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, 2021
Commission File Number 001-07233
STANDEX INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its Charter)
DELAWARE
(State of incorporation)
23 KEEWAYDIN DRIVE, Salem, New Hampshire
(Address of principal executive offices)
31-0596149
(I.R.S. Employer Identification No.)
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)
SXI
Name of Each Exchange on Which Registered
New York Stock Exchange
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☒ 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 ☐
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 USC. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report. YES ☒ NO ☐
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, 2020 was
approximately $943,603,539. Registrant’s closing price as reported on the New York Stock Exchange for December 31, 2020 was $77.52 per share.
The number of shares of Registrant's Common Stock outstanding on August 10, 2021 was 12,212,276.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Registrant’s 2021 Annual Meeting of Stockholders (the “Proxy Statement”) are incorporated by reference into Part III of this
report.
1
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: the impact of pandemics
such as the current coronavirus on employees, our supply chain, and the demand for our products and services around the world;
materially adverse or unanticipated legal judgments, fines, penalties or settlements; conditions in the financial and banking markets,
including fluctuations in exchange rates and the inability to repatriate foreign cash; domestic and international economic conditions,
including the impact, length and degree of economic downturns on the customers and markets we serve and more specifically
conditions in the automotive, construction, aerospace, defense, transportation, food service equipment, consumer appliance, energy,
oil and gas and general industrial markets; lower-cost competition; the relative mix of products which impact margins and operating
efficiencies in certain of our businesses; the impact of higher raw material and component costs, particularly steel, certain materials
used in electronics parts, petroleum based products, and refrigeration components; the impact of higher transportation and logistics
costs, especially with respect to transportation of goods from Asia; an inability to realize the expected cost savings from restructuring
activities including effective completion of plant consolidations, cost reduction efforts including procurement savings and
productivity enhancements, capital management improvements, strategic capital expenditures, and the implementation of lean
enterprise manufacturing techniques; the potential for losses associated with the exit from or divestiture of businesses that are no
longer strategic or no longer meet our growth and return expectations; the inability to achieve the savings expected from global
sourcing of raw materials and diversification efforts in emerging markets; the impact on cost structure and on economic conditions
as a result of actual and threatened increases in trade tariffs; the inability to attain expected benefits from acquisitions and the
inability to effectively consummate and integrate such acquisitions and achieve synergies envisioned by the Company; market
acceptance of our products; our ability to design, introduce and sell new products and related product components; the ability to
redesign certain of our products to continue meeting evolving regulatory requirements; the impact of delays initiated by our
customers; and our ability to increase manufacturing production to meet demand; 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.
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 2021 includes the twelve-month period from July 1, 2020 to June 30, 2021.
We are a diversified industrial manufacturer with leading positions in a variety of products and services that are used in diverse
commercial and industrial markets. We have seven operating segments aggregated into five reportable segments: Electronics,
Engraving, Scientific, Engineering Technologies, and Specialty Solutions. Three operating segments are aggregated into Specialty
Solutions. 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”).
2
Our long-term strategy is to enhance shareholder value by building larger, more profitable focused industrial platforms through our
Standex 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 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 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 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 recruitment, training, development, and succession planning for employees throughout our
worldwide organization. Through the use of our Standex Value Creation System, we have developed a balanced approach to value
creation. We intend to continue investing acquisition capital in high margin and growth businesses, and we will continue to support
all of our businesses as they enhance value through deployment of the Standex Valuation Creation System.
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 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.
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, China, 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. We use cash flow
generated from operations to fund investments in capital assets to upgrade our facilities, improve productivity and lower costs, invest
in the strategic growth programs described above, including organic growth and acquisitions, and to return cash to our shareholders
through payment of dividends and stock buybacks.
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.
3
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, and 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”) or 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, Renco Electronics, Northlake Engineering, Agile
Magnetics, Standex Electronics Japan, and the MEDER, KENT, and KOFU reed switch brands.
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.
In addition to the Mold Tech brand, 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 which provides additional texturizing and prototyping capabilities in North America and China.
● GS Engineering which employs advanced processes and technology to rapidly produce molds for the creation of soft-touch
surfaces.
● Innovent, located in North America and Europe, which is a specialized supplier of tools and machines used to produce
diapers and products that contain absorbent materials between layers of non-woven fabric.
4
Products and Services
Texturing is achieved with either a laser or a chemical etching technique.
● Laser Engraving offers superior features, 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.
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
The Engraving business has become the global leader providing these products and services by offering a full range of services to
automotive 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.
5
Engineering Technologies
The Engineering Technologies Group is a provider of innovative, 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 our Spincraft businesses with locations in Billerica, MA, New Berlin, WI, and Newcastle upon Tyne
in the U.K.
Brands
This business unit’s brand name is Spincraft.
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
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 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.
6
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 industrial ink-jet printer markets.
Industries that utilize Custom Hoists' 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
International operations are conducted at 41 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 increased from 40% in 2020 to 41% in 2021. 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.
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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, “Revenue from Contracts with
Customers.”
Number of Employees
As of June 30, 2021, we employ approximately 3,900 employees of which approximately 1,200 are in the United States. About 200
of our U.S. employees are represented by unions. Approximately 43% of our production workforce is situated in low-cost
manufacturing regions such as Mexico and portions of Asia.
Executive Officers of Standex
The executive officers of the Company as of June 30, 2021 are as follows:
Name
Age Principal Occupation During the Past Five Years
David Dunbar
59 President and Chief Executive Officer of the Company since January 2014.
Ademir Sarcevic
46 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
57 Vice President, Chief Legal Officer and Secretary of the Company since April 2016.
Sean Valashinas
50 Vice President, Chief Accounting Officer and Assistant Treasurer of the Company since October
2007.
Paul Burns
48 Vice President of Strategy and Business Development since July 2015.
Annemarie Bell
James Hooven
57 Vice President, Chief Human Resources Officer since July 2021, 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
50 Vice President of Operations and Supply Chain since February 2020, Integration Leader and Senior
Vice President of Operations for Hillenbrand Inc. from June 2017 to February 2020, several
management roles with Steel Partners Holdings from September 2011 to June 2017 including GM
Industrial/Commercial Products from July 2015 to June 2017.
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.”
8
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. 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.”
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 purchase 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 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 distribute
vaccines.
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A deterioration in the domestic and international economic environment, whether by way of recessionary or inflationary
conditions, 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:
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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.
Inflationary economic conditions could adversely impact our cost of labor and the cost of materials and services we procure. We
may be unable to increase our own prices sufficiently to offset such cost increases, and, to the extent that we are able to do so, we
may not be able to maintain existing operating margins and profitability. Additionally, competitors operating in regions with less
inflationary pressure may be able to compete more effectively which could further impact our ability to increase prices and/or result
in lost sales.
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;
pay cash dividends to shareholders unless we are compliant with the financial covenants set forth in the credit facility; and
sell material assets.
10
Our global operations subject us to international business risks.
We operate in 41 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.
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.
11
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 enacted by the United States government. While we attempt to pass on these
additional costs to our customers, competitive factors (including competitors who import from other countries not subject to such
tariffs) may limit our ability to sustain price increases and, as a result, may adversely impact our net sales, profits and cash flows.
The maintenance of such tariffs over the long-term also could impair the value of our investments in our Chinese operations. In
addition, the imposition of tariffs may influence the sourcing habits of certain end users of our products and services which, in turn,
could have a direct impact on the requirements of our direct customers for our products and services. Such an impact could adversely
affect our net sales, profits and cash flows.
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.
12
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, 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, labor unrest 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 (such as Japan) and others are in areas of higher than nominal political
risk (such as China). The labor workforces in four of our U.S. facilities belong to unions and a strike, slowdown or other concerted
effort could adversely impact production at the affected facility. To the extent any of these events occur, our operations and financial
results could be adversely affected.
13
We depend on our key personnel and the development of high potential employees; the loss of their services may adversely
affect our business.
We believe that our success depends on our ability to hire new talent, develop existing talent and the continued employment of our
senior management team and other key personnel. If one or more members of our senior management team or other key personnel
were unable or unwilling to continue in their present positions, our business could be seriously harmed. In addition, if any of our key
personnel joins a competitor or forms a competing company, some of our customers might choose to use the services of that
competitor or those of a new company instead of our own. Other companies seeking to develop capabilities and products or services
similar to ours may hire away some of our key personnel. If we are unable to maintain and develop our key personnel and attract
new employees, the execution of our business strategy may be hindered and our growth limited.
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.
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.
14
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:
•
•
•
•
•
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.
15
Item 2. Properties
We operate a total of 61 facilities including manufacturing plants, service centers, 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 others are leased. For the year ended June 30, 2021, the approximate building space utilized by each segment
is as follows:
Area in Square Feet (in thousands)
Segment
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)
United States
Specialty Solutions
United States
Corporate & Other
Total
Number of
Locations
3
3
1
5
12
13
14
4
7
38
1
1
1
2
3
1
1
4
6
1
1
61
Leased
96
34
-
112
242
355
417
88
142
1,002
184
184
80
107
187
76
16
32
124
17
17
1,756
Owned
29
66
56
89
240
-
57
-
135
192
-
-
-
171
171
-
-
198
198
-
-
801
Total
125
100
56
201
482
355
474
88
277
1,194
184
184
80
278
358
76
16
230
322
17
17
2,557
(1) EMEA consists of Europe, Middle East and S. Africa.
In general, the buildings are in sound operating condition and are considered to be adequate for their intended purposes and current
uses.
We own substantially all of the machinery and equipment utilized in our businesses.
Item 3. Legal Proceedings
Discussion of legal matters is incorporated by reference to Part II, Item 8, Note 12, “CONTINGENCIES,” in the Notes to the
Consolidated Financial Statements.
Item 4. Mine Safety Disclosures
Not Applicable
16
PART II
Item 5. Market for Standex Common Stock
Related Stockholder Matters and Issuer Purchases of Equity Securities
The principal market in which the Common Stock of Standex is traded is the New York Stock Exchange under the ticker symbol
“SXI”. The approximate number of stockholders of record on July 31, 2021 was 1,310.
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, 2021
(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)
- $
49,741
-
49,741 $
-
100.44
-
100.44
- $
49,466
-
49,466
-
22,068
-
22,068
Period
April 1 - April 30, 2021
May 1 - May 31, 2021
June 1 - June 30, 2021
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.
17
The following graph compares the cumulative total stockholder return on the Company’s Common Stock as of the end of each of
the last five fiscal years, with the cumulative total stockholder return on the Standard & Poor’s Small Cap 600 (Industrial Segment)
Index and on the Russell 2000 Index, assuming an investment of $100 in each at their closing prices on June 30, 2016 and the
reinvestment of all dividends.
Item 6. Selected Consolidated Financial Data
Not Applicable
18
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. We have seven operating segments that aggregate to five reportable segments. Please refer to
Item 1. Business, above, for additional information regarding our segment structure and management strategy.
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 In the third quarter of fiscal year 2021, we divested Enginetics Corporation (“Enginetics”) our jet engine
components business reported within our Engineering Technologies segment, to Enjet Aero, LLC, a
privately held aerospace engine component manufacturing company. This divestiture allows us to focus
on the higher growth and margin opportunities of our core spin forming solutions business that serves
the space, commercial aviation and defense end markets. We received $11.7 million cash consideration
and recorded a pre-tax loss on the sale of $14.6 million in the Consolidated Financial Statements
including a goodwill impairment charge of $7.6 million, assigned to the entirety of the Engineering
Technologies segment, and a $5.4 million write-down of intangible assets.
o During the first quarter of fiscal year 2021, 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 are reported within our Electronics segment beginning
in fiscal year 2021.
o During the third quarter of fiscal year 2020, we initiated a program and signed an agreement to divest
our Master-Bilt and NorLake businesses
(together our Refrigerated Solutions Group or
RSG). This divestiture allowed us to continue the simplification of our portfolio and enabled 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:
Year Ended June 30, 2020
Year Ended June 30, 2019
$000’s
Net Sales
Operating Income/(Loss)
Asset Impairment Charge
Operating Income/(Loss) without
impairment charge
%
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
-
-
60,528
-
-
-
Restated
Continuing
Ops
$ 639,931
-
-
59,821
8.3 %
(707 )
(0.6 )%
60,528
10.0 %
78,117
9.9 %
(1,359 )
79,476
(0.9 )%
12.4 %
19
o During the first quarter of 2019, we decided to divest our 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.
o In the fourth quarter of 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 brought 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 industry-
leading capabilities in texturing molds and tools used to create “hard surface” components. This
technology also complements and enabled 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.
o In September 2018, fiscal year 2019, we acquired New Hampshire-based Regional Mfg. Specialists, Inc.
(now a part of Standex Electronics Magnetics, Inc and operated under the name Agile Magnetics), 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.
o In August 2018, fiscal year 2019, we acquired Michigan-based Tenibac-Graphion, Inc., a provider of
chemical and laser texturing services. The combination of Tenibac and Standex Engraving
expanded services available to customers, increased responsiveness to customer demands, and
drove 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 Architecture 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.
As a result of these portfolio moves, we have transformed Standex to a company with a more focused group of businesses selling
customized solutions to high value end markets via a compelling customer value proposition. The narrowing of the portfolio allows
for greater management focus on driving operational disciplines and positions us well to benefit from an economic rebound
associated with the end of the COVID-19 crisis and to use our cash flow from operations to 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. 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 investments in capital assets to upgrade our facilities, improve productivity and lower costs, invest
in the strategic growth programs described above, including organic growth and acquisitions, and to return cash to our shareholders
through payment of dividends and stock buybacks.
20
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.
Impact of COVID-19 Pandemic on the Company
Given the global nature of our business and the number of our facilities worldwide, we continue to be impacted globally by COVID-
19 related issues. We have taken effective action around the world 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 maintain operations. During the end of fiscal year 2020 and the beginning of fiscal year 2021, we
experienced revenue losses in many of our businesses due to the impact that the pandemic has had on our customers. Conversely,
public and private sector responses to COVID-19 vaccine distribution, especially in the United States, have also resulted in increased
sales of scientific refrigeration equipment to customers within our Scientific reporting segment.
Given the impact that the pandemic created on our backlog and incoming order rate, we took immediate actions in the end of fiscal
year 2020 to identify and implement cost savings and restructuring actions within each of our operating units as well as our corporate
headquarters. Actions identified included 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.
We exited the fourth quarter of 2021 with $136.4 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 1.31 to 1 and allowed us the capacity to
borrow an additional $245.2 million at June 30, 2021. We believe that we have sufficient liquidity around the world and access to
financing to execute on our short and long-term strategic plans.
Finally, we continue to monitor our ability to participate in any governmental assistance programs available to us in each of our
global locations and participate in these programs as available and appropriate. For instance, the Company's required contributions
to the United States funded pension plan for the second half of fiscal year 2021 of approximately $1.7 million was reduced to zero
upon passage of the American Rescue Plan Act (the "Act"). The required contributions to the United States funded pension plan for
fiscal year 2022 is approximately $1.0 million.
21
Consolidated Results from Continuing Operations (in thousands):
Net sales
Gross profit margin
Restructuring costs
Acquisition related expenses
Loss on sale of business
Income from operations
2021
2020
2019
$
656,232 $
36.8 %
3,478
931
(14,624 )
59,165
604,535 $
35.6 %
4,669
1,759
-
60,528
639,931
36.7 %
1,289
3,075
-
79,476
Backlog (realizable within 1 year)
$
210,491 $
152,304 $
183,100
Net sales
Components of change in sales:
Effect of acquisitions
Effect of exchange rates
Effect of business divestitures
Organic sales change
2021
2020
2019
$
656,232 $
604,535 $
639,931
25,554
14,471
(3,633 )
15,305
11,635
(6,089 )
-
(40,942 )
29,122
(12,041 )
-
27,335
Net sales increased for fiscal year 2021 by $51.7 million or 8.6% when compared to the prior year end. The acquisition of Renco
contributed $25.6 million or 4.2% to overall sales growth. Organic sales increased $15.3 million or 2.5% primarily as a result of
impacts from the COVID-19 pandemic economic recovery, and foreign currency had a $14.5 million or 2.4% positive impact on
sales. These increases were offset by a $3.6 million impact on sales due to the divestiture of Enginetics in the third quarter of fiscal
year 2021.We discuss our results and outlook for each segment below.
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 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
decrease occurred in all of our segments and was primarily a result of both direct and indirect impacts of the pandemic driven
economic slowdown.
Gross Profit
Gross profit in fiscal year 2021 increased to $241.3 million, or a gross margin of 36.8% as compared to $215.5 million, or a gross
margin of 35.6% in fiscal year 2020. This increase is a result of organic sales increases, productivity initiatives and targeted prices
increases, offset by raw material and ocean freight cost headwinds, along with business mix.
Gross profit in fiscal year 2020 declined to $215.5 million, or a gross margin of 35.6% as compared to $234.7 million, or a gross
margin of 36.7% in fiscal year 2019 primarily due to the pandemic related organic sales decline during the second half of the year.
Restructuring Charges
During fiscal year 2021, we incurred restructuring expenses of $3.5 million, primarily related to productivity improvements, facility
rationalization activities, and global headcount reductions within our Engraving and Specialty Solutions segments.
During fiscal year 2020, we incurred restructuring expenses of $4.7 million primarily related to restructuring efforts that were
intended to improve profitability, streamline production and reduce our cost base to a level commensurate with a post-pandemic
operating environment. These efforts included approximately $1.1 million related to the announced closure of a Specialty Solutions
pump rotor production facility in Ireland.
Acquisition Related Expenses
We incurred acquisition-related expenses of $0.9 million in fiscal year 2021. Acquisition-related expenses typically consist of due
diligence, integration, and valuation expenses incurred in connection with recent or pending acquisitions.
22
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 were 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 was settled.
Loss on Sale of Business
We recorded a pre-tax loss on sale of the Enginetics business of $14.6 million for fiscal year 2021. The loss included a $7.6 million
impairment of goodwill assigned to the entirety of the Engineering Technologies segment and a $5.4 million write-down of intangible
assets.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses, (“SG&A”) for the fiscal year 2021 were $163.1 million, or 24.8% of sales compared
to $148.5 million, or 24.6% of sales during the prior year. SG&A expenses during this period were impacted by approximately $4.8
million of SG&A expenses related to the Renco acquisition, increased distribution expenses of $2.0 million as a result of increased
organic sales, an increase in research and development spending to drive future product initiatives, and general wage inflation, offset
by productivity and cost out actions.
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.
Income from Operations
Income from operations for the fiscal year 2021 was $59.2 million, compared to $60.5 million during the prior year. The $1.4 million
decrease, or 2.3% is primarily due to the loss on sale of the Enginetics business of $14.6 million along with material inflation,
partially offset by income from organic sales increases and pricing actions, along with cost reduction activities and productivity
improvement initiatives implemented in all of our businesses.
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%, was 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.
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 2021 was $6.0 million, a decrease of $1.5 million as compared to the prior year, due to lower
borrowings outstanding.
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.
Income Taxes
On March 27, 2020, the CARES Act was enacted to address the economic impact of the COVID-19 pandemic in the United States.
Among other things, the CARES Act allows a five-year carryback period for tax losses generated in 2019 through 2021. The June
30, 2021 tax provision includes benefits of $0.2 million and $0.8 million from tax losses in the years ended June 30, 2019 and June
30, 2020, respectively, that the CARES Act allows to be carried back to the years ended June 30, 2014 and June 30, 2015, when the
U.S. federal income tax rate was 35%.
The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2021 was $14.2 million, or an
effective rate of 26.9% compared to $13.1 million, or an effective rate of 24.2% for the year ended June 30, 2020, and $18.7 million,
or an effective rate of 27.9% for the year ended June 30, 2019. 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.
23
The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2021 was impacted by the
following items: (i) a tax provision of $5.1 million due to the mix of income in various jurisdictions, (ii) a tax benefit of $1.0 million
from our 2019 and 2020 tax losses that the CARES Act allows to be carried back to 2014 and 2015, when the U.S. federal income
tax rate was 35%, (iii) a tax benefit of $0.8 million related to Federal R&D credit and Foreign Tax Credit, (iv) a tax benefit of $1.7
million related to return-to-accrual adjustments to true-up up prior-period provision amounts, and (v) the tax expense of $1.2 million
attributable to the divestiture of the Enginetics Corporation during the year.
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.
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 fiscal year 2021, capital expenditures increased to $21.4 million or 3.3% of net sales, as compared to $19.3 million, or 3.2%,
of net sales in the prior year. At the onset of the COVID-19 pandemic in fiscal year 2020, we reduced our capital expenditures to
only necessary maintenance, safety and the highest priority growth initiatives. As the global economic recovery began to take shape
in fiscal year 2021, we increased our investments in machinery and equipment for those opportunities that will provide future growth
and increased productivity, primarily in our Electronics and Engraving segments. Additionally, in fiscal year 2021, $2.2 million of
capital expenditures was spent for construction underway to build a new Electronics facility in Germany to replace a legacy facility
sold in fiscal year 2019. We expect 2022 capital spending to be between $25 million and $30 million.
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. Backlog orders are not necessarily an
indicator of future sales levels because of variations in lead times and customer production demand pull systems, with the exception
of Engineering Technologies. Customers may delay delivery of products or cancel orders prior to shipment, subject to possible
cancellation penalties. Due to the nature of long-term agreements in the Engineering Technologies segment, the timing of orders and
delivery dates can vary considerably resulting in significant backlog changes from one period to another. In general, the majority of
net realizable backlog beyond one year comes from the Engineering Technologies segment.
Backlog orders in place at June 30, 2021 and 2020 are as follows (in thousands):
Electronics
Engraving
Scientific
Engineering Technologies
Specialty Solutions
Total
As of June 30, 2021
As of June 30, 2020
Total
Backlog
Backlog
under
1 year
Total
Backlog
Backlog
under
1 year
$
$
121,488 $
20,076
5,872
68,375
31,356
247,167 $
118,322 $
13,401
5,871
46,350
26,547
210,491 $
56,170 $
16,076
3,341
97,682
17,071
190,340 $
55,991
13,719
3,341
66,493
12,760
152,304
Total backlog realizable within one year increased $58.2 million, or 38.2% to $210.5 million at June 30, 2021 from $152.3 million
at June 30, 2020. We experienced 76% increase in backlog at Scientific due to increased demand for cold storage products in
connection with the COVID-19 vaccine rollout. Electronics backlog increased 111% due to demand in all geographic markets in
response to the beginning of the global recovery from the pandemic, new business opportunities and the acquisition of Renco.
Backlog declines in the Engineering Technologies segment are primarily due to the divestiture of Enginetics.
24
Changes in backlog under 1 year are as follows (in thousands):
Backlog under 1 year, prior year period
Components of change in backlog:
Organic change
Effect of acquisitions
Effect of divestitures
Backlog under 1 year, current period
Segment Analysis (in thousands)
Overall
As of June 30,
2021
$
152,304
61,811
10,983
(14,607 )
210,491
$
Looking forward to fiscal year 2022, we expect to be well-positioned to build on fiscal year 2021 momentum, with anticipated
continued improvement in key financial metrics, supported by orders growth and productivity initiatives.
In general, for fiscal year 2022, we expect:
●
●
●
●
●
continued end market strength in reed switch and relay products as well as growth in magnetics in our Electronics
segment;
an increase in soft trim demand in our Engraving segment;
a decline in demand for COVID-19 related vaccine storage in our Scientific segment;
continued strength in the commercial aviation market and growth in the space market in our Engineering
Technologies segment; and
recovery in the food service market in our Specialty Solutions segment.
Electronics
(in thousands except
percentages)
Net sales
Income from operations
Operating income margin
2021 compared to 2020
2020 compared to 2019
2021
2020
2020
2019
$253,369 $185,294
46,600
18.4%
29,749
16.1%
$185,294 $204,073
29,749
16.1%
41,227
20.2%
%
Change
36.7%
56.6%
%
Change
(9.2%)
(27.8%)
Net sales in fiscal year 2021 increased $68.1 million, or 36.7%, when compared to the prior year as organic sales increased $35.9
million, or 3.6%. The Renco Electronics acquisition added $25.6 million or 13.8%. The foreign currency impacted increased sales
by $6.6 million, or 6.5%. Organic sales growth was positive in all geographic areas as well as the product groups of magnetics,
sensors and switching technologies supported by the rebound from the COVID-19 pandemic impact.
Income from operations in the fiscal year 2021 increased $16.9 million, or 56.6%, when compared to the prior year. The operating
income increase was the result of organic sales growth, product line mix, various cost savings initiatives, and the impact of the Renco
acquisition, offset by inflationary material cost increases and $0.6 million of purchase accounting expenses.
Looking forward to the first quarter of fiscal year 2022, we expect slight revenue growth and moderate operating margin
improvement compared to the fourth quarter of fiscal year 2021, reflecting continued end market strength.
Net sales in fiscal year 2020 decreased 18.8 million, or 9.2%, when compared to the prior year. 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 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%.
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 COVID-19 environment, which more than offset cost saving initiatives implemented throughout the
year.
25
Engraving
(in thousands except
percentages)
Net sales
Income from operations
Operating income margin
2021 compared to 2020
2020 compared to 2019
2021
2020
%
Change
$147,016 $143,736
22,510
15.3%
20,493
14.3%
2.3%
9.8%
2020
2019
$143,736 $149,693
20,493
14.3%
23,996
16.0%
%
Change
(4.0%)
(14.6%)
Net sales in fiscal year 2021 increased by $3.3 million or 2.3% compared to the prior year. Favorable foreign exchange impacts of
$6.6 million, or 4.6%, for the period were offset by organic sales declines of $3.3 million, or 2.3%, as a result of the regional timing
of automotive projects.
Income from operations in fiscal year 2021 increased by $2.0 million, or 9.8%, when compared to the prior year. The increase was
primarily a result of cost savings initiatives partially offset by organic sales declines for the year.
Looking forward to the first quarter of fiscal year 2022, we expect slight to moderate revenue and operating margin declines from
the fourth quarter of fiscal year 2021 reflecting the timing of projects and regional mix.
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 were 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 announced restructuring.
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.
Scientific
(in thousands except
percentages)
Net sales
Income from operations
Operating income margin
2021 compared to 2020
2020 compared to 2019
2021
2020
$79,421
18,240
23.0%
$57,523
13,740
23.9%
%
Change
38.1%
32.8%
2020
2019
$57,523
13,740
23.9%
$57,621
13,676
23.7%
%
Change
(0.2%)
0.5%
Net sales in fiscal year 2021 increased by $21.9 million, or 38.1% when compared to the prior year. The net sales increase reflects
overall growth in end markets including pharmaceutical channels, clinical laboratories, and academic institutions, primarily in
response to customer needs for cold storage surrounding COVID-19 vaccine distribution.
Income from operations in fiscal year 2021 increased by $4.5 million, or 32.8%, reflecting revenue growth, partially offset by
reinvestments in the business for future growth opportunities and increased freight costs.
Looking forward to the first quarter of fiscal year 2022, we expect a moderate sequential decrease in revenue and a slight operating
margin decline from the fourth quarter of fiscal year 2021, reflecting lower demand for COVID-19 vaccine related storage and
increased freight costs partially offset by pricing actions.
Net sales in fiscal year 2020 remained relatively flat 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.
Income from operations in fiscal year 2020 increased $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.
26
Engineering Technologies
(in thousands except
percentages)
Net sales
Income from operations
Operating income margin
2021 compared to 2020
2020 compared to 2019
2021
$75,562
6,164
8.2%
%
Change
(27.4%)
(56.1%)
2020
$104,047
14,027
13.5%
2020
2019
$104,047 $105,270
14,027
13.5%
11,169
10.6%
%
Change
(1.2%)
25.6%
Net sales in fiscal year 2021 decreased $28.5 million or 27.4% when compared to the prior year. Sales distribution by market in
2021 was as follows: 40% space, 26% aviation, 19% defense, 7% energy, and 8% other markets. The decline was primarily due to
the impact of COVID-19 on the commercial aviation segment, especially engine parts manufacturing, along with the divestiture of
our Enginetics business.
Income from operations in fiscal year 2021 decreased $7.9 million or 56.1% when compared to the prior year. The decrease was
primarily due to lower volume in the commercial aviation segment along with project timing in the energy markets. These declines
were partially offset by higher defense segment sales, improvements in manufacturing efficiencies, and cost reductions in response
to the reduced volume levels.
Looking forward to the first quarter of fiscal year 2022, we expect slight to moderate sequential decrease in revenue and operating
margin from the fourth quarter of fiscal year 2021, due to project timing.
Net sales in fiscal year 2020 decreased $1.2 million or 1.2% when compared to the prior year. A 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
the 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.
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.
Specialty Solutions
(in thousands except
percentages)
Net sales
Income from operations
Operating income margin
2021 compared to 2020
2020 compared to 2019
2021
2020
2020
2019
$100,864 $113,935
14,358
14.2%
18,546
16.3%
$113,935 $123,274
18,546
16.3%
19,000
15.4%
%
Change
(11.5%)
(22.6%)
%
Change
(7.6%)
(2.4%)
Net sales for fiscal year 2021 decreased $13.1 million, or 11.5% when compared to the prior year. Organic sales declined $13.6
million, or 11.9%, partially offset by positive foreign exchange impacts of $0.5 million, or 0.5%. Decreased sales volume is primarily
due to the impact of the COVID-19 pandemic earlier in the year, which created market downturns in the beverage, food service, and
OEM equipment markets.
Income from operations for fiscal year 2021 decreased $4.2 million, or 22.6%, when compared to the prior year. The decrease during
the period is primarily due to reduced sales volume in each of our businesses and increased raw material costs in the OEM equipment
market, particularly for steel, partially offset by productivity and cost out actions.
Looking forward to the first quarter of fiscal year 2022, we expect a slight sequential increase in revenue and operating margin from
the fourth quarter of fiscal year 2021, due to a continued recovery in Merchandising and Pumps businesses, partially offset by the
impact of a prior work stoppage at one of the plants.
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 is 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 businesses. The sales volume decrease was offset in our Hydraulics and Display Merchandising
businesses by favorable mix, cost control of labor, and the implementation of identified manufacturing efficiencies.
27
Corporate, Restructuring and Other
(in thousands except
percentages)
Corporate
Loss on sale of business
Restructuring
Other Operating Expenses
2021 compared to 2020
2020 compared to 2019
2021
2020
%
Change
2020
2019
$ (29,674) $ (29,599)
$ (29,599) $ (24,728)
(14,624)
(3,478)
(931)
-
(4,669)
(1,759)
0.3%
(100.0%)
(25.5%)
(47.1%)
-
(4,669)
(1,759)
-
(1,289)
(3,575)
%
Change
19.7%
0.0%
262.2%
(50.8%)
Corporate expenses remained flat in in fiscal year 2021 primarily due to general wage inflation and benefit increases offset by cost
saving reductions compared to the prior year.
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.
The loss on sale of business, restructuring, and acquisition-related costs have been discussed above in the Company Overview.
Discontinued Operations
In pursing our business strategy, the Company may divest certain businesses. Future divestitures may be classified as discontinued
operations based on their strategic significance to the Company. Results of the Refrigerated Solutions Group and Cooking Solutions
Group in current and prior periods have been classified as discontinued operations in the Consolidated Financial Statements and
excluded from the results of continuing operations. Activity related to discontinued operations is as follows (in thousands):
Net sales
Gain (loss) on sale of business
Transaction fees
Profit (loss) before taxes
Benefit (provision) for taxes
Net income (loss) from discontinued
operations
Liquidity and Capital Resources
$
$
$
$
2021
Year Ended June 30,
2020
2019
- $
111,841 $
223,067
- $
-
(2,620 ) $
550
(19,996 ) $
(1,933 )
(23,439 ) $
2,613
20,539
(4,397 )
17,175
2,453
(2,070 ) $
(20,826 ) $
19,628
At June 30, 2021, our total cash balance was $136.4 million, of which $92.2 million was held outside of the United States. During
fiscal years 2021, 2020 and 2019, we repatriated $37.6 million, $39.2 million, and $51.5 million of our cash previously held outside
of the United States, respectively. During fiscal year 2022, we anticipate returning $30.0 million to $35.0 million of foreign cash,
however, the amount and timing of cash repatriation during 2022 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, 2021 was $81.9 million compared to net cash
provided by continuing operating activities of $54.7 million in the prior year. We generated $94.7 million from income statement
activities and used $4.4 million of cash to fund working capital decreases. Cash flow used in investing activities for the year ended
June 30, 2021 totaled $39.1 million. Uses of investing cash consisted primarily of $27.4 million for the acquisition of Renco and
capital expenditures of $21.8 million offset by $11.7 million of proceeds from sale of the Enginetics business. Cash used by financing
activities for the year ended June 30, 2021 were $31.7 million and included stock repurchases of $21.2 million and cash paid for
dividends of $11.4 million.
28
Net cash provided by continuing operating activities for the year ended June 30, 2020 was $54.7 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 $21.52 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.
We sponsor a number of defined benefit and defined contribution retirement plans. The U.S. pension plan is frozen for all
participants. We have evaluated the current and long-term cash requirements of these plans, and our existing sources of liquidity
are expected to be sufficient to cover required contributions under ERISA and other governing regulations.
The fair value of the Company's U.S. defined benefit pension plan assets was $212.6 million at June 30, 2021, as compared to $194.8
million as of June 30, 2020. 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, 2021.
U.S. defined benefit plan contributions of $7.8 million were made during fiscal year 2021 compared to $3.1 million during fiscal
year 2020.The required contributions to the United States funded pension plan for fiscal year 2022 is approximately $1.0 million.
The Company expects to make contributions during fiscal year 2022 of $0.2 million and $0.3 million to its unfunded defined benefit
plans in the U.S. and Germany, respectively. Any subsequent plan contributions will depend on the results of future actuarial
valuations.
We have evaluated the current and long-term cash requirements of our defined benefit and defined contribution plans as of June 30,
2021 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, 2021, the underlying policies had a cash surrender value of
$19.3 million and are reported net of loans of $9.1 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, 2021, the Company has used $6.0 million against the letter of credit sub-facility and had the ability to
borrow $245.2 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, 2021, the Company’s Interest Coverage Ratio was 13.1:1.
29
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, 2021, the Company’s Leverage Ratio was 1.31:1.
As of June 30, 2021, 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 day-to-day operating needs include interest
payments, capital expenditures, acquisitions, share repurchases, and dividends.
In connection with the acquisition of Renco, we assumed $0.7 million of debt under the Paycheck Protection Program, within the
United States Coronavirus Aid, Relief, and Economic Security ("CARES") Act. These borrowings were forgiven in June 2021.
Our primary sources of cash are cash flows from continuing operations and borrowings under the facility. We expect that fiscal year
2022 depreciation and amortization expense will be between $21.0 and $22.0 million and $12.0 and $13.0 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
2021
2020
$
$
199,490 $
136,367
63,123
506,425
569,548 $
199,150
118,809
80,341
461,632
541,973
Stockholders’ equity increased year over year by $44.8 million, primarily as a result of current year net income of $36.5 million. The
Company's net debt to capital percentage changed to 11.1% as of June 30, 2021 from 14.8% in the prior year.
At June 30, 2021, we expect to pay estimated interest payments of $15.4 million within the next five years. This estimate is based
upon effective interest rates as of June 30, 2021 and excludes any interest rate swaps which are assets to us. See Item 7A for further
discussions surrounding interest rate exposure on our variable rate borrowings.
Post-retirement benefits and pension plan contribution payments 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, 2021, we expect to pay estimated post-retirement benefit payments of $175.5 million.
See "Item 8. Financial Statements and Supplementary Data, Note 16. Employee Benefit Plans" for additional information regarding
these obligations.
At June 30, 2021, we had $37.0 million of operating lease obligations. See "Item 8. Financial Statements and Supplementary
Data, Note 20. Leases" for additional information regarding these obligations.
At June 30, 2021, we had $9.4 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.
Other Matters
Inflation – Certain of our expenses, such as wages and benefits, occupancy costs, freight and equipment repair and replacement, are
subject to normal inflationary pressures. Inflation for medical costs can impact both our employee benefit costs as well as our reserves
for workers' compensation claims. We monitor the inflationary rate and make adjustments to reserves whenever it is deemed
necessary. Our ability to control worker compensation insurance medical cost inflation is dependent upon our ability to manage
claims and purchase insurance coverage to limit the maximum exposure for us. Each of our segments is subject to the effects of
changing raw material costs caused by the underlying commodity price movements. In the past year, we have experienced price
fluctuations for a number of materials including rhodium, steel, and other metal commodities. These materials are some of the key
elements in the products manufactured in these segments. Wherever possible, we will implement price increases to offset the impact
of changing prices. The ultimate acceptance of these price increases, if implemented, will be impacted by our affected divisions’
respective competitors and the timing of their price increases. In general, we do not enter into purchase contracts that extend beyond
one operating cycle. While Standex considers our relationship with our suppliers to be good, there can be no assurances that we will
not experience any supply shortage.
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).
30
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 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 five 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 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 that the product complies with agreed-upon specifications.
Assurance type warranties do not represent a separate performance obligation.
In general, the Company recognizes revenue at the point in time control transfers to their customer based on predetermined shipping
terms. Revenue is recognized over time under certain long-term contracts within the Engineering Technologies and Engraving groups
for highly customized customer products that have no alternative use and in which the contract specifies the Company has a right to
payment for its costs, plus a reasonable margin. For products recognized over time, the transfer of control is measured pro rata, based
upon current estimates of costs to complete such contracts. Losses on contracts are fully recognized in the period in which the losses
become determinable. Revisions in profit estimates are reflected on a cumulative basis in the period in which the basis for such
revision becomes known.
Collectability of Accounts Receivable – Accounts Receivable are reduced by an allowance for amounts that represent management's
best estimate of estimated losses over the life of the underlying asset. Our estimate for the allowance for credit loss accounts related
to trade receivables includes evaluation of specific accounts where we have information that the customer may have an inability to
meet its financial obligation together with a detailed review of the collectability of pooled assets based on a combination of qualitative
and quantitative factors.
Realizability of Inventories – Inventories are valued at the lower of cost or market. The Company regularly reviews inventory values
on hand using specific aging categories and records a write down for obsolete and excess inventory based on historical usage and
estimated future usage. As actual future demand or market conditions may vary from those projected by management, adjustments
to inventory valuations may be required.
31
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 seven reporting units for impairment testing: Electronics, Engraving, Scientific, Engineering
Technologies, Procon, Federal, and Hydraulics.
As quoted market prices are not available for the Company’s reporting units, the fair value of the reporting units is determined using
a discounted cash flow model (income approach). This method uses various assumptions that are specific to each individual
reporting unit in order to determine the fair value. In addition, the Company compares the estimated aggregate fair value of its
reporting units to its overall market capitalization.
Our annual impairment testing at each reporting unit relied on assumptions surrounding general market conditions, short-term growth
rates, a terminal growth rate of 2.5%, and detailed management forecasts of future cash flows prepared by the relevant reporting
unit. Fair values were determined primarily by discounting estimated future cash flows at a weighted average cost of capital of
9.54%. During our annual impairment testing, we evaluated the sensitivity of our most critical assumption, the discount rate, and
determined that a 100-basis point change in the discount rate selected would not have impacted the test results. Additionally, the
Company could reduce the terminal growth rate from its current 2.5% to 1.0% and the fair value of all reporting units would still
exceed their carrying value.
While we believe that our estimates of future cash flows are reasonable, changes in assumptions could significantly affect our
valuations and result in impairments in the future. The most significant assumption involved in the Company’s determination of fair
value is the cash flow projections of each reporting unit.
As a result of our annual assessment in the fourth quarter of fiscal year 2021, 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 2021.
In connection with the divestiture of Enginetics, the Company determined that, based on the net realizable value of the operations
divested, the goodwill of the Engineering Technologies reporting unit was partially impaired. As such, the Company recognized
$7.6 million in impairment charges during the third quarter of fiscal year 2021. As a result of the Enginetics divestiture, the Company
completed an interim goodwill impairment assessment for its other reporting units in the third quarter of fiscal year 2021. During
the third quarter fiscal year 2021 review, the Company determined that there were no indications of impairment, therefore, no
additional impairment charges were recorded
Cost of Employee Benefit Plans – We provide a range of benefits to certain retirees, including pensions and some postretirement
benefits. We record expenses relating to these plans based upon various actuarial assumptions such as discount rates, assumed rates
of return, compensation increases and turnover rates. The expected return on plan assets assumption of 6.9% 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 3.0% reflects the current rate
at which pension liabilities could be effectively settled at the end of the year. The discount rate is determined by matching our
expected benefit payments from a stream of AA- or higher bonds available in the marketplace, adjusted to eliminate the effects of
call provisions. We review our actuarial assumptions, including discount rate and expected long-term rate of return on plan assets,
on at least an annual basis and make modifications to the assumptions based on current rates and trends when appropriate. Based
on information provided by our actuaries and other relevant sources, we believe that our assumptions are reasonable.
The cost of employee benefit plans includes the selection of assumptions noted above. A twenty-five-basis point change in the 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 2021 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.
32
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.
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, 2021.
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 and the fact that most of
our foreign currency sales are transacted in their functional currency. We also mitigate certain of our foreign currency exchange
rate risks by entering into forward foreign currency contracts from time to time. The contracts are used as a hedge against anticipated
foreign cash flows, such as loan payments, customer remittances, and materials purchases, and are not used for trading or speculative
purposes. The fair values of the forward foreign currency exchange contracts are sensitive to changes in foreign currency exchange
rates, as an adverse change in foreign currency exchange rates from market rates would decrease the fair value of the
contracts. However, any such losses or gains would generally be offset by corresponding gains and losses, respectively, on the
related hedged asset or liability. At June 30, 2021 and 2020, the fair value, in the aggregate, of the Company’s open foreign exchange
contracts was a liability of $2.8 million and $2.5 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, 2021, 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 2.59% at June 30, 2021 and 2020, 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, 2021, we have $200.0 million of active floating
to fixed rate swaps with terms ranging from one to four years. These swaps convert our interest payments from LIBOR to a weighted
average rate of 1.27%. At June 30, 2021 and 2020, the fair value, in the aggregate, of the Company’s interest rate swaps were
liabilities of $3.1 million and $6.7 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.
33
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, 2021, 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 and
aluminum products, other metal commodities such as rhodium and copper, 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.
34
Item 8. Financial Statements and Supplementary Data
Standex International Corporation and Subsidiaries
Consolidated Balance Sheets
As of June 30 (in thousands, except share data)
2021
2020
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
Total non-current assets
$
136,367 $
109,883
91,862
23,504
12,750
-
374,366
133,373
98,929
278,054
9,566
37,276
30,659
587,857
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
Total assets
$
962,223 $
930,878
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
Total non-current liabilities
Contingencies (Note 12)
Stockholders' equity:
$
74,756 $
61,717
7,236
-
143,709
199,490
29,041
83,558
312,089
54,910
59,929
7,428
610
122,877
199,150
36,293
110,926
346,369
Common stock, par value $1.50 per share - 60,000,000 shares authorized, 27,984,278
issued, 12,044,405 and 12,235,786 shares outstanding in 2021 and 2020
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury shares (15,939,873 shares in 2021 and 15,748,492 shares in 2020)
Total stockholders' equity
41,976
80,788
852,489
(116,140 )
(352,688 )
506,425
41,976
72,752
827,656
(147,659 )
(333,093 )
461,632
Total liabilities and stockholders' equity
$
962,223 $
930,878
See notes to consolidated financial statements.
35
Standex International Corporation and Subsidiaries
Consolidated Statements of Operations
For the Years Ended June 30
(in thousands, except per share data)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Restructuring costs
Loss on sale of business
Acquisition related expenses
Other operating (income) expense, net
Income from operations
Interest expense
Other non-operating (income) expense, net
Income from continuing operations before income taxes
Provision for income taxes
Income from continuing operations
2021
2020
2019
$
656,232 $
(414,971 )
241,261
604,535 $
(389,080 )
215,455
639,931
(405,264 )
234,667
163,063
3,478
14,624
931
-
59,165
5,992
473
52,700
(14,157 )
38,543
148,499
4,669
-
1,759
-
60,528
7,475
(1,021 )
54,074
(13,060 )
41,014
150,327
1,289
-
3,075
500
79,476
10,760
1,742
66,974
(18,688 )
48,286
Income (loss) from discontinued operations, net of tax
(2,070 )
(20,826 )
19,628
Net income
$
36,473 $
20,188 $
67,914
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.
36
$
$
$
$
3.17 $
(0.17 )
3.00 $
3.14 $
(0.17 )
2.97 $
3.33 $
(1.69 )
1.64 $
3.31 $
(1.68 )
1.63 $
3.84
1.56
5.40
3.83
1.55
5.38
Standex International Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
For the Years Ended June 30 (in thousands)
2021
2020
2019
Net income
Other comprehensive income (loss):
Defined benefit pension plans:
$
36,473 $
20,188 $
67,914
Actuarial gains (losses) and other changes in unrecognized costs, net
of tax
Amortization of unrecognized costs, net of tax
$
Derivative instruments:
Change in unrealized gains and (losses), net of tax
Amortization of unrealized gains and (losses) into interest expense,
net of tax
Foreign currency translation gains (losses), net of tax
Other comprehensive income (loss), net of tax
Comprehensive income
See notes to consolidated financial statements.
37
12,425 $
5,083
(6,864 ) $
4,363
(15,640 )
3,372
3,041
(3,501 )
(1,995 )
1,168
9,802
31,519 $
67,992 $
(991 )
(3,388 )
(10,381 ) $
9,807 $
1,489
(2,645 )
(15,419 )
52,495
$
$
Standex International Corporation and Subsidiaries
Consolidated Statements of Stockholders' Equity
Additional
For the Years Ended June 30
(in thousands, except as specified)
Balance, June 30, 2018
Stock issued under incentive
compensation plans and employee
purchase plans
Stock-based compensation
Treasury stock acquired
Adoption of ASC 606
Comprehensive income:
Net income
Foreign currency translation
adjustment
Pension, 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 under incentive
compensation plans and employee
purchase plans
Stock-based compensation
Treasury stock acquired
Adoption of ASC 606
Comprehensive income:
Net income
Foreign currency translation
adjustment
Pension, 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
Stock issued under incentive
compensation plans and employee
purchase plans
Stock-based compensation
Treasury stock acquired
Comprehensive income:
Net income
Foreign currency translation
adjustment
Pension, net of tax of $5.6 million
Change in fair value of derivatives, net
of tax of $0.9 million
Dividends declared ($0.94 per share)
Balance, June 30, 2021
Retained
Capital Earnings
Common Paid-in
Stock
$ 41,976 $
61,328 $ 761,430 $
Accumulated
Other
Comprehensive
Income
(Loss)
Treasury Stock
Shares Amount Equity
Total
Stockholders’
(121,859 ) 15,279 $ (292,080 ) $
450,795
-
-
-
-
-
-
-
(163 )
4,350
-
-
-
-
-
(1,107 )
- 67,914
-
-
-
-
-
-
-
-
-
(2,645 )
(12,268 )
(67 )
-
1,292
-
438 (33,394 )
-
-
-
-
-
-
-
-
-
-
$ 41,976 $
-
-
-
(9,955 )
65,515 $ 818,282 $
(506 )
-
-
-
(137,278 ) 15,650 $ (324,182 ) $
-
-
-
-
-
-
-
-
-
211
7,026
-
-
-
-
-
(55 )
- 20,188
-
-
-
-
-
-
-
-
-
(3,388 )
(2,500 )
(74 )
-
1,526
-
172 (10,437 )
-
-
-
-
-
-
-
-
-
-
$ 41,976 $
-
-
- (10,759 )
72,752 $ 827,656 $
(4,493 )
-
-
-
(147,659 ) 15,748 $ (333,093 ) $
-
-
-
-
-
-
-
-
(332 )
8,368
-
-
-
-
- 36,473
-
-
-
-
-
-
-
-
9,802
17,508
(76 )
-
1,605
-
268 (21,200 )
-
-
-
-
-
-
-
-
$ 41,976 $
-
-
- (11,640 )
80,788 $ 852,489 $
4,209
-
-
-
(116,140 ) 15,940 $ (352,688 ) $
-
-
1,129
4,350
(33,394 )
(1,107 )
67,914
(2,645 )
(12,268 )
(506 )
(9,955 )
464,313
1,737
7,026
(10,437 )
(55 )
20,188
(3,388 )
(2,500 )
(4,493 )
(10,759 )
461,632
1,273
8,368
(21,200 )
36,473
9,802
17,508
4,209
(11,640 )
506,425
See notes to consolidated financial statements.
38
Standex International Corporation and Subsidiaries
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 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
Loss on sale of business
Gain from extinguishment of debt - PPP loan
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 assets
Accounts payable
Accrued liabilities, pension and other liabilities
Income taxes payable
Net cash provided by operating activities from continuing operations
Net cash provided by (used for) operating activities from discontinued
operations
Net cash provided by operating activities
Cash Flows from Investing Activities
Expenditures for property, plant and equipment
Expenditures for acquisitions, net of cash acquired
Expenditures for executive life insurance policies
Proceeds from sale of business
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
Activity under share-based payment plans
Purchase of treasury stock
Cash dividends paid
Net cash (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.
$
$
$
39
2021
2020
2019
$
36,473 $
(2,070 )
38,543
20,188 $
(20,826 )
41,014
67,914
19,628
48,286
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
(32,507 )
(127,924 )
(377 )
-
3,164
-
(157,644 )
107,973
(49,671 )
241,950
(237,150 )
(910 )
1,129
(33,394 )
(9,826 )
(38,201 )
(1,931 )
(16,457 )
109,602
93,145
33,241
8,368
(489 )
14,624
(713 )
836
-
(5,542 )
(7,717 )
(8,120 )
(8,000 )
17,612
4,920
(5,697 )
81,866
1,716
83,582
(21,752 )
(27,406 )
(243 )
11,678
117
(1,485 )
(39,091 )
-
(39,091 )
17,000
(17,000 )
(356 )
1,273
(21,200 )
(11,449 )
(31,732 )
4,799
17,558
118,809
136,367 $
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
(21,521 )
(622 )
(281 )
-
180
1,624
(20,620 )
20,003
(617 )
106,500
(105,300 )
(872 )
1,738
(10,437 )
(10,606 )
(18,977 )
(1,984 )
25,664
93,145
118,809 $
4,904 $
17,185 $
6,324 $
18,737 $
9,471
23,969
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 industrial manufacturer in five broad business
segments: Electronics, Engraving, Scientific, Engineering Technologies, and Specialty Solutions with operations in the United
States, Europe, Canada, Japan, Singapore, Mexico, Brazil, Turkey, South Africa, India, and China. The accompanying consolidated
financial statements include the accounts of Standex International Corporation and its subsidiaries and are prepared in accordance
with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany accounts and
transactions have been eliminated in consolidation.
The Company considers events or transactions that occur after the balance sheet date, but before the financial statements are issued
to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. We evaluated
subsequent events through the date and time our consolidated financial statements were issued.
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 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, 2021 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, 2021 and 2020, 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 $3.0 million at June 30, 2021 and $2.1 million
at June 30, 2020. 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 credit losses. All trade account receivables are reported net of allowances for expected
credit losses. The allowances for expected credit losses represent management’s best estimate of the credit losses expected from our
trade account receivables over the life of the underlying assets. Assets with similar risk characteristics are pooled together for
determination of their current expected credit losses. The Company regularly performs detailed reviews of its pooled assets to
evaluate the collectability of receivables based on a combination of past, current, and future financial and qualitative factors that
may affect customers’ ability to pay. In circumstances where the Company is aware of a specific customer’s inability to meet its
financial obligations, a specific reserve is recorded against amounts due to reduce the recognized receivable to the amount reasonably
expected to be collected.
40
The changes in the allowances for credit losses accounts during 2021, 2020, and 2019 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
2021
2020
2019
$ 2,113
20
605
(1,150)
$ 1,588
$ 1,250
192
824
(153)
$ 2,113
$ 1,590
66
(48)
(358)
$ 1,250
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)
40 to 50
Lesser of useful life or
term, unless renewals are
deemed to be reasonably
assured
8 to 15
3 to 10
3 to 7
Routine maintenance costs are expensed as incurred. Major improvements, including those made to leased facilities, are capitalized.
Leases
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.
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.
41
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. Definite lived
identifiable intangible assets are amortized over the following useful lives:
Customer relationships (years)
Patents (years)
Non-compete agreements (years)
Other (years)
Developed technology (years)
5 to 15
12
5
10
10 to 20
Trade names are considered to have an indefinite life and are not amortized.
See discussion of the Company’s assessment of impairment in Note 6 – Goodwill and Note 7 – Intangible Assets.
Fair Value of Financial Instruments
The financial instruments, shown below, are presented at fair value. Fair value is defined as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available,
fair value is based on observable market prices or parameters or derived from such prices or parameters. When observable prices or
inputs are not available, valuation models may be applied.
Assets and liabilities recorded at fair value in the consolidated balance sheet are categorized based upon the level of judgment
associated with the inputs used to measure their fair values. Hierarchical levels directly related to the amount of subjectivity
associated with the inputs to fair valuation of these assets and liabilities and the methodologies used in valuation are as follows:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets and liabilities. The Company’s deferred
compensation plan assets consist of shares in various mutual funds (for the deferred compensation plan, investments are
participant-directed) which invest in a broad portfolio of debt and equity securities. These assets are valued based on
publicly quoted market prices for the funds’ shares as of the balance sheet dates. For pension assets (see Note 16 – Employee
Benefit Plans), securities are valued based on quoted market prices for securities held directly by the trust.
Level 2 – Inputs, other than quoted prices in an active market, that are observable either directly or indirectly through
correlation with market data. For foreign exchange forward contracts and interest rate swaps, the Company values the
instruments based on the market price of instruments with similar terms, which are based on spot and forward rates as of
the balance sheet dates. For pension assets held in commingled funds (see Note 16 – Employee Benefit Plans), the Company
values investments based on the net asset value of the funds, which are derived from the quoted market prices of the
underlying fund holdings. The Company has considered the creditworthiness of counterparties in valuing all assets and
liabilities.
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, 2021 or 2020. The Company’s policy is to recognize transfers between levels as of the date they occur.
Cash and cash equivalents, accounts receivable, accounts payable and debt are carried at cost, which approximates fair value.
42
The fair values of our financial instruments at June 30, 2021 and 2020 were (in thousands):
Financial Assets
Marketable securities - deferred compensation plan
Foreign exchange contracts
Financial Liabilities
Foreign exchange contracts
Interest rate swaps
Contingent consideration (a)
Financial Assets
Marketable securities - deferred compensation plan
Interest rate swaps
Financial Liabilities
Foreign exchange contracts
Interest rate swaps
Contingent consideration(a)
Total
Level 1
2021
Level 2
Level 3
2,988 $
255
2,988 $
-
- $
255
-
-
1,222 $
3,096
3,333
- $
-
-
1,222 $
3,096
-
-
-
3,333
Total
Level 1
2020
Level 2
Level 3
2,065 $
-
2,065 $
-
- $
-
-
-
2,477 $
6,667
1,343
- $
-
-
2,477 $
6,667
-
-
-
1,343
$
$
$
$
(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 Piazza Rosa, GS Engineering, and Renco Electronics. The Company is contractually obligated to pay contingent
consideration payments to the Sellers of these businesses based on the achievement of certain criteria.
The Company is 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 were payable in euros and could 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. The final revenue target was not achieved in the second quarter of fiscal year
2021. This obligation is considered settled as of December 31, 2020.
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 or second year, which concluded in the fourth quarter of fiscal years 2020 and 2021, respectively. As of
June 30, 2021, 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 2022 through 2024.
The Company is also obligated to pay contingent consideration to the sellers of Renco Electronics in the event that certain earnings
targets are achieved during the three years following acquisition. Contingent acquisition payments are scheduled to be paid in periods
through fiscal year 2024. As of June 30, 2021, the Company could be required to pay up to $3.5 million for contingent consideration
arrangements if the earnings targets are met. During the first quarter of fiscal year 2022, the Company paid $1.2 million to the sellers
as Renco exceeded the defined revenue targets during the first year of the measurement period.
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 the financial performance of the acquired
businesses and the risk-adjusted discount rate for the fair value measurement.
43
The Company will update its assumptions each reporting period based on new developments and record such amounts at fair value
based on the revised assumptions until the agreements expire.
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 its customer based on predetermined shipping
terms. Revenue is recognized over time under certain long-term contracts within the Engineering Technologies and Engraving groups
for highly customized customer products that have no alternative use and in which the contract specifies the Company has a right to
payment for its costs, plus a reasonable margin. For products manufactured over time, the transfer of control is measured pro rata,
based upon current estimates of costs to complete such contracts. Losses on contracts are fully recognized in the period in which the
losses become determinable. Revisions in profit estimates are reflected on a cumulative basis in the period in which the basis for
such revision becomes known.
Cost of Goods Sold and Selling, General and Administrative Expenses
The Company includes expenses in either cost of goods sold or selling, general and administrative categories based upon the natural
classification of the expenses. Cost of goods sold includes expenses associated with the acquisition, inspection, manufacturing and
receiving of materials for use in the manufacturing process. These costs include inbound freight charges, purchasing and receiving
costs, inspection costs, internal transfer costs as well as depreciation, amortization, wages, benefits and other costs that are incurred
directly or indirectly to support the 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 $1.7 million, $1.3 million, and $2.5 million for the years ended June 30, 2021, 2020, and 2019, 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 $9.6 million, $6.9 million, and $6.3 million for the years ended June 30, 2021,
2020, and 2019, 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.
44
The changes in the continuing operations warranty reserve, which are recorded as accrued liabilities, during 2021, 2020, and 2019
were as follows (in thousands):
Balance at beginning of year
Acquisitions and other charges
Warranty expense
Warranty claims
Balance at end of year
2021
2020
2019
$
$
1,781 $
68
2,007
(1,770 )
2,086 $
1,911 $
(86 )
1,783
(1,827 )
1,781 $
1,849
(85 )
2,346
(2,199 )
1,911
The increase in warranty expense during 2021 compared to 2020 is primarily due to increased claim experience in Scientific
primarily as a result of sales volume increases during the most recent fiscal year.
Stock-Based Compensation Plans
Restricted stock awards, including performance based awards, generally vest over terms from one to three years. Compensation
expense associated with these awards is recorded based on their grant-date fair value and is generally recognized on a straight-line
basis over the vesting period. Compensation cost for an award with a performance condition is based on the probable outcome of
that performance condition. The stated vesting period is considered non-substantive for retirement eligible participants. Accordingly,
the Company recognizes any remaining unrecognized compensation expense upon participant reaching retirement eligibility.
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.
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, 2021 and
2020, and 2019 the Company recorded federal taxes using a federal rate of 21.0%.
The provision for fiscal year ending June 30, 2021, 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 U.S. 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.
45
The Company's income tax provision from continuing operations for the fiscal years ended June 30, 2021, 2020, and 2019 was
$14.2 million, $13.1 million, and $18.7 million,
respectively, or an effective rate of 26.9%, 24.3%, and 27.9%,
respectively. 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, 2021 was impacted by the
following items: (i) a tax provision of $5.1 million due to the mix of income in various jurisdictions, (ii) a tax benefit of $1.0 million
from our 2019 and 2020 tax losses that the CARES Act allows to be carried back to 2014 and 2015, when the U.S. federal income
tax rate was 35%, (iii) a tax benefit of $0.8 million related to Federal R&D credit and Foreign Tax Credit, (iv) a tax benefit of $1.7
million related to return to provision adjustments, and (v) the tax expense of $1.2 million attributable to the divestiture of the
Enginetics Corporation during the year.
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.
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
2021
2020
2019
12,156
12,324
12,574
102
12,258
63
12,387
59
12,633
Both basic and diluted income is the same for computing earnings per share. There were no outstanding instruments that had an anti-
dilutive effect at June 30,2021. 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.
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 2016-13. This amendment provides clarity and improves the codification to ASU 2016-13. The pronouncements are
concurrently effective for fiscal years beginning after December 15, 2019 and interim periods therein. The Company adopted ASU
2016-13 in fiscal year 2021. The adoption did not have a material impact on the consolidated financial statements.
As a result of the adoption of ASU 2016-13, the Company has updated its critical accounting policy related to trade account
receivables and allowances for credit losses. See Accounts Receivable Allowances above.
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, 2021, the Company evaluated the significance of each acquisition on a standalone basis and in aggregate,
considering both qualitative and quantitative factors.
46
Renco Electronics
During the first quarter of fiscal year 2021, the Company 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 are reported within our Electronics segment.
The Company paid $27.4 million in cash for all of the issued and outstanding equity interests of Renco Electronics. The preliminary
purchase price was allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on a
preliminary estimate of their fair values on the closing date. The Company commenced a formal valuation of the acquired assets
and liabilities and have updated the preliminary intangible assets based on the final valuation results. Goodwill recorded from this
transaction is attributable to Renco’s significant engineering and technical expertise in end markets supported by strong engineer-
to-engineer relationships. In addition, Renco’s end markets and customer base in areas such as consumer and industrial are highly
complementary to the Company’s existing business.
Intangible assets of $10.4 million consist primarily of $3.6 million for indefinite lived tradenames, and $6.8 million of customer
relationships to be amortized over 12 years. The goodwill of $14.0 million created by the transaction is deductible for income tax
purposes. 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 the finalization of the purchase price allocations. The accounting for business combinations requires
estimates and judgments regarding expectations for future cash flows of the acquired business, and the allocations of those cash
flows to identifiable tangible and intangible assets, in determining the assets acquired and liabilities assumed. The fair values
assigned to tangible and intangible assets acquired and liabilities assumed, including contingent consideration, are based on
management’s best estimates and assumptions, as well as other information compiled by management, including valuations that
utilize customary valuation procedures and techniques.
In connection with the acquisition, the Company entered into two lease arrangements and recorded right-of-use assets and short-
term and long-term liabilities at inception. The Company signed a new lease agreement with a related party, an entity in which the
Renco Electronics President is a shareholder, on July 15, 2020. The lease is for three years and is subject to renewal, at the Company’s
option under similar terms and conditions. The Company recorded a fair value adjustment of $0.1 million in connection with this
lease, which is included in other acquired assets in the table below.
The Company recorded right of use assets of $3.3 million, current lease liabilities of $1.8 million and non-current lease liabilities of
$1.5 million, related to two operating leases in connection with the acquisition of Renco. Renco does not have material financing
leases.
The components of the fair value of the Renco Electronics acquisition, including the final allocation of the purchase price at June
30, 2021, are as follows (in thousands):
Preliminary
Allocation
September 30,
2020 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
Property, plant, & equipment
Identifiable intangible assets
Goodwill
Debt assumed
Liabilities assumed
Total
$
$
$
$
47
29,530 $
(2,132 )
3,000
30,398 $
4,762 $
5,446
-
10,400
14,153
(712 )
(3,651 )
30,398 $
83 $
(75 )
-
8 $
(240 ) $
-
410
-
(162 )
-
-
8 $
29,613
(2,207 )
3,000
30,406
4,522
5,446
410
10,400
13,991
(712 )
(3,651 )
30,406
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):
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
Preliminary
Allocation
June 30, 2019 Adjustments
Final Allocation
$
$
$
$
30,002
(622 )
500
29,880 $
2,197 $
228
180
1,391
8,910
17,976
(1,002 )
29,880 $
780 $
(158 )
-
622 $
(679 ) $
168
(180 )
3,179
200
(2,518 )
452
622 $
30,782
(780 )
500
30,502
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 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 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.
48
The components of the fair value of the Agile acquisition, including the final allocation of the purchase price are as follows (in
thousands):
Preliminary Allocation September 30, 2019 Adjustments
Final
Allocation
Fair value of business combination:
Cash payments
Less, cash acquired
Total
$
$
39,194 $
(1 )
39,193 $
- $
-
- $
39,194
(1 )
39,193
Preliminary Allocation September 30, 2019 Adjustments
Final
Allocation
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.
1,928 $
2,506
-
1,318
13,718
20,142
(419 )
39,193 $
(35 ) $
268 $
200 $
(348 ) $
3,632 $
(3,708 ) $
(9 ) $
- $
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 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.
49
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
Fair value of business combination:
Cash payments
Less cash acquired
Total
$
$
57,284 $
(558 )
56,726 $
- $
-
- $
57,284
(558 )
56,726
Preliminary Allocation September 30, 2019 Adjustments
Final
Allocation
Identifiable assets acquired and liabilities assumed:
Other acquired assets
Inventories
Customer backlog
Property, plant, & equipment
Identifiable intangible assets
Goodwill
Liabilities assumed
Total
$
$
Acquisition-Related Costs
5,023 $
324
1,000
2,490
15,960
32,949
(1,020 )
56,726 $
(1,253 ) $
-
(800 )
(19 )
900
1,411
(239 )
- $
3,770
324
200
2,471
16,860
34,360
(1,259 )
56,726
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 the Company 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, the
Company 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 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
$
$
- $
931
931 $
1,170 $
589
1,759 $
2,810
265
3,075
June 30,
2021
June 30,
2020
June 30,
2019
3. REVENUE FROM CONTRACTS WITH CUSTOMERS
Most of the Company’s contracts have a single performance obligation which represents the product or service being sold to the
customer. Some contracts include multiple performance obligations such as a product and the related installation and/or extended
warranty. Additionally, most of the Company’s contracts offer assurance type warranties in connection with the sale of a product to
customers. Assurance type warranties provide a customer with assurance that the product complies with agreed-upon specifications.
Assurance type warranties do not represent a separate performance obligation.
50
In general, the Company recognizes revenue at the point in time control transfers to its customer based on predetermined shipping
terms. Revenue is recognized over time under certain long-term contracts within the Engineering Technologies and Engraving groups
for highly customized customer products that have no alternative use and in which the contract specifies the Company has a right to
payment for its costs, plus a reasonable margin. For products manufactured over time, the transfer of control is measured pro rata,
based upon current estimates of costs to complete such contracts. Losses on contracts are fully recognized in the period in which the
losses become determinable. Revisions in profit estimates are reflected on a cumulative basis in the period in which the basis for
such revision becomes known.
Disaggregation of Revenue from Contracts with Customers
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
June 30, 2021
Year Ended
June 30, 2020
June 30, 2019
253,369
185,294
204,073
137,159
9,857
147,016
132,586
11,150
143,736
139,769
9,924
149,693
79,421
57,523
57,621
Engineering Technologies
75,562
104,047
105,270
Hydraulics Cylinders and System
Merchandising & Display
Pumps
Total Specialty Solutions
48,776
26,049
26,039
100,864
51,722
31,488
30,725
113,935
53,943
34,532
34,799
123,274
Total Revenue by Product Line
$
656,232 $
604,535 $
639,931
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
June 30, 2021
$
Year Ended
June 30, 2020
June 30, 2019
386,829 $
125,516
129,908
13,979
656,232 $
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.
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, 2021 June 30, 2020 June 30, 2019
607,980
$
31,951
639,931
619,029 $
37,203
656,232 $
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 prepaid expenses and other current assets. Contract liabilities are customer
deposits for which revenue has not been recognized. Current contract liabilities are recorded as accrued expenses.
51
The timing of revenue recognition, invoicing and cash collections results in billed receivables, contract assets and contract liabilities
on the consolidated balance sheets.
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.
The following table provides information about contract assets and liability balances as of June 30, 2021 and 2020 (in thousands):
Year ended June 30, 2021
Contract assets:
Prepaid expenses and other current assets
Contract liabilities:
Customer deposits
Year ended June 30, 2020
Contract assets:
Prepaid expenses and other current assets
Contract liabilities:
Customer deposits
Balance at
Beginning
of Period Additions Deductions
Balance at
End of
Period
9,140
30,773
24,900 $
15,013
2,298
9,912
11,739 $
471
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
$
$
$
$
During the years ended June 30, 2021 and 2020, we recognized the following revenue which was included in the contract liability
beginning 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, 2021
$
2,298
Year ended
June 30, 2020
$
1,358
4. INVENTORIES
Inventories are comprised of (in thousands):
June 30
Raw materials
Work in process
Finished goods
Total
2021
2020
$
$
47,000 $
22,539
22,323
91,862 $
37,257
25,527
22,247
85,031
Distribution costs associated with the sale of inventory are recorded as a component of selling, general and administrative expenses
and were $11.0 million, $9.0 million, and $9.7 million in 2021, 2020 and 2019 respectively.
52
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
2021
2020
73,785 $
210,594
284,379
(151,006 )
133,373 $
69,869
203,258
273,127
(140,594 )
132,533
$
$
Depreciation expense totaled $19.2 million, $19.2 million, and $17.5 million, respectively for the years ended June 30, 2021,
2020 and 2019.
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 seven reporting units for impairment testing: Electronics, Engraving, Scientific, Engineering
Technologies, Procon, Federal, and Hydraulics. The Specialty Solutions segment includes Procon, Federal and Hydraulics.
As quoted market prices are not available for the Company’s reporting units, the fair value of the reporting units is determined using
a discounted cash flow model (income approach). This method uses various assumptions that are specific to each individual
reporting unit in order to determine the fair value. In addition, the Company compares the estimated aggregate fair value of its
reporting units to its overall market capitalization.
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.
In connection with the divestiture of Enginetics, the Company determined that, based on the net realizable value of the operations
divested, the goodwill of the Engineering Technologies reporting unit was impaired. As such, the Company recognized $7.6 million
in impairment charges during the third quarter of fiscal year 2021. As a result of the Enginetics divestiture, the Company completed
an interim goodwill impairment assessment for its other reporting units in the third quarter of fiscal year 2021. As a result of the
assessment in the third quarter, the Company determined that there were no indications of impairment, therefore, no additional
impairment charges were recorded.
In connection with the divestiture of the Refrigerated Solutions Group, the Company compared the fair value of each reporting unit,
Master-Bilt and NorLake, 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, in each of the last two fiscal years and determined that the fair
value of each of its reporting units substantially exceeded each unit’s respective carrying value, therefore, no impairment charges
were recorded in connection with the testing and assessment.
53
Changes to goodwill by segment associated with continuing operations during the years ended June 30, 2021 and 2020 are as follows
(in thousands):
June 30, 2020 Acquisitions Impairments
$
Electronics
Engraving
Scientific
Engineering Technologies
Specialty Solutions
Total
$
131,582 $
77,195
15,454
43,685
3,305
271,221 $
13,991 $
-
-
-
-
13,991 $
Translation
Adjustment June 30, 2021
144,832
77,378
15,454
37,085
3,305
278,054
(741 ) $
183
-
1,000
-
442 $
- $
-
-
(7,600 )
-
(7,600 ) $
7. INTANGIBLE ASSETS
Intangible assets consist of the following (in thousands):
Tradenames
(Indefinite- Developed
Customer
Relationships
lived)
Technology Other
Total
June 30, 2021
Cost
Accumulated amortization
Balance, June 30, 2021
June 30, 2020
Cost
Accumulated amortization
Balance, June 30, 2020
$
$
$
$
57,970 $
(19,038 )
38,932 $
22,273 $
-
22,273 $
53,721 $
(16,768 )
36,953 $
3,812 $
(3,041 )
771 $
137,776
(38,847 )
98,929
74,104 $
(31,003 )
43,101 $
19,916 $
-
19,916 $
55,164 $
(13,006 )
42,158 $
3,980 $
(2,743 )
1,237 $
153,164
(46,752 )
106,412
Amortization expense from continuing operations totaled $11.8 million, $11.6 million, and $10.5 million, respectively for the years
ended June 30, 2021, 2020, and 2019.
At June 30, 2021, aggregate amortization expense is estimated to be (in thousands):
2022
2023
2024
2025
2026
Thereafter
Amortization
8. DEBT
9,653
9,245
8,415
7,971
7,740
33,632
76,656
$
Long-term debt is comprised of the following at June 30 (in thousands):
Bank credit agreements
Total funded debt
Issuance Cost
Total long-term debt
The Company's long-term debt matures in December 2023.
2021
2020
200,000 $
200,000
(510 )
199,490 $
200,000
200,000
(850 )
199,150
$
$
54
Bank Credit Agreements
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.
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, 2021, the Company had the ability to borrow $245.2 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, 2021. The Company’s current financial covenants under the
facility are as follows:
Interest Coverage Ratio - The Company is required to maintain a ratio of Earnings Before Interest and Taxes, as Adjusted (“Adjusted
EBIT per the Credit Agreement”), to interest expense for the trailing twelve months of at least 2.75:1. Adjusted EBIT per the Credit
Agreement specifically excludes extraordinary and certain other defined items such as cash restructuring and acquisition-related
charges up to the lower of $20 million or 10% of EBITDA. The facility also allows unlimited non-cash charges including purchase
accounting and goodwill adjustments. At June 30, 2021, the Company’s Interest Coverage Ratio was 13.10:1.
Leverage Ratio - The Company’s ratio of funded debt to trailing twelve month Adjusted EBITDA per the credit agreement, calculated
as Adjusted EBIT per the Credit Agreement plus depreciation and amortization, may not exceed 3.5:1. Under certain circumstances
in connection with a Material Acquisitions (as defined in the Facility), the Credit Agreement allows for the leverage ratio to go as
high as 4.0:1 for a four-fiscal quarter period. At June 30, 2021 the Company’s Leverage Ratio was 1.31:1.
As of June 30, 2021, 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%. Our primary sources of cash for these requirements are cash flows from continuing
operations and borrowings under the facility.
In connection with the acquisition of Renco, the company assumed $0.7 million of debt under the Paycheck Protection Program,
within the United States Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. These borrowings were forgiven by the
Small Business Administration ("SBA") in June 2021.
Other Long-Term Borrowings
At June 30, 2021 and 2020, the Company had standby letter of credit sub-facility outstanding, primarily for insurance and trade
financing purposes of $6.0 million and $7.3 million, respectively.
9. ACCRUED LIABILITIES
Accrued expenses from continuing operations recorded in our Consolidated Balance Sheets at June 30, 2021 and 2020 consist of the
following (in thousands):
Payroll and employee benefits
Workers' compensation
Warranty
Fair value of derivatives
Lease liability
Other
Total
2021
2020
32,550 $
2,118
2,086
4,318
7,933
12,712
61,717 $
24,084
2,743
1,781
9,144
8,016
14,161
59,929
$
$
55
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, 2021.
The fair value of the swaps recognized in accrued liabilities and in other comprehensive income (loss) at June 30, 2021 and 2020 is
as follows (in thousands):
Effective Date
May 24, 2017
August 6, 2018
March 23, 2020
April 24, 2020
May 24, 2020
Notional
Amount
25,000
25,000
100,000
25,000
25,000
Fixed
Interest
Rate
1.88%
2.83%
0.91%
0.88%
0.91%
Maturity
Fair Value at June 30,
April 24, 2022
August 6, 2023
March 23, 2025
April 24, 2025
March 24, 2025
2021
2020
(374 )
(1,401 )
(907 )
(192 )
(222 )
(3,096 ) $
(815 )
(2,167 )
(2,485 )
(585 )
(615 )
(6,667 )
$
The Company reported no losses for the years ended June 30, 2021, 2020, and 2019, 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 sales to foreign customers and loan payments between subsidiaries. The Company enters into such contracts for
hedging purposes only. The Company has designated certain of these currency contracts as hedges, and changes in the fair value of
these contracts are recognized in other comprehensive income until the hedged items are recognized in earnings. Hedge
ineffectiveness, if any, associated with these contracts will be reported in net income. At June 30, 2021 and 2020, the Company had
outstanding forward contracts related to hedges of intercompany loans with net losses of $1.0 million and $2.5 million, respectively,
which approximate the unrealized gains or losses on the related loans. The contracts have maturity dates ranging from fiscal year
2022 to 2024, which correspond to the related intercompany loans. The notional amounts of these instruments, by currency in
thousands, are as follows:
Currency
2021
2020
USD
Euro
SGD
Canadian
987
5,750
21,836
20,600
287
5,750
64,696
20,600
56
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):
2021
2020
Asset Derivatives
Derivative designated as
hedging instruments
Foreign exchange contracts
Balance
Sheet
Line Item
Other Assets
Fair Value
255
255
$
Balance
Sheet
Line Item
Other Assets
Fair Value
-
-
$
2021
Derivative designated as
hedging instruments
Interest rate swaps
Foreign exchange contracts
Balance
Sheet
Line Item
Accrued Liabilities
Accrued Liabilities
Fair Value
$
$
3,096
1,222
4,318
2020
Balance
Sheet
Line Item
Accrued Liabilities
Accrued Liabilities
Fair Value
$
$
6,667
2,477
9,144
Liability Derivatives
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
2021
2020
2019
$
$
1,284 $
2,072
3,356 $
(7,098 ) $
1,851
(5,247 ) $
1,703
(3,279 )
(1,576 )
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
2021
2020
2019
Affected line item
in the Statements
of Operations
$
$
2,287 $
(557 )
-
1,730 $
547 $
(1,403 )
-
(856 ) $
Interest expense
(321 )
1,730 Other non-operating income
(285 ) Other non-operating income
1,124
On March 27, 2020, the CARES Act was enacted to address the economic impact of the COVID-19 pandemic in the United States.
Among other things, the CARES Act allows a five-year carryback period for tax losses generated in 2019 through 2021. The June
30, 2021 tax provision includes benefits of $0.2 million and $0.8 million from tax losses in the years ended June 30, 2019 and June
30, 2020, respectively, that the CARES Act allows to be carried back to the years ended June 30, 2014 and June 30, 2015, when the
U.S. federal income tax rate was 35%.
57
U.S. 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, 2021, 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 $2.4 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
2021
2020
2019
$
$
4,997 $
47,703
52,700 $
11,890 $
42,184
54,074 $
6,794
60,180
66,974
The Company utilizes the asset and liability method of accounting for income taxes. Deferred income taxes are determined based
on the estimated future tax effects of differences between the financial and tax bases of assets and liabilities given the provisions of
the enacted tax laws. The components of the provision for income taxes on continuing operations (in thousands) were as shown
below:
Current:
Federal
State
Non-U.S.
Total Current
Deferred:
Federal
State
Non-U.S.
Total Deferred
Total
2021
2020
2019
$
$
$
$
(2,592 ) $
307
15,606
13,321 $
1,469 $
374
(1,007 )
836
14,157 $
(870 ) $
70
13,963
13,163 $
2,743 $
885
(3,731 )
(103 )
13,060 $
648
190
21,288
22,126
277
207
(3,922 )
(3,438 )
18,688
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
Benefit from U.S. tax loss carryback to prior
years
Tax expense on Enginetics disposal
Return to provision
Valuation allowance release
Other
Effective income tax provision
2021
2020
2019
21.0 %
1.4 %
4.0 %
(1.0 %)
0.0 %
4.6 %
0.0 %
1.5 %
(1.8 %)
2.4 %
(3.2 %)
(2.3 %)
0.8 %
26.9 %
21.0 %
1.1 %
0.7 %
(3.5 %)
0.0 %
2.2 %
1.4 %
(1.3 %)
0 %
0 %
1.0 %
0 %
1.7 %
24.3 %
21.0 %
0.5 %
4.9 %
(1.5 %)
(1.2 %)
3.2 %
0.4 %
0.0 %
0.0 %
0.0 %
(0.1 %)
0.0 %
0.7 %
27.9 %
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.
58
The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2021 was impacted by the
following items: (i) a tax provision of $5.1 million due to the mix of income in various jurisdictions, (ii) a tax benefit of $1.0 million
from our 2019 and 2020 tax losses that the CARES Act allows to be carried back to 2014 and 2015, when the U.S. federal income
tax rate was 35%, (iii) a tax benefit of $0.8 million related to Federal R&D credits and Foreign Tax credits, (iv) a tax benefit of $1.7
million related to return to provision adjustments, and (v) tax expense of $1.2 million attributable to the divestiture of Enginetics
Corporation during the year.
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.
Significant components of the Company’s deferred income taxes are as follows (in thousands):
Deferred tax liabilities:
Depreciation and amortization
Withholding taxes
Other
Operating lease right-of-use-asset
Total deferred tax liability
Deferred tax assets:
Accrued compensation
Accrued expenses and reserves
Pension
Inventory
Lease liabilities
Other
Net operating loss and credit carry forwards
Total deferred tax asset
Less: Valuation allowance
Net deferred tax asset (liability)
2021
2020
(28,997 ) $
(4,497 )
(302 )
(4,711 )
(38,507 ) $
2,610 $
2,610
12,653
769
4,783
-
16,127
39,552 $
(34,422 )
(4,295 )
-
(11,384 )
(50,101 )
2,410
4,117
19,847
588
11,446
127
22,676
61,211
(12,191 )
(11,146 ) $
(15,172 )
(4,062 )
$
$
$
$
$
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, 2021 applies to federal capital loss, state
loss, foreign loss, and state R&D credit carryforwards, which management has concluded that it is more likely than not that these
tax benefits will not be realized. The increase (decrease) in the valuation allowance from the prior year was due to the current year
activity in those same federal, state and foreign jurisdictions.
59
In addition, the sale of the Enginetics Corporation in the fiscal year generated a capital loss for tax purposes. As of June 30, 2021,
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. In addition, the Company decreased the valuation allowance by $5.1 million due to a return to
provision adjustment on the RSG Group capital loss carryforward.
As of June 30, 2021, the Company had gross state net operating loss ("NOL") and credit carry forwards of approximately $88.8
million and $3.2 million, respectively, which may be available to offset future state income tax liabilities and expire at various dates
from 2021 through 2040. In addition, the Company had foreign NOL carry forwards of approximately $4.7 million, $3.7 million of
which carry forward indefinitely and $1.0 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 an income tax provision in the
consolidated statements of income of $0.4 million during the fiscal year ended June 30, 2021, 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
2021
2020
2019
$
$
14,157 $
(550 )
13,607 $
13,060 $
(2,613 )
10,447 $
18,688
(2,453 )
16,235
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 2021, 2020 and 2019 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
2021
2020
2019
$
$
9,286 $
5
121
-
-
9,412 $
11,251 $
4
-
(1,641 )
(328 )
9,286 $
3,003
4
8,281
(37 )
-
11,251
At June 30, 2021, we had $9.4 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. The Company increased its uncertain tax position during the
year due to Canadian withholding tax exposures.
If the unrecognized tax benefits in the table above were recognized in a future period, $8.6 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 expected to have an impact of $8.6 million to the Company's financial
statements. The Company does not reasonably expect any other significant changes in the next twelve months. The following tax
years, in the major tax jurisdictions noted, are open for assessment or refund:
Country
United States
Canada
Germany
Ireland
Portugal
United Kingdom
Years Ending June
30,
2018 to 2021
2017 to 2021
2018 to 2021
2021
2020 to 2021
2017 to 2021
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, 2021 and 2020, the company had $0.8 million and
$0.1 million for accrued interest expense on unrecognized tax benefits.
60
12. CONTINGENCIES
From time to time, the Company is subject to various claims and legal proceedings, including claims related to environmental
remediation, either asserted or unasserted, that arise in the ordinary course of business. While the outcome of these proceedings and
claims cannot be predicted with certainty, the Company’s management does not believe that the outcome of any of the currently
existing legal matters will have a material impact on the Company’s consolidated financial position, results of operations or cash
flow. The Company accrues for losses related to a claim or litigation when the Company’s management considers a potential loss
probable and can reasonably estimate such potential loss.
Litigation
In the second quarter of fiscal year 2019, a lawsuit was filed against Standex Electronics, Inc., a wholly owned subsidiary of the
Company (“Electronics”), by Miniature Precision Components, Inc., a customer (“MPC”), seeking damages in connection with
allegedly faulty sensors designed and manufactured by Electronics. The subject sensors were incorporated by MPC into a
subassembly sold by MPC to its customer, an automotive manufacturer. MPC alleges that the sensors incorrectly activated a
diagnostic code in vehicles for which MPC’s customer issued a service bulletin, resulting in significant warranty costs for MPC. In
the litigation, which is pending in the U.S. District Court for the Eastern District of Wisconsin, MPC seeks indemnification from
Electronics for its costs. Electronics has numerous defenses to MPC’s claims and, based upon discovery completed to date, the
Company believes that liability to Electronics, while possible, is not probable, and the range of any potential liability would be
between $0 and $4.0 million. There have been no accrued liabilities recorded related to this litigation.
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 the consolidated statement of operations for equity based compensation awards was $8.4
million, $7.0 million, and $4.4 million for the years ended June 30, 2021, 2020, and 2019, respectively, primarily within Selling,
General, and Administrative Expenses. The total income tax benefit recognized in the consolidated statement of operations for
equity-based compensation plans was $1.8 million, $1.9 million, and $1.1 million for the years ended June 30, 2021, 2020 and 2019,
respectively.
There were 208,971 shares of common stock reserved for issuance under various compensation plans at June 30, 2021.
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. Restrictions on non-vested stock awards generally lapse between fiscal year 2022 and fiscal year 2024. $5.3 million, $4.2
million, and $3.7 million, respectively, was recognized as compensation expense related to restricted stock awards for fiscal years
ended June 30, 2021, 2020, and 2019. Substantially all awards are expected to vest.
A summary of restricted stock awards activity during the year ended June 30, 2021 is as follows:
Outstanding, June 30, 2020
Granted
Vested
Canceled
Outstanding, June 30, 2021
Restricted Stock Awards
Number
of
Shares
Weighted
Average
Grant Date
Fair Value
146,015 $
72,475
(44,647 )
(5,832 )
168,011 $
80.35
59.57
88.70
42.45
74.61
61
Restricted stock awards granted during fiscal years 2020 and 2019 had a weighted average grant date fair value of $71.38, and
$102.74, respectively. The grant date fair value of restricted stock awards is determined based on the closing price of the Company’s
common stock on the date of grant. The fair value of awards vested during fiscal years 2021, 2020 and 2019 was $2.8 million, $2.3
million and $4.5 million, respectively.
As of June 30, 2021, there was $3.7 million of unrecognized compensation costs related to awards expected to be recognized over a
weighted-average period of 1.38 years.
Executive Compensation Program
The Company operates a compensation program for key employees. The plan contains both an annual component as well as a long-
term component. Under the annual component, participants may elect to defer up to 50% of their annual incentive compensation in
restricted stock which is purchased at a discount to the market. Additionally, non-employee directors of the Company may defer a
portion of their director’s fees in restricted stock units which is purchased at a discount to the market. During the restriction period,
recipients of the shares are entitled to dividend equivalents on such units, providing that such shares are not forfeited.
Dividend equivalents are accumulated and paid out at the end of the restriction period. The restrictions on the units expire after three
years. Restrictions on non-vested annual component awards generally lapse between fiscal year 2022 and fiscal year 2024. 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 $0.4 million, $0.3 million, and $0.3 million for the years ended June 30,
2021, 2020 and 2019, respectively.
As of June 30, 2021, there was $0.4 million of unrecognized compensation costs related to awards expected to be recognized over a
weighted-average period of 1.4 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)
2021
2020
2019
0.18 %
3
44.1 %
0.22 $
1.42 %
3
32.0 %
0.20 $
2.63 %
3
25.1 %
0.18
$
Under the long-term component, grants of performance share units (“PSUs”) are made annually to key employees and the share units
are earned based on the achievement of certain overall corporate financial performance targets over the performance period. At the
end of the performance period, the number of shares of common stock issued will be determined by adjusting upward or downward
from the target in a range between 50% and 200%. No shares will be issued if the minimum performance threshold is not achieved.
The final performance percentage, on which the payout will be based considering the performance metrics established for the
performance period, will be certified by the Compensation Committee of the Board of Directors.
A participant’s right to any shares that are earned will cliff vest in three years. An executive whose employment terminates prior to
the vesting of any award for a reason other than death, disability, retirement, or following a change in control, will forfeit the shares
represented by that award. In certain circumstances, such as death, disability, or retirement, PSUs are paid on a pro-rata basis. In
the event of a change in control, vesting of the awards granted is accelerated.
A summary of the awards activity under the executive compensation program during the year ended June 30, 2021 is as follows:
Annual Component
Weighted
Average
Exercise
Price
Number
of
Shares
Intrinsic
Value
Performance Stock Units
Weighted
Average
Grant Date
Fair Value
of
Shares
Aggregate Number
Non-vested, June 30, 2020
Granted
Exercised / vested
Forfeited
Non-vested, June 30, 2021
64.33 $
43.16
64.32 $
76.65
54.36 $
(685,647 )
(43,978 )
691,647
79,312 $
69,071
(12,560 )
(6,396 )
129,427 $
84.87
58.81
91.75
85.51
70.27
32,387 $
19,311
(10,474 )
(105 )
41,119 $
62
Restricted stock awards granted under the annual component of this program in fiscal years 2021, 2020, and 2019 had a weighted
average grant date fair value of $43.16, $74.37, and $110.22, respectively. The PSUs granted in fiscal years 2020 and 2019 had a
weighted average grant date fair value of $70.37, and $106.65, respectively. The grant date fair value of the PSUs is determined
based on the closing price of the Company’s common stock on the date of grant. The fair value of PSUs vested under the long-term
component of this program during the fiscal years ended June 30, 2021, 2020, and 2019 was $0.7 million, $0.8 million, and
$0.7 million respectively.
The Company recognized compensation expense related to the PSUs of $2.6 million, $2.9 million, and $0.3 million for the fiscal
years ended June 30, 2021, 2020 and 2019 respectively based on the probability of the performance targets being met. The total
unrecognized compensation costs related to non-vested performance share units was $3.6 million at June 30, 2021, 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 54,975 at June 30,
2021. Shares purchased under this plan aggregated to 7,509 in fiscal year 2021, 11,132 in 2020, and 7,698 in 2019, at an average
price of $66.98, $52.57, and $65.63, respectively.
14. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The components of the Company’s accumulated other comprehensive income (loss) at June 30, 2021 and 2020 are as follows (in
thousands):
Foreign currency translation adjustment
Unrealized pension losses, net of tax
Unrealized losses on derivative instruments, net of tax
Total
$
$
(21,244 ) $
(92,372 )
(2,524 )
(116,140 ) $
(31,046 ) $
(109,880 )
(6,733 )
(147,659 ) $
(27,658 )
(107,380 )
(2,240 )
(137,278 )
2021
2020
2019
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,
2021 Restructuring Initiatives
Prior Year Initiatives
Total expense
2020 Restructuring Initiatives
Prior Year Initiatives
Total expense
2019 Restructuring Initiatives
Prior Year Initiatives
Total expense
Involuntary
Employee
Severance and
Benefit Costs
$
1,313 $
926
2,239 $
4,004 $
-
4,004 $
953 $
210
1,163 $
Other
Total
662 $
577
1,239 $
606 $
59
665 $
15 $
111
126 $
1,975
1,503
3,478
4,610
59
4,669
968
321
1,289
$
$
$
$
$
63
2021 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. Restructuring expenses primarily related to headcount reductions and
facility rationalization within our Specialty Solutions and Engraving segment. During fiscal year 2021, we have also incurred
restructuring expenses related to third party assistance with analysis and implementation of these activities.
Restructuring liabilities at June 30, 2020
Additions and adjustments
Payments
Restructuring liabilities at June 30, 2021
Prior Year Restructuring Initiatives
Involuntary
Employee
Severance
and Benefit
Costs
Other
Total
$
$
- $
1,313
(1,274 )
39 $
- $
662
(662 )
- $
-
1,975
(1,936 )
39
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 2020 and 2019, the Company also incurred
restructuring expenses related to headcount reductions, facility rationalization within our Specialty Solutions and Engraving
segment, and third party assistance with analysis and implementation of these activities.
The Company expects to incur additional restructuring costs of approximately $2.0 million in fiscal year 2022 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.
Activity in the reserves related to 2020 restructuring initiatives is as follows (in thousands):
Restructuring liabilities at June 30, 2020
Additions and adjustments
Payments
Restructuring liabilities at June 30, 2021
$
Activity in the reserves related to fiscal year 2020 (in thousands):
Involuntary
Employee
Severance and
Benefit Costs
$
520 $
926
(1,446 )
- $
Restructuring liabilities at June 30, 2019
Additions and adjustments
Payments
Restructuring liabilities at June 30, 2020
Involuntary
Employee
Severance and
Benefit Costs
$
147 $
4,004
(3,631 )
520 $
$
64
Other
Total
18 $
577
(585 )
10 $
538
1,503
(2,031 )
10
Other
Total
5 $
665
(652 )
18 $
152
4,669
(4,283 )
538
The Company’s total restructuring expenses by segment are as follows (in thousands):
Year Ended June 30,
Fiscal Year 2021
Electronics
Engraving
Engineering Technologies
Specialty Solutions
Corporate and Other
Total expense
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
Involuntary
Employee
Severance and
Benefit Costs
Other
Total
$
$
$
$
$
$
355 $
1046
37
673
128
2,239 $
355 $
1512
296
1,326
515
4,004 $
327 $
662
17
21
136
1,163 $
22 $
631
-
586
-
1,239 $
97 $
499
-
69
-
665 $
27 $
-
99
-
-
126 $
377
1,677
37
1,259
128
3,478
452
2,011
296
1,395
515
4,669
354
662
116
21
136
1,289
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,
2020
2021
2019
2021
Foreign Plans
Year Ended June 30,
2020
2019
Service Cost
Interest Cost
Expected return on plan assets
Recognized net actuarial loss
Amortization of prior service cost
(benefit)
Net periodic benefit cost (benefit)
$
$
4 $
7,439
(13,012 )
5,933
3 $
9,083
(13,150 )
5,101
3 $
10,342
(13,541 )
4,121
217 $
725
(629 )
757
-
364 $
-
1,037 $
-
925 $
(5 )
1,065 $
236 $
846
(868 )
651
(5 )
860 $
189
1,013
(908 )
340
(3 )
631
65
The following table sets forth the funded status and amounts recognized as of June 30, 2021 and 2020 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
U.S. Plans
Year Ended June 30,
2020
2021
Foreign Plans
Year Ended June 30,
2020
2021
$
$
$
$
264,619 $
4
7,439
(3,457 )
(16,513 )
-
252,092 $
253,540 $
3
9,083
18,121
(16,128 )
-
264,619 $
45,190 $
217
725
(746 )
(1,906 )
4,329
47,809 $
194,824 $
26,277
8,015
(16,513 )
-
212,603 $
186,205 $
21,447
3,301
(16,129 )
-
194,824 $
41,973 $
40
105
(1,906 )
4,805
45,017 $
43,983
236
846
2,604
(1,537 )
(942 )
45,190
39,665
4,037
739
(1,537 )
(931 )
41,973
Funded Status
$
(39,489 ) $
(69,795 ) $
(2,792 ) $
(3,217 )
Amounts recognized in the consolidated balance sheets consist of:
$
Prepaid benefit cost
Current liabilities
Non-current liabilities
Net amount recognized
$
- $
(208 )
(39,281 )
(39,489 ) $
- $
(208 )
(69,587 )
(69,795 ) $
5,661 $
(309 )
(8,144 )
(2,792 ) $
Unrecognized net actuarial loss
Unrecognized prior service cost
Accumulated other comprehensive income, pre-tax
$
$
117,847 $
-
117,847 $
140,501 $
-
140,501 $
4,618 $
(51 )
4,567 $
4,663
(295 )
(7,585 )
(3,217 )
5,075
(57 )
5,018
The accumulated benefit obligation for all defined benefit pension plans was $299.8 million and $309.7 million at June 30, 2021 and
2020, 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 $5.9 million.
66
Plan Assets and Assumptions
The fair values of the Company’s pension plan assets at June 30, 2021 and 2020 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
Corporate bonds and other fixed income securities
Other
Total
Level 1
Level 2
Level 3
June 30, 2021
3,209 $
86,499
146,742
21,170
257,620 $
3,148 $
2,425
1,850
-
7,423 $
61 $
84,074
144,892
21,170
250,197
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
-
5,161 $
1,429 $
83,784
125,083
21,478
231,774
-
-
-
-
-
-
-
-
-
-
$
$
$
$
Asset allocation at June 30, 2021 and 2020 and target asset allocations for 2021 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
Year Ended June 30,
2020
2021
Foreign Plans
Year Ended June 30,
2020
2021
36%
43%
12%
9%
100%
41%
38%
11%
10%
100%
5%
70%
24%
1%
100%
2021
U.S.
36%
44%
12%
8%
100%
5%
64%
29%
2%
100%
U.K.
0%
70%
30%
0%
100%
Our investment policy for the U.S. pension plans targets a range of exposure to the various asset classes. Standex rebalances the
portfolio periodically when the allocation is not within the desired range of exposure. The plan seeks to provide returns in excess of
the various benchmarks. The benchmarks include the following indices: S&P 500; Citigroup PMI EPAC; Citigroup World
Government Bond and Barclays Aggregate Bond. A third-party investment consultant tracks the plan’s portfolio relative to the
benchmarks and provides quarterly investment reviews which consist of a performance and risk assessment on all investment
managers and on the portfolio.
Certain managers within the plan use, or have authorization to use, derivative financial instruments for hedging purposes, the creation
of market exposures and management of country and asset allocation exposure. Currency speculation derivatives are strictly
prohibited.
67
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
2021
2020
2019
0.73 - 3.00%
3.25%
0.99 - 2.90%
2.90%
0.24 - 3.70%
3.20%
0.99 - 2.90%
1.40 - 6.90%
2.90%
0.31 - 3.70%
2.30 - 7.00%
3.20%
0.38 - 4.40%
2.45 - 7.00%
3.60%
Included in the above are the following assumptions relating to the obligations for defined benefit pension plans in the United States
at June 30, 2021; a discount rate of 2.90% and expected return on assets of 6.9%. 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: 2022, $18.2 million; 2023, $17.9 million; 2024,
$17.8 million; 2025, $17.8 million; 2026, $17.6 million and five years thereafter, $86.2 million. The Company expects to make $1.6
million of contributions to its pension plans in 2022.
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.
68
The following table outlines the Company’s participation in multiemployer pension plans for the periods ended June 30, 2021, 2020,
and 2019, 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 2021
and 2020 relates to the plans’ two most recent fiscal year-ends. The zone status is based on information that we received from the
plans’ administrators and is certified by each plan’s actuary. Among other factors, plans certified in the red zone are generally less
than 65% funded, plans certified in the orange zone are both less than 80% funded and have an accumulated funding deficiency or
are expected to have a deficiency in any of the next six plan years, plans certified in the yellow zone are less than 80% funded, and
plans certified in the green zone are at least 80% funded. The “FIP/RP Status Pending/Implemented” column indicates whether a
financial improvement plan (“FIP”) for yellow/orange zone plans, or a rehabilitation plan (“RP”) for red zone plans, is either pending
or has been implemented. For all plans, the Company’s contributions do not exceed 5% of the total contributions to the plan in the
most recent year.
Pension Fund
EIN/Plan
Number
2021 2020
FIP/RP
Status
2021
2020
Pension Protection Act
Zone Status
Contributions
Expiration
Date of
Collective
Surcharge Bargaining
2019 Imposed? Agreement
New England Teamsters and
Trucking Industry Pension Fund
04-
6372430-
001 Red Red
Yes/
Implemented
$
631 $
531 $
461
No
May-25
IAM National Pension Fund, National
Pension Plan
Retirement Savings Plans
51-
6031295-
002 Red Red Yes/Implemented
513
644
$ 1,144 $ 1,126 $ 1,105
595
No
Oct-22 - May-25
The Company has two primary employee savings plans, one for salaried employees and one for hourly employees. Substantially all
of our full-time domestic employees are covered by these savings plans. Under the provisions of the plans, employees may contribute
a portion of their compensation within certain limitations. The Company, at the discretion of the Board of Directors, may make
contributions on behalf of our employees under the plans. Company contributions were $2.9 million, $3.7 million, and $4.0 million
for the years ended June 30, 2021, 2020, and 2019, respectively. At June 30, 2021, the salaried plan holds approximately 124,000
shares of Company common stock, representing approximately 3.9% of the holdings of the plan.
17. INDUSTRY SEGMENT INFORMATION
The company has five reportable segments 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.
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.
69
Given the nature of our corporate expenses, management concluded that it would not presently be appropriate to allocate the expenses
associated with corporate activities to our operating segments. These corporate expenses include the costs for the corporate
headquarters, salaries and wages for the personnel in corporate, professional fees related to corporate matters and compliance efforts,
stock-based compensation and post-retirement benefits related to our corporate executives, officers and directors, and other
compliance related costs. The Company has a process to allocate and recharge certain direct costs to the operating segments when
such direct costs are administered and paid at corporate. Such direct expenses that are recharged on an intercompany basis each
month include such costs as insurance, workers’ compensation programs, and audit fees. The accounting policies applied by the
reportable segments are the same as those described in the Summary of Accounting Policies footnote to the consolidated financial
statements. There are no differences in accounting policies which would be necessary for an understanding of the reported segment
information.
Industry Segments
(in thousands)
Electronics
Engraving
Scientific
Engineering Technologies
Specialty Solutions
Corporate and Other
Total
Electronics
Engraving
Scientific
Engineering Technologies
Specialty Solutions
Restructuring charge
Loss on sale of business
Acquisition-related costs
Other operating income (expense),
net
Corporate
Total
Interest expense
Other, net
Income from continuing operations
before income taxes
$
$
$
$
2021
Net Sales
2020
2019
Depreciation and Amortization
2020
2021
2019
253,369 $
147,016
79,421
75,562
100,864
-
656,232 $
185,294 $
143,736
57,523
104,047
113,935
-
604,535 $
204,073 $
149,693
57,621
105,270
123,274
-
639,931 $
13,159 $
11,140
1,590
5,519
1,513
320
33,241 $
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
Income (Loss) From Operations
2020
2019
2021
Capital Expenditures (1)
2020
2019
2021
46,600 $
22,510
18,240
6,164
14,358
(3,478 )
(14,624 )
(931 )
-
(29,674 )
59,165 $
(5,992 )
(473 )
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 )
-
(29,599 )
60,528 $
(7,475 )
1,021
(500 )
(24,728 )
79,476 $
(10,760 )
(1,742 )
11,154 $
6,517
693
1,110
1,313
-
-
-
-
626
21,413 $
5,334 $
10,618
360
1,170
1,154
-
-
-
-
668
19,304 $
12,646
13,868
77
3,857
2,108
-
-
-
-
57
32,613
$
52,700 $
54,074 $
66,974
(1) Includes capital expenditures in accounts payable of $2.4 million, $3.2 million, and $0.9 million at June 30, 2021, 2020,
and 2019 respectively.
Electronics
Engraving
Scientific
Engineering Technologies
Specialty Solutions
Corporate & Other
Discontinued Operations
Total
Goodwill
Identifiable Assets
2021
2020
2021
2020
$
$
144,832 $
77,378
15,454
37,085
3,305
-
-
278,054 $
70
131,582 $
77,195
15,454
43,685
3,305
-
-
271,221 $
382,045 $
263,406
110,300
114,012
46,883
45,577
962,223 $
324,725
257,104
90,595
147,797
52,528
55,193
2,936
930,878
Tangible Long-lived assets
United States
Asia Pacific
EMEA (2)
Other Americas
Total
2021
2020
63,613 $
33,722
30,677
5,361
133,373 $
69,548
32,057
26,057
4,871
132,533
$
$
(2) EMEA consists primarily of Europe, Middle East and S. Africa.
18. DIVESTITURES
On March 31, 2021, the Company divested Enginetics Corporation (“Enginetics”), its jet engine components business, to Enjet Aero,
LLC, a privately-held aerospace engine component manufacturing company. Enginetics generated approximately $9.0 million in
revenue in the first nine months of fiscal 2021. The business activities, which are reported within the Engineering Technologies
Group, were divested in order to focus on the higher growth and margin opportunities of the Company's core spin forming solutions
business that serves the space, commercial aviation and defense end markets. The Company received $11.7 million cash
consideration and recorded a pre-tax loss on sale of the business of $14.6 million, including a goodwill impairment charge of $7.6
million, assigned to the entirety of the Engineering Technologies segment, and a $5.4 million write-down of intangible assets. The
sale transaction and financial results of Enginetics are classified as continuing operations in the Consolidated Financial Statements.
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 NorLake 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.
71
Activity related to the Refrigerated Solutions Group, the Cooking Solutions Group and other discontinued operations for the
years ended June 30, 2021, 2020, and 2019 is as follows (in thousands):
Net sales
Gain (loss) on sale of business
Transaction fees
Profit (loss) before taxes
Benefit (provision) for taxes
Net income (loss) from discontinued operations
20. LEASES
2021
Year Ended June 30,
2020
2019
- $
111,841 $
223,067
- $
-
(2,620 ) $
550
(2,070 ) $
(19,996 ) $
(1,933 )
(23,439 ) $
2,613
(20,826 ) $
20,539
(4,397 )
17,175
2,453
19,628
$
$
$
$
In the normal course of its business, the Company enters into various leases as the lessee, primarily related to certain transportation
vehicles, facilities, office space, and machinery and equipment. These leases have remaining lease terms between one and fifty-
seven years, some of which may include options to extend the leases or options to terminate the leases. Some lease arrangements
require variable payments that are dependent on usage, output, or index-based adjustments.
Amounts (in thousands) recorded in the Company's Condensed Consolidated Balance Sheet and Statement of Operations related to
leases are as follows:
Assets
Operating lease right-of-use-asset
Liabilities
Current (accrued liabilities)
Operating lease long-term liabilities
Total lease liability
Lease cost
June 30, 2021 June 30, 2020
$
$
$
37,276 $
44,788
7,933 $
29,041
36,974 $
8,016
36,293
44,309
The components of lease costs for the years ended June 30, 2021 and 2020 are as follows (in thousands):
Operating lease cost
Variable lease cost
Net lease cost
72
Year Ended
Year Ended
June 30, 2021 June 30, 2020
10,791
$
492
11,283
11,747 $
863
12,610 $
$
Maturity of lease liability
The maturity of the Company's lease liabilities included in continuing operations at June 30, 2021 were as follows (in thousands):
2022
2023
2024
2025
2026
After 2026
Less: interest
Present value of lease liabilities
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)
Other Information
Supplemental cash flow information related to leases is as follows:
Operating cash outflows from operating leases
73
Operating
Leases
8,823
6,213
4,995
4,097
3,313
13,724
(4,191 )
36,974
$
June 30, 2021
9.3
2.61 %
Year Ended
June 30, 2021 June 30, 2020
10,436
$
Year Ended
11,025 $
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Standex International Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Standex International Corporation and subsidiaries (the
"Company") as of June 30, 2021, the related consolidated statement of operations, comprehensive income, stockholders' equity,
and cash flows, for the year ended June 30, 2021, 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,
2021, and the results of its operations and its cash flows for the year ended June 30, 2021, in conformity with accounting principles
generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of June 30, 2021, based on criteria established in Internal
Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
and our report dated August 13, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.
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 Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are
material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
74
Revenue recognition – Revenue recognized over time – Refer to note 3 to the financial statements
Critical Audit Matter Description
Revenue is recognized over time under certain long-term contracts within the Engineering Technologies and Engraving groups for
highly customized customer products that have no alternative use and in which the contract specifies the Company has a right to
payment for its costs, plus a reasonable margin. For products manufactured over time, the transfer of control is measured pro rata,
based upon current estimates of costs to complete such contracts. Losses on contracts are fully recognized in the period in which
the losses become determinable. Revisions in profit estimates are reflected on a cumulative basis in the period in which the basis
for such revision becomes known. For the year ended June 30, 2021, the revenue recognized over time was $37.2 million.
We identified revenue recognized over time as a critical audit matter because of the judgments and subjectivity involved in the
determination of estimated costs to complete contracts. This required extensive audit effort and a high degree of auditor judgment
when performing audit procedures to audit costs incurred to date and management’s estimates of margin at completion used to
recognize revenue over time and evaluating the results of those procedures.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to management’s estimates of total costs and profit for the performance obligation used to recognize
revenue for certain performance obligations accounted for over time included the following, among others:
● We tested the effectiveness of controls for revenue recognized over time, including management’s controls over the
estimates of total costs and profit for performance obligations.
● We selected a sample of long-term contracts with customers for which the revenue is recognized over time and we
performed the following:
o
o
o
evaluated whether the contracts were properly included in management’s calculation of long-term contract
revenue based on the terms and conditions of each contract, including whether continuous transfer of control to
the customer occurred as progress was made toward fulfilling the performance obligation
evaluated management’s ability to achieve the estimates of total costs and profit at completion by comparing the
estimates to management’s work plans, engineering specifications, and supplier contracts, and performing
corroborating inquiries with the Company’s project managers and engineers.
tested the accuracy and completeness of the costs incurred to date for the performance obligation to supporting
documentation
o
tested the mathematical accuracy of management’s calculation of revenue for the contract.
● We evaluated management’s ability to estimate total costs and profits accurately by comparing actual costs and profits to
management’s historical estimates for performance obligations that have been fulfilled.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
August 13, 2021
We have served as the Company’s auditor since 2020.
75
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 sheet of Standex International Corporation (a Delaware corporation) and
subsidiaries (the “Company”) as of June 30, 2020, the related consolidated statements of comprehensive income, changes in
shareholders’ equity, and cash flows for the years ended June 30, 2020 and 2019, 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 the results of its operations and its cash flows for the years ended June 30, 2020 and 2019 in
conformity with accounting principles generally accepted in the United States of America.
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 Public Company
Accounting Oversight Board (United States) ("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.
/s/ GRANT THORNTON LLP
We served as the Company’s auditor from 2015 to 2020.
Boston, Massachusetts
August 25, 2020
76
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, 2021, 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, 2021) 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, 2021 to provide reasonable
assurance of achieving its objectives. These results were reviewed with the Audit Committee of the Board of Directors. Deloitte &
Touche, LLP, the independent registered public accounting firm that audited our consolidated financial statements included in this
Annual Report on Form 10-K, has issued an unqualified attestation report on the Company’s internal control over financial reporting,
which is included below.
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.
77
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Standex International Corporation
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Standex International Corporation and subsidiaries (the "Company")
as of June 30, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of June 30, 2021, based on criteria established in Internal Control - Integrated
Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements as of and for the year ended June 30, 2021, of the Company and our report dated
August 13, 2021, expressed an unqualified opinion on those financial statements.
As described in Management's Report on Internal Control over Financial Reporting, management excluded from its assessment the
internal control over financial reporting at Renco Electronics Inc., which was acquired on July 16, 2020 and whose financial
statements constitute 2.4% of total consolidated assets and 3.9% revenues of the consolidated financial statement amounts as of and
for the year ended June 30, 2021. Accordingly, our audit did not include the internal control over financial reporting at Renco
Electronics Inc.
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's Report on Internal
Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial
reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
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/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
August 13, 2021
78
Item 9B. Other Information
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, 2021 (the “Proxy Statement”). The information required by this item and not provided
in Part 1 of this report under Item 1 “Executive Officers of Standex” is incorporated by reference from the Proxy Statement under
the captions “Election of Directors,” “Stock Ownership in the Company,” “Other Information Concerning the Company, Board of
Directors and its Committees” and “Section 16(a) Beneficial Ownership Reporting Compliance.”
There have been no material changes to the procedures by which security holders may recommend nominees to our Board of
Directors. Information regarding the process for identifying and evaluating candidates for director are set forth and incorporated in
reference to the information in the Proxy Statement under the caption “Corporate Governance/Nominating Committee Report.”
Information regarding the Audit Committee Financial Expert and the identification of the Audit Committee is incorporated by
reference to the information in the Proxy Statement under the caption “Other Information Concerning the Company, Board of
Directors and its Committees, Audit Committee.” The Audit Committee is established in accordance with Section 3(a)(58)(A) of
the Securities Exchange Act.
We maintain a corporate governance section on our website, which includes our code of ethics for senior financial management that
applies to our chief executive officer, principal financial officer, principal accounting officer, controller or persons performing
similar functions. Our corporate governance section also includes our code of business conduct and ethics for all employees. In
addition, we will promptly post any amendments to or waivers of the code of ethics for senior financial management on our website.
You can find this and other corporate governance information at www.standex.com.
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,” “2021
Summary Compensation Table,” “Other Information Concerning the Company, Board of Directors and Its Committees,” and
“Directors Compensation.”
79
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, 2021.
(A)
Number of Securities
(B)
To Weighted-Average
Be Issued Upon
Exercise Exercise Price Of
Of Outstanding
Options, Outstanding Options,
Plan Category
2018 Omnibus Equity compensation plan approved by
Warrants and Rights Warrants and Rights
(C)
Number of Securities
Remaining
Available for Future
Issuance Under
Equity
Compensation Plans
(Excluding
Securities reflected
in Column (A))
stockholders
Total
196,442 $
196,442 $
4.24
4.24
208,971
208,971
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.”
80
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, 2021, 2020 and 2019
(B) Consolidated Balance Sheets as of June 30, 2021 and 2020
(C) Comprehensive Income for the fiscal years ended June 30, 2021, 2020 and 2019
(D) Consolidated Statements of Stockholders’ Equity for the fiscal years ended June 30, 2021, 2020 and 2019
(E) Consolidated Statements of Cash Flows for the fiscal years ended June 30, 2021, 2020 and 2019
(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
Exhibit Description
Incorporated
by Reference
Date
Form
Filed
Herewith
3.
(i)
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 February 2, 2021,
filed as Exhibit 3.1
10-Q 12/31/2020
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)
(h)
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*
10-K 6/30/2020
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*
10-K 6/30/2020
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*
10-K 6/30/2020
Employment Agreement dated August 2, 2019 between the Company and
Ademir Sarcevic*
8-K
8/8/2019
81
(i)
(j)
(k)
(l)
(m)
(n)
First Amendment to Employment Agreement dated August 2, 2019 between
the Company and Ademir Sarcevic*
10-K 6/30/2020
Employment Agreement dated October 1, 2020 between the Company and
Sean Valashinas*
10-Q 9/30/2020
Employment Agreement dated December 13, 2019 between the Company and
James A. Hooven*
10-Q 9/30/2020
Standex International Corporation Amended and 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
Form of Indemnification Agreement for directors and executive officers of
the Company.*
8-K
5/5/2008
(o)
2018 Omnibus Incentive Plan*
8-K
10/29/2018
(p)
(q)
(r)
Standex Deferred Compensation Plan for highly compensated employees filed
as Item 5.02.*
8-K
1/31/2008
Code of Ethics for Chief Executive Officer and Senior Financial Officers is
incorporated by reference as Exhibit 14.
10-K 6/30/2004
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
(s)
Standex International Long-Term Incentive Plan Award
10-K 6/30/2019
Code of Ethics for Chief Executive Officer and Senior Financial Officers is
incorporated by reference as Exhibit 14.
10-K 6/30/2004
Subsidiaries of Standex International Corporation
Consent of Independent Registered Public Accounting Firm Deloitte &
Touche LLP
Consent of Independent Registered Public Accounting Firm Grant Thornton
LLP
Powers of Attorney of Charles H. Cannon, Thomas E. Chorman, Jeffrey S.
Edwards, B. Joanne Edwards, Thomas J. Hansen, and Michael A. Hickey
Rule 13a-14(a) Certification of President and Chief Executive Officer
Rule 13a-14(a) Certification of Vice President and Chief Financial Officer
82
X
X
X
X
X
X
14.
21.
23.1
23.2
24.
31.1
31.2
32.
101
Section 1350 Certification
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
X
* Management contract or compensatory plan or arrangement.
83
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
13, 2021.
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 13, 2021:
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
Vice President/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 13, 2021 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
/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 2021 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.
84
21
23
24
Subsidiaries of Standex
INDEX TO EXHIBITS
Consents of Independent Registered Public Accounting Firm Deloitte & Touche LLP and Grant Thorton LLP
Powers of Attorney of Charles H. Cannon, Thomas E. Chorman, B. Joanne
Edwards, Jeffrey S. Edwards, Thomas J. Hansen, and Michael A. Hickey
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
Retired Chairman and CEO, JBT Corporation
Thomas E. Chorman 1, 2, 3
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
Thomas J. Hansen 1
Michael A. Hickey1.2
Retired Senior Vice President & General Manager, Residential & Wiring
Device Business, Eaton Corporation
Former Vice Chairman of Illinois Tool Works, Inc.
Retired Executive Vice President and President of the Global Institutional
Business, Ecolab Inc.
________________________
1 Member of Audit Committee
2 Member of Compensation Committee
3 Member of Corporate Governance/Nominating Committee
Corporate Officers
David Dunbar
Ademir Sarcevic
Alan J. Glass
Stacey S. Constas
Sean Valashinas
Timo Goodloe
Annemarie Bell
Paul Burns
James Hooven
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, Chief Human Resources Officer
Vice President of Strategy and Business Development
Vice President, Operations and Supply Chain
85
Shareholder Information
Corporate Headquarters
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
Deloitte & Touche LLP
200 Berkeley St, 10th Floor
Boston, MA 02116
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 26, 2021 at Standex International Corporation’s Corporate Headquarters,
23 Keewaydin Drive 3rd Floor, Salem, NH 03079
86
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, 2021 (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.
Horizon Scientific, Inc.
Mold-Tech Singapore Pte. Ltd.
Precision Engineering International Limited
Renco Electronics, Inc.
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
South Carolina
Singapore
United Kingdom
Florida
Mexico
Delaware
Delaware
Japan
United Kingdom
The Netherlands
United Kingdom
Germany
United Kingdom
Italy
Ireland
Canada
Michigan
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Exhibit 23.1
We consent to the incorporation by reference in Registration Statement Nos. 333-147190, File No. 333-179513, File No. 333-161647
and File No. 333-231598 on Form S-8 on our reports dated August 13, 2021 relating to the consolidated financial statements of
Standex International Corporation and the effectiveness of Standex International Corporation’s internal control over financial
reporting, appearing in this Annual Report on Form 10-K of Standex International Corporation for the year ended June 30, 2021.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
August 13, 2021
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our report dated August 25, 2020, with respect to the consolidated financial statements included in the Annual
Report of Standex International Corporation on Form 10-K for the year ended June 30, 2021. We consent to the incorporation by
reference of said report in the Registration Statements of Standex International Corporation on Forms S-8 (File No. 333-147190,
File No. 333-179513, File No. 333-161647 and File No. 333-231598).
Exhibit 23.2
/s/ GRANT THORNTON LLP
Boston, Massachusetts
August 13, 2021
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, 2021, 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 10th day of August, 2021.
/s/ Charles H. Cannon, Jr.
_______________________________
Charles H. Cannon, Jr.
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, 2021, 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 10th day of August, 2021.
/s/ Thomas E. Chorman
_______________________________
Thomas E. Chorman
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, 2021, 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 10th day of August, 2021.
/s/ Jeffrey S. Edwards
_______________________________
Jeffrey S. Edwards
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, 2021, 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 10th day of August, 2021.
/s/ B. Joanne Edwards
_______________________________
B. Joanne Edwards
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, 2021, 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 10th day of August, 2021.
.
/s/ Thomas J. Hansen
_______________________________
Thomas J. Hansen
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, 2021, 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 10th day of August, 2021.
/s/ Michael A. Hickey
_______________________________
Michael A. Hickey
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, 2021;
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
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 13, 2021
/s/ David Dunbar
______________________________
David Dunbar
President/Chief Executive Officer
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, 2021;
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
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 13, 2021
/s/ Ademir Sarcevic
______________________________
Ademir Sarcevic
Vice President/Chief Financial Officer
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, 2021 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 13, 2021
Dated: August 13, 2021
/s/ David Dunbar
_______________________________
David Dunbar
President/Chief Executive Officer
/s/ Ademir Sarcevic
_______________________________
Ademir Sarcevic
Vice President/Chief Financial Officer