, provided
employees the option to purchase Standex stock at a discount of 5%. The Plan was modified, effective as of April 1,
2017, to increase the stock purchase discount to 15% and is considered a compensatory Plan. Under this amendment,
shares of Company stock may be purchased by employees quarterly at 85% of the fair market value on the last day of
each quarter. The 15% discount is recorded as a component of SG&A in the Company’s Consolidated Statements of
Operations. Shares of stock reserved for the plan were 62,484 at June 30, 2020. Shares purchased under this plan
aggregated to 11,132 in fiscal year 2020, 7,698 in 2019, and 5,622 in 2018, at an average price of $52.57, $65.63, and
$86.01, respectively.
14. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The components of the Company’s accumulated other comprehensive income (loss) at June 30, 2020 and 2019 are as
follows (in thousands):
Foreign currency translation adjustment
Unrealized pension losses, net of tax
Unrealized losses on derivative instruments, net of tax
Total
2020
2019
$
$
(31,046 ) $
(109,880 )
(6,733 )
(147,659 ) $
(27,658 )
(107,380 )
(2,240 )
(137,278 )
70
15. RESTRUCTURING
The Company has undertaken a number of initiatives that have resulted in severance, restructuring, and related charges.
A summary of charges by initiative is as follows (in thousands):
Year Ended June 30,
2020 Restructuring Initiatives
Prior Year Initiatives
Total expense
2019 Restructuring Initiatives
Prior Year Initiatives
Total expense
2018 Restructuring Initiatives
Prior Year Initiatives
Total expense
2020 Restructuring Initiatives
Involuntary
Employee
Severance and
Benefit Costs
$
4,004 $
-
4,004 $
953 $
210
1,163 $
1,706 $
224
1,930 $
Other
Total
606 $
59
665 $
15 $
111
126 $
621 $
877
1,498 $
4,610
59
4,669
968
321
1,289
2,327
1,101
3,428
$
$
$
$
$
The Company continues to focus our efforts to reduce cost and improve productivity across our businesses, particularly
through headcount reductions, facility closures, and consolidations. Restructuring expenses primarily related to
headcount reductions and facility rationalization within our Specialty Solutions and Engraving segments. Thus far,
during fiscal year 2020, we have also incurred restructuring expenses related to third party assistance with analysis and
implementation of these activities.
Involuntary
Employee
Severance
and Benefit
Costs
$
$
- $
4,004
(3,484 )
520 $
Other
Total
- $
606
(588 )
18 $
-
4,610
(4,072 )
538
Restructuring liabilities at June 30, 2019
Additions and adjustments
Payments
Restructuring liabilities at June 30, 2020
Prior Year Restructuring Initiatives
The Company continues to focus our efforts to reduce cost and improve productivity across our businesses, particularly
through headcount reductions, facility closures, and consolidations. During fiscal year 2019 and 2018, the Company
also incurred restructuring expenses related to third party assistance with analysis and implementation of these activities.
The Company expects to incur additional restructuring costs of approximately $2.6 million in fiscal year 2021 as the
Company continues to focus its efforts to reduce cost and improve productivity across its businesses, particularly
through headcount reductions, facility closures, and consolidations.
71
Activity in the reserves related to 2019 restructuring initiatives is as follows (in thousands):
Restructuring liabilities at June 30, 2019
Additions and adjustments
Payments
Restructuring liabilities at June 30, 2020
$
Involuntary
Employee
Severance and
Benefit Costs
$
147 $
-
(147 )
- $
Other
Total
5 $
59
(64 )
- $
152
59
(211 )
-
Activity in the reserves related to 2018 restructuring initiatives is as follows (in thousands):
Restructuring liabilities at June 30, 2018
Additions and adjustments
Payments
Restructuring liabilities at June 30, 2019
$
Involuntary
Employee
Severance and
Benefit Costs
$
168 $
211
(379 )
- $
Other
Total
334 $
110
(444 )
- $
502
321
(823 )
-
The Company’s total restructuring expenses by segment are as follows (in thousands):
Year Ended June 30,
Fiscal Year 2020
Electronics
Engraving
Engineering Technologies
Specialty Solutions
Corporate and Other
Total expense
Fiscal Year 2019
Electronics
Engraving
Engineering Technologies
Specialty Solutions
Corporate and Other
Total expense
Fiscal Year 2018
Electronics
Engraving
Engineering Technologies
Specialty Solutions
Corporate and Other
Total expense
Involuntary
Employee
Severance and
Benefit Costs
Other
Total
355 $
1512
296
1,326
515
4,004 $
327 $
662
17
21
136
1,163 $
215 $
1199
224
-
292
1,930 $
97 $
499
0
69
-
665 $
27 $
0
99
-
-
126 $
84 $
488
874
-
52
1,498 $
452
2,011
296
1,395
515
4,669
354
662
116
21
136
1,289
299
1,687
1,098
-
344
3,428
$
$
$
$
$
$
72
16. EMPLOYEE BENEFIT PLANS
Retirement Plans
The Company has defined benefit pension plans covering certain current and former employees both inside and outside
of the U.S. The Company’s pension plan for U.S. employees is frozen for substantially all employees and participants
in the plan have ceased accruing future benefits.
Net periodic benefit cost for U.S. and non-U.S. plans included the following components (in thousands):
U.S. Plans
Year Ended June 30,
2019
2020
2018
2020
Foreign Plans
Year Ended June 30,
2019
2018
$
Service Cost
Interest Cost
Expected return on plan assets
Recognized net actuarial loss
Amortization of prior service cost
(benefit)
Net periodic benefit cost (benefit) $
3 $
9,083
(13,150 )
5,101
3 $
10,342
(13,541 )
4,121
3 $
10,079
(13,484 )
4,579
-
1,037 $
-
925 $
-
1,177 $
236 $
846
(868 )
651
(5 )
860 $
189 $
1,013
(908 )
340
(3 )
631 $
187
1,050
(947 )
941
(37 )
1,194
The following table sets forth the funded status and amounts recognized as of June 30, 2020 and 2019 for our U.S. and
foreign defined benefit pension plans (in thousands):
Change in benefit obligation
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial loss (gain)
Benefits paid
Foreign currency exchange rate & other changes
Projected benefit obligation at end of year
Change in plan assets
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contribution
Benefits paid
Foreign currency exchange rate
Fair value of plan assets at end of year
Funded Status
Amounts recognized in the consolidated balance sheets
consist of:
Prepaid Benefit Cost
Current liabilities
Non-current liabilities
Net amount recognized
U.S. Plans
Foreign Plans
Year Ended June 30,
Year Ended June 30,
2020
2019
2020
2019
$ 253,540 $ 243,096 $
3
10,342
16,268
(16,169 )
-
$ 264,619 $ 253,540 $
3
9,083
18,121
(16,128 )
-
$ 186,205 $ 190,960 $
11,190
244
(16,189 )
-
$ 194,824 $ 186,205 $
21,447
3,301
(16,129 )
-
43,983 $
236
846
2,604
(1,537 )
(942 )
45,190 $
39,665 $
4,037
739
(1,537 )
(931 )
41,973 $
41,194
189
1,013
4,580
(1,545 )
(1,448 )
43,983
38,117
3,464
1,115
(1,545 )
(1,486 )
39,665
$
(69,795 ) $
(67,335 ) $
(3,217 ) $
(4,318 )
$
$
- $
(208 )
(69,587 )
(69,795 ) $
- $
(211 )
(67,124 )
(67,335 ) $
4,663 $
(295 )
(7,585 )
(3,217 ) $
3,919
(213 )
(8,024 )
(4,318 )
Unrecognized net actuarial loss
Unrecognized prior service cost
Accumulated other comprehensive income, pre-tax
$ 140,501 $ 135,779 $
-
$ 140,501 $ 135,779 $
-
5,075 $
(57 )
5,018 $
6,405
(42 )
6,363
73
The accumulated benefit obligation for all defined benefit pension plans was $309.7 million and $297.4 million at
June 30, 2020 and 2019, respectively.
The estimated actuarial net loss for the defined benefit pension plans that will be amortized from accumulated other
comprehensive income into net periodic benefit cost over the next fiscal year is $6.1 million.
Plan Assets and Assumptions
The fair values of the Company’s pension plan assets at June 30, 2020 and 2019 by asset category, as classified in the
three levels of inputs described in Note 1 under the caption Fair Value of Financial Instruments, are as follows (in
thousands):
Cash and cash equivalents
Common and preferred stocks
Corporate bonds and other fixed income securities
Other
Cash and cash equivalents
Common and preferred stocks
U.S. Government securities
Corporate bonds and other fixed income securities
Other
Total
Level 1
Level 2
Level 3
June 30, 2020
$
3,113 $
85,641
126,703
21,478
$ 236,935 $
1,684 $
1,857
1,620
-
1,429 $
83,784
125,083
21,478
5,161 $ 231,774
Total
Level 1
Level 2
Level 3
June 30, 2019
$
7,696 $
86,415
9,161
97,627
24,971
$ 225,870 $
439 $
1,866
-
7,163
-
7,257
84,549
9,161
90,464
24,971
9,468 $ 216,402
-
-
-
-
-
-
-
-
-
-
-
Asset allocation at June 30, 2020 and 2019 and target asset allocations for 2020 are as follows:
Asset Category
Equity securities
Debt securities
Global balanced securities
Other
Total
Asset Category – Target
Equity securities
Debt and market neutral securities
Global balanced securities
Other
Total
U.S. Plans
Foreign Plans
Year Ended June 30,
2019
2020
Year Ended June 30,
2019
2020
41%
38%
11%
10%
100%
31%
35%
24%
10%
100%
5%
64%
29%
2%
100%
2020
U.S.
40%
38%
12%
10%
100%
20%
41%
37%
2%
100%
U.K.
0%
70%
29%
1%
100%
Our investment policy for the U.S. pension plans targets a range of exposure to the various asset classes. Standex
rebalances the portfolio periodically when the allocation is not within the desired range of exposure. The plan seeks to
provide returns in excess of the various benchmarks. The benchmarks include the following indices: S&P 500;
Citigroup PMI EPAC; Citigroup World Government Bond and Barclays Aggregate Bond. A third-party investment
consultant tracks the plan’s portfolio relative to the benchmarks and provides quarterly investment reviews which
consist of a performance and risk assessment on all investment managers and on the portfolio.
74
Certain managers within the plan use, or have authorization to use, derivative financial instruments for hedging
purposes, the creation of market exposures and management of country and asset allocation exposure. Currency
speculation derivatives are strictly prohibited.
Year Ended June 30
Plan assumptions - obligations
Discount rate
Rate of compensation increase
Plan assumption - cost
Discount rate
Expected return on assets
Rate of compensation increase
2020
2019
2018
0.99 - 2.90%
2.90%
0.24 - 3.70%
3.20%
0.38 - 4.40%
3.60%
0.31 - 3.70%
2.30 - 7.00%
3.20%
0.38 - 4.40%
2.45 - 7.00%
3.60%
0.43 - 4.00%
2.55 - 7.00%
3.70%
Included in the above are the following assumptions relating to the obligations for defined benefit pension plans in the
United States at June 30, 2020; a discount rate of 2.90% and expected return on assets of 7.0%. The U.S. defined benefit
pension plans represent the majority of our pension obligations. The expected return on plan assets assumption is based
on our expectation of the long-term average rate of return on assets in the pension funds and is reflective of the current
and projected asset mix of the funds. The discount rate reflects the current rate at which pension liabilities could be
effectively settled at the end of the year. The discount rate is determined by matching our expected benefit payments
from a stream of AA- or higher bonds available in the marketplace, adjusted to eliminate the effects of call provisions.
Expected benefit payments for all plans during the next five years are as follows: 2021, $17.7 million; 2022, $17.6
million; 2023, $17.6 million; 2024, $17.5 million; 2025, $17.5 million and five years thereafter, $85.6 million. The
Company expects to make $9.9 million of contributions to its pension plans in 2021 including contributions originally
scheduled to be made in fiscal year 2020 but deferred under provisions on the U.S. CARES Act.
The Company operates defined benefit plans in Germany and Japan which are unfunded.
Multi-Employer Pension Plans
We contribute to two multiemployer defined benefit plans under the terms of collective bargaining agreements that
cover our union-represented employees. These plans generally provide for retirement, death and/or termination benefits
for eligible employees within the applicable collective bargaining units, based on specific eligibility/participation
requirements, vesting periods and benefit formulas. The risks of participating in these multiemployer plans are different
from single-employer plans in the following aspects:
●
●
●
Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees
of other participating employers.
If a participating employer stops contributing to the multiemployer plan, the unfunded obligations of the
plan may be borne by the remaining participating employers.
If we choose to stop participating in some of our multiemployer plans, we may be required to pay those
plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability. However,
cessation of participation in a multiemployer plan and subsequent payment of any withdrawal liability is
subject to the collective bargaining process.
The following table outlines the Company’s participation in multiemployer pension plans for the periods ended June 30,
2020, 2019, and 2018, and sets forth the yearly contributions into each plan. The “EIN/Pension Plan Number” column
provides the Employer Identification Number (“EIN”) and the three-digit plan number. The most recent Pension
Protection Act zone status available in 2020 and 2019 relates to the plans’ two most recent fiscal year-ends. The zone
status is based on information that we received from the plans’ administrators and is certified by each plan’s actuary.
Among other factors, plans certified in the red zone are generally less than 65% funded, plans certified in the orange
zone are both less than 80% funded and have an accumulated funding deficiency or are expected to have a deficiency
in any of the next six plan years, plans certified in the yellow zone are less than 80% funded, and plans certified in the
green zone are at least 80% funded. The “FIP/RP Status Pending/Implemented” column indicates whether a financial
improvement plan (“FIP”) for yellow/orange zone plans, or a rehabilitation plan (“RP”) for red zone plans, is either
75
pending or has been implemented. For all plans, the Company’s contributions do not exceed 5% of the total
contributions to the plan in the most recent year.
Pension Protection Act
Zone Status
Contributions
EIN/Plan
Number 2020 2019
FIP/RP
Status
2020
2019
Expiration
Date of
Collective
Surcharge Bargaining
2018 Imposed? Agreement
04-
6372430-
001
Red Red
Yes/
Implemented
$531
$461
482 No
Apr-21
Pension Fund
New England
Teamsters and
Trucking Industry
Pension Fund
IAM National Pension
Fund, National
Pension Plan
51-
6031295-
002
Retirement Savings Plans
Red Green Yes/Implemented
595
644
$1,126 $1,105
638 No
1,120
May 2021-
Oct. 2022
The Company has two primary employee savings plans, one for salaried employees and one for hourly employees.
Substantially all of our full-time domestic employees are covered by these savings plans. Under the provisions of the
plans, employees may contribute a portion of their compensation within certain limitations. The Company, at the
discretion of the Board of Directors, may make contributions on behalf of our employees under the plans. Company
contributions were $3.7 million, $4.0 million, and $3.7 million for the years ended June 30, 2020, 2019, and 2018,
respectively. At June 30, 2020, the salaried plan holds approximately 55,000 shares of Company common stock,
representing approximately 3.0% of the holdings of the plan.
17.
INDUSTRY SEGMENT INFORMATION
During the third quarter of 2020, the Company announced the divestiture of its Refrigerated Solutions Group (an
accumulation of the Master-Bilt and Nor-Lake operating segments) consistent with its strategy to focus financial assets
and managerial resources on higher growth and operating margin businesses. The divestiture of the Refrigerated
Solutions Group was completed and consideration was exchanged in April of fiscal year 2020. Subsequent to the
disposition of the Refrigeration Solutions Group, the Company reviewed the quantitative and qualitative characteristics
of its remaining businesses and determined that it has seven operating segments that aggregate to five reportable
segments. The reportable segments are organized around the types of products sold:
• Electronics – manufacturing and selling of electronic components for applications throughout the end-user
market spectrum;
• Engraving – provides mold texturizing, slush molding tools, project management and design services, roll
engraving, hygiene product tooling, low observation vents for stealth aircraft, and process machinery for a
number of industries;
Scientific – specialty temperature-controlled equipment for the medical, scientific, pharmaceutical, biotech and
industrial markets;
•
• Engineering Technologies – provides net and near net formed single-source customized solutions in the
manufacture of engineered components for the aviation, aerospace, defense, energy, industrial, medical,
marine, oil and gas, and manned and unmanned space markets.
Specialty Solutions – an aggregation of three operating segments that manufacture and sell refrigerated, heated
and dry merchandizing display cases, custom fluid pump solutions, and single and double acting telescopic
and piston rod hydraulic cylinders.
•
All periods presented have been revised accordingly to reflect the new reportable segments.
76
Net sales include only transactions with unaffiliated customers and include no significant intersegment or export sales.
Operating income by segment and geographic area excludes general corporate and interest expenses. Assets of the
Corporate segment consist primarily of cash, office equipment, and other non-current assets.
Given the nature of our corporate expenses, management concluded that it would not presently be appropriate to allocate
the expenses associated with corporate activities to our operating segments. These corporate expenses include the costs
for the corporate headquarters, salaries and wages for the personnel in corporate, professional fees related to corporate
matters and compliance efforts, stock-based compensation and post-retirement benefits related to our corporate
executives, officers and directors, and other compliance related costs. The Company has a process to allocate and
recharge certain direct costs to the operating segments when such direct costs are administered and paid at corporate.
Such direct expenses that are recharged on an intercompany basis each month include such costs as insurance, workers’
compensation programs, audit fees and pension expense. The accounting policies applied by the reportable segments
are the same as those described in the Summary of Accounting Policies footnote to the consolidated financial statements.
There are no differences in accounting policies which would be necessary for an understanding of the reported segment
information.
Industry Segments
(in thousands)
Electronics
Engraving
Scientific
Engineering Technologies
Specialty Solutions
Corporate and Other
Total
Electronics
Engraving
Scientific
Engineering Technologies
Specialty Solutions
Restructuring charge
Acquisition-related costs
Other operating income
(expense), net
Corporate
Total
Interest expense
Other, net
Income from continuing
operations before income taxes
2020
Net Sales
2019
2018
Depreciation and Amortization
2018
2019
2020
$ 185,294 $ 204,073 $ 196,291 $
136,275
52,086
90,781
120,082
-
$ 604,535 $ 639,931 $ 595,515 $
143,736
57,523
104,047
113,935
-
149,693
57,621
105,270
123,274
-
12,339 $
10,595
1,594
6,000
1,446
320
32,294 $
11,751 $
8,232
1,590
5,963
1,350
402
29,288 $
10,564
5,483
1,258
6,006
1,356
400
25,067
Income (Loss) From Operations
2018
2019
2020
Capital Expenditures (1)
2019
2018
2020
$
29,749 $
20,493
13,740
14,027
18,546
(4,669 )
(1,759 )
41,227 $
23,996
13,676
11,169
19,000
(1,289 )
(3,075 )
45,501 $
29,618
11,436
6,506
18,688
(3,428 )
(3,749 )
5,334 $
10,618
360
1,170
1,154
-
-
12,646 $
13,868
77
3,857
2,108
-
-
8,487
9,339
313
3,581
1,918
-
-
$
-
(29,599 )
60,528 $
(7,475 )
1,021
(500 )
(24,728 )
79,476 $
(10,760 )
(1,742 )
-
(26,430 )
78,142 $
(8,029 )
(1,720 )
$
54,074 $
66,974 $
68,393
-
668
19,304 $
-
57
32,613 $
-
258
23,896
(1) Includes capital expenditures in accounts payable of $3.2 million, $0.9 million, and $0.4 million at June 30, 2020,
2019, and 2018 respectively.
77
Electronics
Engraving
Scientific
Engineering Technologies
Specialty Solutions
Corporate & Other
Discontinued Operations
Total
Net sales (2)
United States
Asia Pacific
EMEA (3)
Other Americas
Total
Goodwill
2020
2019
Identifiable Assets
2019
2020
$
$
131,582 $
76,742
15,454
43,685
3,305
453
-
271,221 $
131,317 $
79,392
15,454
43,890
3,305
485
-
273,843 $
324,725 $
257,104
90,595
147,797
52,528
55,193
2,936
930,878 $
332,326
233,569
63,657
149,628
64,492
18,578
59,639
921,889
2020
2019
2018
$
$
364,188 $
98,665
128,037
13,645
604,535 $
370,235 $
108,667
144,636
16,393
639,931 $
321,284
108,569
149,249
16,413
595,515
(2) Net sales were identified based on geographic location where our products and services were initiated.
(3) EMEA consists primarily of Europe, Middle East and S. Africa.
Long-lived assets
United States
Asia Pacific
EMEA (4)
Other Americas
Total
2020
2019
2018
$
$
69,548 $
32,057
26,057
4,871
132,533 $
67,337 $
35,033
27,160
4,709
134,239 $
63,677
30,911
25,709
3,064
123,361
(4) 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, 2020 and 2019 are as follows (in thousands,
except for per share data):
Net sales
Gross profit
Net income
EARNINGS PER SHARE (1)
Basic
Diluted
Net sales
Gross profit
Net income
EARNINGS PER SHARE (1)
2020
First
Second
Third
Fourth
196,444 $
68,283
12,439
190,585 $
66,453
12,237
187,039 $
58,108
(6,323 )
142,308
46,550
1,835
1.01 $
1.00 $
0.99 $
0.99 $
(0.51 ) $
(0.51 ) $
0.15
0.15
2019
First
Second
Third
Fourth
217,528 $
77,050
15,857
219,498 $
75,569
13,398
216,773 $
68,199
26,269
209,199
70,081
12,390
$
$
$
$
78
Basic
Diluted
$
$
1.25 $
1.24 $
1.06 $
1.05 $
2.09 $
2.09 $
1.00
0.99
(1) Basic and diluted earnings per share are computed independently for each reporting period. Accordingly, the
sum of the quarterly earnings per share amounts may not agree to the year-to-date amounts.
19. DISCONTINUED OPERATIONS
In pursuing our business strategy, the Company continues to divest certain businesses and record activities of these
businesses as discontinued operations.
During the third quarter of fiscal 2020, in order to focus its financial assets and managerial resources on its remaining
portfolio of businesses, the Company entered into a definitive agreement to sell the Refrigerated Solutions Group,
consisting of the Master-Bilt and Nor-Lake operating segments, to Ten Oaks Group for a cash purchase price of $10.6
million, subject to post-closing adjustments and various transaction fees. The Refrigerated Solutions Group was a part
of the Company's Food Service Equipment segment, and manufactured refrigerated cabinets and walk-ins for customers
food service and retail end markets.
The transaction closed on April 16, 2020 and resulted in a pre-tax loss of $20.0 million less related transaction expenses
of $1.9 million. The Company reported a tax benefit related to the loss on sale of $2.6 million.
During the first quarter of 2019, in order to focus its financial assets and managerial resources on its remaining portfolio
of businesses, the Company decided to divest its Cooking Solutions Group, which consisted of three operating segments
and a minority interest investment. In connection with the divestiture, during the second quarter of 2019, the Company
sold its minority interest investment to the majority shareholders. During the third quarter of fiscal 2019, the Company
entered into a definitive agreement to sell the three operating segments to the Middleby Corporation for a cash purchase
price of $105 million, subject to post-closing adjustments and various transaction fees. The transaction closed on
March 31, 2019 and resulted in a pre-tax gain of $20.5 million less related transaction expenses of $4.4 million. The
Company reported a tax benefit related to the sale due to the write-off of deferred tax liabilities related to the Cooking
Solutions Group. A cash payment of $106.9 million was received on April 1, 2019. The proceeds received were
subsequently used to pay down borrowings on our revolving credit facility.
Results of the Refrigerated Solutions Group in current and prior periods and results of the Cooking Solutions Group in
prior periods have been classified as discontinued operations in the Condensed Consolidated Financial Statements and
excluded from the results of continuing operations. Activity related to the Refrigerated Solutions Group, the Cooking
Solutions Group and other discontinued operations for the years ended June 30, 2020, 2019, and 2018 is as follows (in
thousands):
Net Sales
Gain (Loss) on Sale of Business
Transaction Fees
Income (loss) from Discontinued Operations
Non-operating Income (Expense)
Profit (loss) Before Taxes
Benefit (Provision) for Taxes
Net income (loss) from Discontinued Operations
2020
Year Ended June 30,
2019
2018
111,841 $
223,067 $
272,867
(19,996 ) $
(1,933 )
(23,553 ) $
-
(23,439 ) $
2,613
(20,826 ) $
20,539 $
(4,397 )
17,541 $
(366 )
17,175 $
2,453
19,628 $
-
-
8,006
809
8,815
(2,578 )
6,237
$
$
$
$
$
79
Assets and liabilities related to our discontinued operations appear in the condensed consolidated balance sheets are as
follows (in thousands):
Accounts receivable
Inventories
Prepaid Expenses
Due from Buyer
Total current assets
Property, plant, equipment, net
Intangible assets, net
Goodwill
Other non-current assets
Total non-current assets
Total Assets
Accounts Payable
Accrued Liabilities
Income Tax Payable
Total current liabilities
Non-current Liabilities
Total Liabilities
June 30, 2020 June 30, 2019
16,215
$
12,343
9,052
-
37,610
2,936 $
-
-
-
2,936
-
-
-
-
-
2,936
-
610
0
610
-
610
13,785
-
7,660
584
22,029
59,639
18,402
13,101
-
31,503
2,223
33,726
Net Assets
$
2,326 $
25,913
20.
LEASES
Effective July 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842), using the modified retrospective
approach and utilizing the effective date as its date of initial application. As a result, prior periods are presented in
accordance with the previous guidance in ASC 840, Leases (“ASC 840”). The Company has elected to apply the
‘package of practical expedients’ which allow it to not reassess (i) whether existing or expired arrangements contain a
lease, (ii) the lease classification of existing or expired leases, or (iii) whether previous initial direct costs would qualify
for capitalization under the new lease standard.
At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on
the unique facts and circumstances present in the arrangement. Leases with a term greater than one year are recognized
on the balance sheet as right-of-use assets and short-term and long-term lease liabilities, as applicable. The Company
does not have material financing leases.
Operating lease liabilities and their corresponding right-of-use assets are initially recorded based on the present value
of lease payments over the expected remaining lease term. The interest rate implicit in lease contracts is typically not
readily determinable. As a result, the Company utilizes its incremental borrowing rate to discount lease payments,
which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease
payments in the same currency, for a similar term, in a similar economic environment. To estimate its incremental
borrowing rate, a credit rating applicable to the Company is estimated using a synthetic credit rating analysis since the
Company does not currently have a rating agency-based credit rating.
The Company has elected not to recognize leases with an original term of one year or less on the balance sheet. The
Company typically only includes an initial lease term in its assessment of a lease arrangement. Options to renew a lease
are not included in the Company’s assessment unless there is reasonable certainty that the Company will renew.
73
80
Amounts (in thousands) recorded in the Company's Condensed Consolidated Balance Sheet and Statement of Operations
related to leases are as follows:
Assets
ROU Assets (other assets)
Liabilities
Current (accrued expense)
Other non-current liability
Total lease liability
Lease cost
June 30, 2020
$
$
$
44,788
8,016
36,293
44,309
The components of lease costs for the years ended June 30, 2020 and June 30, 2019 are as follows:
Operating lease cost
Maturity of lease liability
Year Ended Year Ended
June 30, 2020 June 30, 2019
-
$
11,283 $
The maturity of the Company's lease liabilities included in continuing operations at June 30, 2020 were as follows:
2021
2022
2023
2024
2025
After 2025
Less: Interest
Present value of lease Liabilities
Operating
Leases
9,329
7,729
5,512
4,917
4,085
18,256
(5,519 )
44,309
$
The Company will make future payments on a lease that have not yet commenced of $0.3 million. This lease will
commence in 2021 and has lease term of 2 years.
The weighted average remaining lease term and discount rates are as follows:
Lease Term and Discount Rate
Weighted average remaining lease term (years)
Weighted average discount rate (percentage)
June 30, 2020
9.55
2.74%
81
Other Information
Supplemental cash flow information related to leases is as follows:
Operating cash flows from operating leases
Total cash paid for amounts included in the measurement of lease liabilities
Year Ended Year Ended
June 30, 2020 June 30, 2019
-
$
-
10,436 $
10,436
21.
SUBSEQUENT EVENTS
On July 15, 2020 the Company acquired privately-held, Florida-based Renco Electronics for approximately
$28.0 million in cash with an additional three-year earnout payment based upon achieving certain financial targets. The
transaction is being financed from Standex’s existing cash balance.
82
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Standex International Corporation
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Standex International Corporation (a Delaware
corporation) and subsidiaries (the “Company”) as of June 30, 2020 and 2019, the related consolidated statements of
comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended
June 30, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of June 30, 2020 and 2019,
and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2020, in
conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (“PCAOB”), the Company’s internal control over financial reporting as of June 30, 2020, based on criteria
established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (“COSO”), and our report dated August 25, 2020 expressed an unqualified opinion.
Change in accounting principle
As discussed in Note 20 to the consolidated financial statements, the Company has changed its method of accounting
for leases as of July 1, 2019 due to the adoption of Accounting Standards Codification (ASC) Topic 842, Leases.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
Critical audit matters
The critical audit matters communicated below are matters arising from the current period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below,
providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
83
Revenue recognition – Revenue Recognized Over Time
As described in Notes 1 and 3 to the consolidated financial statements, the Company’s revenue that is recognized over
time was $35.1 million for the year ended June 30, 2020. For these transactions, revenue is recognized over time based
on cost incurred to date as a percentage of total estimated cost. We identified revenue recognized over time as a critical
audit matter.
The principal considerations for our determination that this matter is a critical audit matter are as follows. Accounting
for these transactions requires the Company to monitor customer contracts to determine the expected costs to be incurred
to satisfy the related performance obligation. Management’s determination of these expected costs involves estimation
and subjectivity, which, in turn, involved complexity and auditor subjectivity in evaluating management’s estimates and
obtaining sufficient appropriate audit evidence related to such estimates.
Our audit procedures related to revenue recognized over time included the following, among others.
● We tested the operating effectiveness of controls relating to management’s development and ongoing
●
●
evaluation of each contract’s expected cost.
For a sample of transactions, we inspected the customer contract and evaluated assumptions used by
management in determining the contract’s estimated expected cost in order to fulfill the performance
obligation under the contract. This included comparing planned costs to actual costs incurred to date
based on management’s original assumptions and corroborating management’s assumptions with
company engineers assigned to the contract.
For a sample of transactions, we evaluated whether the assumptions surrounding the expected costs to be
incurred were reasonable by testing management’s historical ability to estimate. This included comparing
actual costs incurred on completed contracts to management’s original assumptions and assumptions
throughout the contract’s life related to expected costs to be incurred.
Goodwill Impairment Assessment
As described in Notes 1 and 6 to the consolidated financial statements, the Company’s consolidated goodwill balance
was $271 million at June 30, 2020, which is allocated to the Company’s 7 reporting units. Goodwill is tested for
impairment at least annually at the reporting unit level. Due to the impact of the COVID-19 pandemic on the Company’s
projected operating results, cash flow and market capitalization, the Company completed an interim goodwill
impairment assessment of its reporting units during the third quarter along with the Company’s annual impairment
assessment during the fourth quarter. We identified the Company’s goodwill impairment assessments of certain
reporting units as a critical audit matter.
The principal considerations for our determination that this matter is a critical audit matter are as follows. The
determination of the fair value of reporting units requires management to make significant estimates and assumptions
related to forecasts of future cash flows and discount rates. This requires management to evaluate historical results and
expectations of future operating performance based on relevant information available to them regarding expectations of
industry performance, as well as expectations for entity-specific performance. In addition, determining the discount
rate requires management to evaluate the appropriate risk premium based on their judgment of industry and entity-
specific risks. As disclosed by management, changes in these assumptions could have a significant impact on either the
fair value of the reporting units, the amount of any goodwill impairment charge, or both. In turn, auditing management’s
judgments regarding forecasts of future cash flows and the discount rate to be applied involved a high degree of auditor
subjectivity.
Our audit procedures related to the Company’s goodwill impairment assessment of certain reporting units included the
following, among others.
● We tested the design and operating effectiveness of controls relating to management’s goodwill
impairment tests, including controls over the determination of key inputs such as the forecasting of future
cash flows and determination of the discount rate.
● We compared management’s forecasts of future revenue and operating margin to third -party industry
projections, historical operating results, and past projections.
● We evaluated management’s historical ability to achieve forecasted revenue and operating margins.
84
● We performed sensitivity analysis on the Company’s future revenue and operating margins to evaluate
the reasonableness of management’s forecasts.
● We utilized a valuation specialist to assist in recalculating the Company’s discounted cash flow model
and in evaluating the reasonableness of significant assumptions to the model, including the discount rate.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2015.
Boston, Massachusetts
August 25, 2020
85
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
Not Applicable
Item 9A. Controls and Procedures
The management of the Company including its Chief Executive Officer, and Chief Financial Officer, have conducted
an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) as of
the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded as of June 30, 2020, that the disclosure controls and procedures are effective in ensuring that the
information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is
(i) recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms
and (ii) that such information is accumulated and communicated to the Company’s management, including its Chief
Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure.
There were no changes in the Company’s internal control over financial reporting identified in connection with
management’s evaluation that occurred during the fourth quarter of our fiscal year (ended June 30, 2020) that has
materially affected, or is reasonably likely to materially affect our internal control over financial reporting.
Management's Report on Internal Control over Financial Reporting
The management of Standex is responsible for establishing and maintaining adequate internal control over financial
reporting (as defined in Section 240.13a-15(f) of the Exchange Act). The Company’s internal control over financial
reporting is designed to provide reasonable assurance as to the reliability of the Company’s financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Management, including the Chief Executive Officer and the Chief Financial Officer, assessed the effectiveness of our
internal control over financial reporting as of the end of the fiscal year covered by this report on Form 10-K. In making
this assessment, management used the criteria established by the Committee of Sponsoring Organizations of the
Treadway Commission in “Internal Control-Integrated Framework (2013).” These criteria are in the areas of control
environment, risk assessment, control activities, information and communication and monitoring. Management’s
assessment included documenting, evaluating and testing the design and operating effectiveness of our internal control
over financial reporting.
Based on the Company’s processes, as described above, management, including the Chief Executive Officer and the
Chief Financial Officer, has concluded that our internal control over financial reporting was effective as of June 30, 2020
to provide reasonable assurance of achieving its objectives. These results were reviewed with the Audit Committee of
the Board of Directors. Grant Thornton, LLP, the independent registered public accounting firm that audited our
consolidated financial statements included in this Annual Report on Form 10-K, has issued an unqualified attestation
report on the Company’s internal control over financial reporting, which is included below.
Inherent Limitation on Effectiveness of Controls
No matter how well designed, internal control over financial reporting has inherent limitations. Internal control over
financial reporting determined to be effective can provide only reasonable, not absolute, assurance with respect to
financial statement preparation and may not prevent or detect all misstatements that might be due to error or fraud. In
addition, a design of a control system must reflect the fact that there are resource constraints, and the benefits of controls
must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have
been detected.
86
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Standex International Corporation
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Standex International Corporation (a Delaware
corporation) and subsidiaries (the “Company”) as of June 30, 2020, based on criteria established in the 2013 Internal
Control—Integrated Framework 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, 2020, based on criteria established in the 2013 Internal Control—Integrated Framework issued
by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended June 30, 2020,
and our report dated August 25, 2020 expressed an unqualified opinion on those financial statements.
Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management Report on Internal Control over Financial Reporting (“Management’s Report”). Our responsibility is to
express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on
the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ GRANT THORNTON LLP
Boston, Massachusetts
August 25, 2020
87
Item 9B. Other Information
Compensatory Arrangements of Certain Officers
On August 24, 2020, the Registrant, pursuant to a previous approval from the Compensation Committee of the Board
of Directors, amended the employment agreements of certain executive officers including named executive officers
Paul C. Burns, Alan J. Glass and Annemarie Bell. The amendments implement the Compensation Committee’s decision
to align certain benefits payable to each named executive officer in the event of a Change of Control of the Company
(as defined in the agreements) with the recommendation from the independent advisors to the Compensation Committee.
More specifically, in the event of a qualifying termination due to a Change of Control, each such named executive
officer will be entitled to a lump sum payment equal to two times the sum of (i) such officer’s then base salary and
(ii) the higher of such officer’s most recent annual incentive award or target annual incentive award, as well as
continuation of health and welfare benefits for a period of two years. All other provisions of the employment agreements
remain in full force and effect. The amendments to such employment agreements are attached as Exhibits 10(c), 10(e),
and 10(g) hereto.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The Company will file with the Securities and Exchange Commission (“SEC”) a definitive Proxy Statement no later
than 120 days after the close of the fiscal year ended June 30, 2020 (the “Proxy Statement”). The information required
by this item and not provided in Part 1 of this report under Item 1 “Executive Officers of Standex” is incorporated by
reference from the Proxy Statement under the captions “Election of Directors,” “Stock Ownership in the Company,”
“Other Information Concerning the Company, Board of Directors and its Committees” and “Section 16(a) Beneficial
Ownership Reporting Compliance.”
There have been no material changes to the procedures by which security holders may recommend nominees to our
Board of Directors. Information regarding the process for identifying and evaluating candidates for director are set
forth and incorporated in reference to the information in the Proxy Statement under the caption “Corporate Governance/
Nominating Committee Report.”
Information regarding the Audit Committee Financial Expert and the identification of the Audit Committee is
incorporated by reference to the information in the Proxy Statement under the caption “Other Information Concerning
the Company, Board of Directors and its Committee, Audit Committee.” The Audit Committee is established in
accordance with Section 3(a)(58)(A) of the Securities Exchange Act.
We maintain a corporate governance section on our website, which includes our code of ethics for senior financial
management that applies to our chief executive officer, principal financial officer, principal accounting officer,
controller or persons performing similar functions. Our corporate governance section also includes our code of business
conduct and ethics for all employees. In addition, we will promptly post any amendments to or waivers of the code of
ethics for senior financial management on our website. You can find this and other corporate governance information
at www.standex.com.
Item 11. Executive Compensation
Information regarding executive compensation is incorporated by reference from the Proxy Statement under the
captions and sub-captions: “Executive Compensation,” “Compensation Discussion and Analysis,” “Compensation
Committee Report,” “2020 Summary Compensation Table,” “Other Information Concerning the Company, Board of
Directors and Its Committees,” and “Directors Compensation.”
88
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The stock ownership of each person known to Standex to be the beneficial owner of more than 5% of its Common
Stock is incorporated by reference in the Proxy Statement under the caption “Stock Ownership of Certain Beneficial
Owners.” The beneficial ownership of Standex Common Stock of all directors and executive officers of the Company
is incorporated by reference in the Proxy Statement under the caption and sub-caption “Stock Ownership in the
Company” and “Stock Ownership by Directors, Nominees for Director and Executive Officers,” respectively.
The Equity Compensation Plan table below represents information regarding the Company’s equity based
compensation plan at June 30, 2020.
(A)
(B)
Number of
Securities To Weighted-Average
Be Issued Upon
Exercise Exercise Price Of
Of Outstanding
Options,
Warrants and
Rights
Outstanding
Options,
Warrants and
Rights
(C)
Number of
Securities
Remaining
Available for
Future Issuance
Under
Equity
Compensation
Plans (Excluding
Securities reflected
in Column (A))
134,670 $
5.67
365,330
- $
134,670 $
-
5.67
-
365,330
Plan Category
2018 Omnibus Equity compensation plan
approve by stockholders
Equity compensation plans not approved by
stockholders
Total
The Company has one equity compensation plan, approved by stockholders, under which equity securities of the
Company have been authorized for issuance to employees and non-employee directors. This plan is further described
in the “Notes to Consolidated Financial Statements” under the heading “Stock-Based Compensation and Purchase
Plans.”
Item 13. Certain Relationships and Related Transactions and Director Independence
Information regarding certain relationships and related transactions is incorporated by reference in the Proxy Statement
under the caption and sub-caption “Certain Relationships and Related Transactions” and “Stock Ownership by
Directors, Nominees for Director and Executive Officers,” respectively.
Information regarding director independence is incorporated by reference in the Proxy Statement under the caption
“Election of Directors - Determination of Independence.”
Item 14. Principal Accountant Fees and Services
This Information in addition to information regarding aggregate fees billed for each of the last two fiscal years for
professional services rendered by the professional accountant for audit of the Company’s annual financial statements
and review of financial statements included in the Company’s Form 10-K as well as others are incorporated by reference
in the Proxy Statement under the caption “Independent Auditors’ Fees.”
89
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) 1. Financial Statements
Financial Statements covered by the Reports of Independent Registered Public Accounting Firm
(A) Consolidated Statements of Operations for the fiscal years ended June 30, 2020, 2019 and 2018
(B) Consolidated Balance Sheets as of June 30, 2020 and 2019
(C) Comprehensive Income for the fiscal years ended June 30, 2020, 2019 and 2018
(D) Consolidated Statements of Stockholders’ Equity for the fiscal years ended June 30, 2020, 2019 and 2018
(E) Consolidated Statements of Cash Flows for the fiscal years ended June 30, 2020, 2019 and 2018
(F) Notes to Consolidated Financial Statements
2. Financial Statements Schedule
The following financial statement schedule is included as required by Item 8 to this report on Form 10-K
Schedule II – Valuation and Qualifying Accounts is included in the Notes to Consolidated Financial Statements
All other schedules are not required and have been omitted
3. Exhibits
Exhibit
Number
3.
(i)
Exhibit Description
Incorporated
by Reference
Date
Form
Filed
Herewith
Restated Certificate of Incorporation of Standex, dated October 27,
1998 filed as Exhibit 3(i).
10-Q 12/31/1998
(ii)
By-Laws of Standex, as amended, and restated effective January 30,
2015 filed as Item 5.03, Exhibit 3.1
8-K
2/4/2015
10.
(a)
Employment Agreement dated January, 20, 2014 between the Company
and David Dunbar*
10-K 6/30/2016
(b)
(c)
(d)
(e)
(f)
(g)
Employment Agreement dated April 4, 2016 between the Company and
Alan J. Glass*
10-K 6/30/2016
First Amendment to Employment Agreement dated April 4, 2016
between the Company and Alan J. Glass*
Employment Agreement dated August 26, 2019 between the Company
and Annemarie Bell*
10-K 6/30/2019
First Amendment to Employment Agreement dated August 26, 2019
between the Company and Annemarie Bell*
Employment Agreement dated July 27, 2015 between the Company and
Paul Burns*
10-K 6/30/2016
First Amendment to Employment Agreement dated July 27, 2015
between the Company and Paul Burns*
X
X
X
90
(h)
(i)
(j)
(k)
Employment Agreement dated August 2, 2019 between the Company
and Ademir Sarcevic*
8-K
8/8/2019
First Amendment to Employment Agreement dated August 2, 2019
between the Company and Ademir Sarcevic*
X
Standex International Corporation Amended and Restated 2008 Long
Term Incentive Plan, effective October 28, 2008.*
10-K 6/30/2012
Standex International Corporation Supplemental Retirement Plan
adopted April 26, 1995 and Amended on July 26, 1995 filed as Exhibit
10(n).*
10-K 6/30/1995
(l)
Form of Indemnification Agreement for directors and executive officers
of the Company.*
8-K
5/5/2008
(m)
2018 Omnibus Incentive Plan*
Standex Deferred Compensation Plan for highly compensated
employees filed as Item 5.02.*
8-K
10/29/2018
8-K
1/31/2008
Code of Ethics for Chief Executive Officer and Senior Financial
Officers is incorporated by reference as Exhibit 14.
10-K 6/30/2004
Amended and Restated Credit Agreement Dated December 19, 2014 by
and among
Standex International Corporation, Citizens Bank, N.A.; Bank of
America, N.A.; TD Bank, N.A.; JPMorgan Chase Bank, N.A.; Branch
Banking & Trust Company and Santander Bank, N.A. Filed as Item
1.01, Exhibit 10
8-K
12/19/2014
Second Amended and Restated Credit Agreement Dated December 21,
2018 by and among Standex International Corporation, Citizens Bank,
N.A.; Bank of America N.A.; TD Bank, N.A., JPMorgan Chase Bank,
N.A.; and Branch Banking & Trust Company
8-K
12/21/2018
(n)
(o)
(p)
(q)
(r)
Standex International Long-Term Incentive Plan Award
10-K 6/30/2019
14.
Code of Ethics for Chief Executive Officer and Senior Financial
Officers is incorporated by reference as Exhibit 14.
10-K 6/30/2004
21.
Subsidiaries of Standex International Corporation
23.1
Consent of Independent Registered Public Accounting Firm Grant
Thornton LLP
24.
Powers of Attorney of Charles H. Cannon, Thomas E. Chorman,
Jeffrey S. Edwards, B. Joanne Edwards, Thomas J. Hansen, Michael A.
Hickey and Daniel B. Hogan
31.1
Rule 13a-14(a) Certification of President and Chief Executive Officer
31.2
Rule 13a-14(a) Certification of Vice President and Chief Financial
Officer
32.
Section 1350 Certification
X
X
X
X
X
X
91
101
The following materials from this Annual Report on Form 10-K,
formatted in Inline Extensible Business Reporting Language (iXBRL):
(i) Condensed Consolidated Balance Sheets, (ii) Condensed
Consolidated Statements of Operations, (iii) Condensed Consolidated
Statements of Comprehensive Income, (iv) Condensed Consolidated
Statements of Cash Flows, and (v) Notes to Unaudited Condensed
Consolidated Financial Statements
104
Cover Page Interactive Data File (formatted as Inline XBRL and
contained in Exhibit 101).
X
X
* Management contract or compensatory plan or arrangement.
92
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Standex International
Corporation has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto
duly authorized, on August 25, 2020.
STANDEX INTERNATIONAL CORPORATION
(Registrant)
/s/ DAVID DUNBAR
David Dunbar
President/Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of Standex International Corporation and in the capacities indicated on August 25, 2020:
Signature
/s/ DAVID DUNBAR
David Dunbar
/s/ ADEMIR SARCEVIC
Ademir Sarcevic
/s/ SEAN VALASHINAS
Sean Valashinas
Title
President/Chief Executive Officer
Vice President/Chief Financial Officer
Chief Accounting Officer / Assistant Treasurer
David Dunbar, pursuant to powers of attorney which are being filed with this Annual Report on Form 10-K, has
signed below on August 25, 2020 as attorney-in-fact for the following directors of the Registrant:
Charles H. Cannon
Thomas E. Chorman
B. Joanne Edwards
Jeffrey S. Edwards
Thomas J. Hansen
Michael A. Hickey
Daniel B. Hogan
/s/ DAVID DUNBAR
David Dunbar
Supplemental Information to be furnished with reports filed pursuant to Section 15(d) of the Act by Registrants which
have not registered securities pursuant to Section 12 of the Act.
The Company will furnish its 2017 Proxy Statement and proxy materials to security holders subsequent to the filing of
the annual report on this Form. Copies of such material shall be furnished to the Commission when they are sent to
security holders.
93
INDEX TO EXHIBITS
10(c)
First Amendment to Employment Agreement – Alan J. Glass
10(e)
First Amendment to Employment Agreement – Annemarie Bell
10(g)
First Amendment to Employment Agreement – Paul C. Burns
10(i)
First Amendment to Employment Agreement – Ademir Sarcevic
21
23
24
Subsidiaries of Standex
Consent of Independent Registered Public Accounting Firm Grant Thornton LLP
Powers of Attorney of Charles H. Cannon, Thomas E.
Chorman, B. Joanne Edwards, Jeffrey S. Edwards, Thomas J.
Hansen, Michael A. Hickey and Daniel B. Hogan.
31.1
Rule 13a-14(a) Certification of President and Chief Executive
Officer
31.2
Rule 13a-14(a) Certification of Vice President and Chief Financial Officer
32
Section 1350 Certification
END OF FORM 10-K
SUPPLEMENTAL INFORMATION FOLLOWS
Board of Directors
Title
Charles H. Cannon, Jr., 1, 2, 4
Retired Chairman and CEO, JBT Corporation
Thomas E. Chorman 1, 2, 3, 4
CEO, Foam Partners LLC
David Dunbar 4
President and Chief Executive Officer; Chairman of the Board
Jeffrey S Edwards 2, 3
Chairman and Chief Executive Officer, Cooper Standard Holdings, Inc.
B. Joanne Edwards 1,3
Retired Senior Vice President & General Manager, Residential & Wiring
Device Business, Eaton Corporation
Thomas J. Hansen 1
Former Vice Chairman of Illinois Tool Works, Inc.
Michael A. Hickey2,4
Executive Vice President and President of the Global Institutional
Business, Ecolab Inc.
Daniel B. Hogan, Ph. D. 3
________________________
Executive Director, Passim Folk Music and Cultural Center
1 Member of Audit Committee
2 Member of Compensation Committee
3 Member of Corporate Governance/Nominating Committee
4 Member of Executive Committee
94
Corporate Officers
David Dunbar
Ademir Sarcevic
Alan J. Glass
Stacey S. Constas
Sean Valashinas
Timo Goodloe
Annemarie Bell
Paul Burns
James Hooven
Shareholder Information
Corporate Headquarters
President and Chief Executive Officer
Vice President, Chief Financial Officer
Vice President, Chief Legal Officer and Secretary
Corporate Governance Officer and Assistant Secretary
Vice President, Chief Accounting Officer and Assistant Treasurer
Vice President, Global Tax
Vice President, Human Resources
Vice President of Strategy and Business Development
Vice President, Operations and Global Supply Chain
Standex International Corporation
23 Keewaydin Drive, Suite 300
Salem, NH 03079
(603) 893-9701
Facsimile: (603) 893-7324
www.standex.com
Common Stock
Listed on the New York Stock Exchange
(Ticker symbol: SXI)
Transfer Agent and Registrar
Independent Auditors
Shareholder Services
Stockholders’ Meeting
Computershare
250 Royall Street
Canton, MA 07021
(800) 368-5948
www.Computershare.com
Grant Thornton LLP
75 State Street, 13th Floor
Boston, MA 02109-1827
Stockholders should contact Standex’s Transfer Agent (Computershare,
250 Royall Street, Canton, MA 02021) regarding changes in name,
address or ownership of stock; lost certificates of dividends; and
consolidation of accounts.
The Annual Meeting of Stockholders will be held at 9:00 a.m. on
Tuesday, October 20, 2020 at Standex International Corporation’s
Corporate Headquarters, 23 Keewaydin Drive, Salem, NH 03079
95
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
EXHIBIT 10.c
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (“Amendment”) is entered into as of the 24th day of
August 2020 by and between Standex International Corporation, a Delaware corporation with executive offices located at
23 Keewaydin Drive, Salem, NH 03079 (the “Employer”) and Alan Glass, an Individual residing at 118 Allerton Road, Newton,
MA 02461 (the “Employee”).
WHEREAS, Employer and Employee entered into an Employment Agreement dated April 4, 2016 (the “Employment
Agreement”).
WHEREAS, Employer and Employee desire to amend the Employment Agreement.
NOW, THEREFORE In consideration of the mutual covenants and agreements of the parties hereto and terms and for
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto intending to be legally
bound hereby agree as follows:
1.
2.
Capitalized Terms. Unless otherwise stated, any capitalized terms not defined herein shall have the meanings
ascribed to them in the Employment Agreement.
Conflicting Terms. In the event of a conflict between the provisions of this Amendment and the provisions of the
Employment Agreement, the provisions of this Amendment shall be controlling.
3.
Amendment.
Change of Control. Section 13(b) of the Employment Agreement shall be deleted in its entirety and replaced with
the following:
“(b) Following a change of control of Employer, any termination of Employee's employment either by Employee pursuant
to Section 13(a)(ii) or by Employer under any circumstances other than involving conclusive evidence of substantial
and indisputable intentional personal malfeasance in office, then:
(i)
(ii)
Employee shall be promptly paid a lump sum payment equal to two times his current annual base salary
plus two times the higher of the Employee’s then current target bonus or most recent actual bonus amount
under the Annual Incentive Program as in effect on the date immediately prior to the changes in control;
Employee shall become 100% vested in all benefit plans in which he participates including but not limited
to the Management Savings Program portion of the Standex Annual Incentive Program and all restricted
stock grants and performance share units granted under the Standex Long Term Incentive Program, or any
successor plan of the Employer, and any other stock based plans of the Employer; and
96
(iii)
All life insurance and medical plan benefits covering the Employee and his dependents shall be continued
at the expense of Employer for the two-year period following such termination as if the Employee were still
an employee of the Employer.”
4. Ratification. Except as modified by this Amendment, the terms and provisions of the Employment Agreement shall
continue in full force and effect and are hereby ratified by the parties.
5. Binding Effect. This Amendment shall inure to the benefit of and be binding upon the parties named herein and their
respective successors and assigns.
6. Counterparts; Facsimile Signatures. The parties may execute this Amendment in any number of counterparts, each
of which, when executed shall have the force and effect of an original, but all such counterparts shall constitute one and the same
Amendment. For purposes of this Amendment, a facsimile signature or a scanned signature shall be deemed the same as an
original.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day and year first above
written.
STANDEX INTERNATIONAL
CORPORATION
/s/ David Dunbar
By:
David Dunbar
President/CEO
/s/ Alan Glass
Alan Glass
97
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
EXHIBIT 10.e
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (“Amendment”) is entered into as of the 24th day of
August 2020 by and between Standex International Corporation, a Delaware corporation with executive offices located at
23 Keewaydin Drive, Salem, NH 03079 (the “Employer”) and Annemarie Bell, an Individual residing at 8 Premier Drive,
Londonderry, NH 03053 (the “Employee”).
WHEREAS, Employer and Employee entered into an Employment Agreement dated August 26, 2019 (the “Employment
Agreement”).
WHEREAS, Employer and Employee desire to amend the Employment Agreement.
NOW, THEREFORE In consideration of the mutual covenants and agreements of the parties hereto and terms and for
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto intending to be legally
bound hereby agree as follows:
1.
2.
Capitalized Terms. Unless otherwise stated, any capitalized terms not defined herein shall have the meanings
ascribed to them in the Employment Agreement.
Conflicting Terms. In the event of a conflict between the provisions of this Amendment and the provisions of the
Employment Agreement, the provisions of this Amendment shall be controlling.
3.
Amendment.
Change of Control. Section 13(b) of the Employment Agreement shall be deleted in its entirety and replaced with
the following:
“(b) Following a change of control of Employer, any termination of Employee's employment either by Employee pursuant
to Section 13(a)(ii) or by Employer under any circumstances other than involving conclusive evidence of substantial
and indisputable intentional personal malfeasance in office, then:
(i)
Employee shall be promptly paid a lump sum payment equal to two times her current annual base salary
plus two times the higher of the Employee’s then current target bonus or most recent actual bonus amount
under the Annual Incentive Program as in effect on the date immediately prior to the changes in control;
98
(ii)
(iii)
Employee shall become 100% vested in all benefit plans in which she participates including but not limited
to the Management Savings Program portion of the Standex Annual Incentive Program and all restricted
stock grants and performance share units granted under the Standex Long Term Incentive Program, or any
successor plan of the Employer, and any other stock based plans of the Employer; and
All life insurance and medical plan benefits covering the Employee and her dependents shall be continued
at the expense of Employer for the two-year period following such termination as if the Employee were still
an employee of the Employer.”
4. Ratification. Except as modified by this Amendment, the terms and provisions of the Employment Agreement shall
continue in full force and effect and are hereby ratified by the parties.
5. Binding Effect. This Amendment shall inure to the benefit of and be binding upon the parties named herein and their
respective successors and assigns.
6. Counterparts; Facsimile Signatures. The parties may execute this Amendment in any number of counterparts, each
of which, when executed shall have the force and effect of an original, but all such counterparts shall constitute one and the same
Amendment. For purposes of this Amendment, a facsimile signature or a scanned signature shall be deemed the same as an
original.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day and year first above
written.
STANDEX INTERNATIONAL
CORPORATION
/s/ David Dunbar
By:
David Dunbar
President/CEO
/s/ Annemarie Bell
Annemarie Bell
99
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
EXHIBIT 10.g
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (“Amendment”) is entered into as of the 24th day of
August 2020 by and between Standex International Corporation, a Delaware corporation with executive offices located at
23 Keewaydin Drive, Salem, NH 03079 (the “Employer”) and Paul C. Burns, an Individual residing at 29 London Bridge Road,
Windham, NH 03087 (the “Employee”).
WHEREAS, Employer and Employee entered into an Employment Agreement dated July 27, 2015 (the “Employment
Agreement”).
WHEREAS, Employer and Employee desire to amend the Employment Agreement.
NOW, THEREFORE In consideration of the mutual covenants and agreements of the parties hereto and terms and for
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto intending to be legally
bound hereby agree as follows:
1.
2.
Capitalized Terms. Unless otherwise stated, any capitalized terms not defined herein shall have the meanings
ascribed to them in the Employment Agreement.
Conflicting Terms. In the event of a conflict between the provisions of this Amendment and the provisions of the
Employment Agreement, the provisions of this Amendment shall be controlling.
3.
Amendment.
Change of Control. Section 13(b) of the Employment Agreement shall be deleted in its entirety and replaced with
the following:
“(b) Following a change of control of Employer, any termination of Employee's employment either by Employee pursuant
to Section 13(a)(ii) or by Employer under any circumstances other than involving conclusive evidence of substantial
and indisputable intentional personal malfeasance in office, then:
(i)
Employee shall be promptly paid a lump sum payment equal to two times his current annual base salary
plus two times the higher of the Employee’s then current target bonus or most recent actual bonus amount
under the Annual Incentive Program as in effect on the date immediately prior to the changes in control;
100
(ii)
(iii)
Employee shall become 100% vested in all benefit plans in which he participates including but not limited
to the Management Savings Program portion of the Standex Annual Incentive Program and all restricted
stock grants and performance share units granted under the Standex Long Term Incentive Program, or any
successor plan of the Employer, and any other stock based plans of the Employer; and
All life insurance and medical plan benefits covering the Employee and his dependents shall be continued
at the expense of Employer for the two-year period following such termination as if the Employee were still
an employee of the Employer.”
4. Ratification. Except as modified by this Amendment, the terms and provisions of the Employment Agreement shall
continue in full force and effect and are hereby ratified by the parties.
5. Binding Effect. This Amendment shall inure to the benefit of and be binding upon the parties named herein and
their respective successors and assigns.
6. Counterparts; Facsimile Signatures. The parties may execute this Amendment in any number of counterparts, each
of which, when executed shall have the force and effect of an original, but all such counterparts shall constitute one and the same
Amendment. For purposes of this Amendment, a facsimile signature or a scanned signature shall be deemed the same as an
original.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day and year first above
written.
STANDEX INTERNATIONAL
CORPORATION
/s/ David Dunbar
By:
David Dunbar
President/CEO
/s/ Paul C. Burns
Paul C. Burns
101
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
EXHIBIT 10.i
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (“Amendment”) is entered into as of the 24th day of
August 2020 by and between Standex International Corporation, a Delaware corporation with executive offices located at
23 Keewaydin Drive, Salem, NH 03079 (the “Employer”) and Ademir Sarcevic, an Individual residing at 500 Central Street Unit
5105, Salem NH 03079, NH 03079 (the “Employee”).
WHEREAS, Employer and Employee entered into an Employment Agreement dated August 2, 2019 (the “Employment
Agreement”).
WHEREAS, Employer and Employee desire to amend the Employment Agreement.
NOW, THEREFORE In consideration of the mutual covenants and agreements of the parties hereto and terms and for
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto intending to be legally
bound hereby agree as follows:
1.
2.
Capitalized Terms. Unless otherwise stated, any capitalized terms not defined herein shall have the meanings
ascribed to them in the Employment Agreement.
Conflicting Terms. In the event of a conflict between the provisions of this Amendment and the provisions of
the Employment Agreement, the provisions of this Amendment shall be controlling.
3.
Amendment.
Change of Control. Section 14(b)(iii) of the Employment Agreement shall be deleted in its entirety and replaced
with the following:
“(iii) All life insurance and medical plan benefits covering the Employee and his dependents shall be continued
at the expense of Employer for the two-year period following such termination as if the Employee were
still an employee of the Employer.”
4. Ratification. Except as modified by this Amendment, the terms and provisions of the Employment Agreement shall
continue in full force and effect and are hereby ratified by the parties.
5. Binding Effect. This Amendment shall inure to the benefit of and be binding upon the parties named herein and
their respective successors and assigns.
102
6. Counterparts; Facsimile Signatures. The parties may execute this Amendment in any number of counterparts,
each of which, when executed shall have the force and effect of an original, but all such counterparts shall constitute one and the
same Amendment. For purposes of this Amendment, a facsimile signature or a scanned signature shall be deemed the same as an
original.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day and year first above
written.
STANDEX INTERNATIONAL
CORPORATION
/s/ David Dunbar
By:
David Dunbar
President/CEO
/s/ Ademir Sarcevic
Ademir Sarcevic
103
STANDEX INTERNATIONAL CORPORATION AND SUBSIDIARIES
SUBSIDIARIES OF REGISTRANT
EXHIBIT 21
Information is set forth below concerning all operating subsidiaries of the Company as of June 30, 2020 (except subsidiaries
which, considered in the aggregate do not constitute a significant subsidiary).
Name of Subsidiary
Custom Hoists, Inc.
Dornbusch & Cia Industria E. Comercio Ltda.
Enginetics Corporation
Genius Solutions Engineering Corporation
Horizon Scientific, Inc.
Mold-Tech Singapore Pte. Ltd.
Piazzo Rosa S.r.l.
Precision Engineering International Limited
S. I. de Mexico S.A. de C.V.
Standex Electronics, Inc.
Standex Electronics Magnetics, Inc.
Standex Electronics Japan Corporation
Standex Electronics (U.K.) Limited
Standex Europe B.V.
Standex Holdings Limited
Standex International GmbH
Standex International Limited
Standex International S.r.l.
Standex (Ireland) Limited
SXI Limited
Tenibac-Graphion, Inc.
Jurisdiction of
Incorporation
Ohio
Brazil
Ohio
Ohio
South Carolina
Singapore
Italy
United Kingdom
Mexico
Delaware
Delaware
Japan
United Kingdom
The Netherlands
United Kingdom
Germany
United Kingdom
Italy
Ireland
Canada
Michigan
104
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Exhibit 23.1
We have issued our reports dated August 25, 2020, with respect to the consolidated financial statements, and internal control over
financial reporting included in the Annual Report of Standex International Corporation on Form 10-K for the year ended June 30,
2020. We consent to the incorporation by reference of said reports in the Registration Statements of Standex International
Corporation on Forms S-8 (File No. 333-147190, File No. 333-179513 and File No. 333-231598).
/s/ GRANT THORNTON LLP
Boston, Massachusetts
August 25, 2020
105
POWER OF ATTORNEY
EXHIBIT 24
The undersigned, being a director of Standex International Corporation (“Standex”), hereby
constitutes David A. Dunbar and Alan J. Glass, and each of them singly, my true and lawful attorney with
full power to them, and each of them singly, to sign for me and in my name in my capacity as a director of
Standex, the Annual Report of Standex on Form 10-K for the fiscal year ended June 30, 2020, and any and
all amendments thereto and generally to do such things in my name and behalf to enable Standex to comply
with the requirements of the Securities and Exchange Commission relating to Form 10-K.
Witness my signature as of the 20th day of August, 2020.
/s/ Charles H. Cannon, Jr.
_______________________________
Charles H. Cannon, Jr.
106
POWER OF ATTORNEY
EXHIBIT 24
The undersigned, being a director of Standex International Corporation (“Standex”), hereby
constitutes David A. Dunbar and Alan J. Glass, and each of them singly, my true and lawful attorney with
full power to them, and each of them singly, to sign for me and in my name in my capacity as a director of
Standex, the Annual Report of Standex on Form 10-K for the fiscal year ended June 30, 2020, and any and
all amendments thereto and generally to do such things in my name and behalf to enable Standex to comply
with the requirements of the Securities and Exchange Commission relating to Form 10-K.
Witness my signature as of the 20th day of August, 2020.
/s/ Thomas E. Chorman
_______________________________
Thomas E. Chorman
107
POWER OF ATTORNEY
EXHIBIT 24
The undersigned, being a director of Standex International Corporation (“Standex”), hereby
constitutes David A. Dunbar and Alan J. Glass, and each of them singly, my true and lawful attorney with
full power to them, and each of them singly, to sign for me and in my name in my capacity as a director of
Standex, the Annual Report of Standex on Form 10-K for the fiscal year ended June 30, 2020, and any and
all amendments thereto and generally to do such things in my name and behalf to enable Standex to comply
with the requirements of the Securities and Exchange Commission relating to Form 10-K.
Witness my signature as of the 20th day of August, 2020.
/s/ Jeffrey S. Edwards
_______________________________
Jeffrey S. Edwards
108
POWER OF ATTORNEY
EXHIBIT 24
The undersigned, being a director of Standex International Corporation (“Standex”), hereby
constitutes David A. Dunbar and Alan J. Glass, and each of them singly, my true and lawful attorney with
full power to them, and each of them singly, to sign for me and in my name in my capacity as a director of
Standex, the Annual Report of Standex on Form 10-K for the fiscal year ended June 30, 2020, and any and
all amendments thereto and generally to do such things in my name and behalf to enable Standex to comply
with the requirements of the Securities and Exchange Commission relating to Form 10-K.
Witness my signature as of the 20th day of August, 2020.
/s/ B. Joanne Edwards
_______________________________
B. Joanne Edwards
109
POWER OF ATTORNEY
EXHIBIT 24
The undersigned, being a director of Standex International Corporation (“Standex”), hereby
constitutes David A. Dunbar and Alan J. Glass, and each of them singly, my true and lawful attorney with
full power to them, and each of them singly, to sign for me and in my name in my capacity as a director of
Standex, the Annual Report of Standex on Form 10-K for the fiscal year ended June 30, 2020, and any and
all amendments thereto and generally to do such things in my name and behalf to enable Standex to comply
with the requirements of the Securities and Exchange Commission relating to Form 10-K.
Witness my signature as of the 20th day of August, 2020.
.
/s/ Thomas J. Hansen
_______________________________
Thomas J. Hansen
110
POWER OF ATTORNEY
EXHIBIT 24
The undersigned, being a director of Standex International Corporation (“Standex”), hereby
constitutes David A. Dunbar and Alan J. Glass, and each of them singly, my true and lawful attorney with
full power to them, and each of them singly, to sign for me and in my name in my capacity as a director of
Standex, the Annual Report of Standex on Form 10-K for the fiscal year ended June 30, 2020, and any and
all amendments thereto and generally to do such things in my name and behalf to enable Standex to comply
with the requirements of the Securities and Exchange Commission relating to Form 10-K.
Witness my signature as of the 20th day of August, 2020.
/s/ Michael A. Hickey
_______________________________
Michael A. Hickey
111
POWER OF ATTORNEY
EXHIBIT 24
The undersigned, being a director of Standex International Corporation (“Standex”), hereby
constitutes David A. Dunbar and Alan J. Glass, and each of them singly, my true and lawful attorney with
full power to them, and each of them singly, to sign for me and in my name in my capacity as a director of
Standex, the Annual Report of Standex on Form 10-K for the fiscal year ended June 30, 2020, and any and
all amendments thereto and generally to do such things in my name and behalf to enable Standex to comply
with the requirements of the Securities and Exchange Commission relating to Form 10-K.
Witness my signature as of the 20th day of August, 2020.
/s/ Daniel B. Hogan
_______________________________
Daniel B. Hogan
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EXHIBIT 31.1
I, David Dunbar, certify that:
RULE 13a-14(a) CERTIFICATION
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Standex International Corporation for the year ending June 30,
2020;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
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5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: August 25, 2020
/s/ David Dunbar
______________________________
David Dunbar
President/Chief Executive Officer
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EXHIBIT 31.2
I, Ademir Sarcevic, certify that:
RULE 13a-14(a) CERTIFICATION
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Standex International Corporation for the year ending June 30,
2020;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
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5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: August 25, 2020
/s/ Ademir Sarcevic
______________________________
Ademir Sarcevic
Vice President/Chief Financial Officer
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EXHIBIT 32
SECTION 1350 CERTIFICATION
The following statement is being made to the Securities and Exchange Commission solely for purposes of Section 906 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350), which carries with it certain criminal penalties in the event of a knowing or
willful misrepresentation.
Each of the undersigned hereby certifies that the Annual Report on Form 10-K for the period ended June 30, 2020 fully
complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as
amended, and that the information contained in such report fairly presents, in all material respects, the financial condition
and results of operations of the registrant.
Dated: August 25, 2020
Dated: August 25, 2020
/s/ David Dunbar
_______________________________
David Dunbar
President/Chief Executive Officer
/s/ Ademir Sarcevic
_______________________________
Ademir Sarcevic
Vice President/Chief Financial Officer
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