# Standex International Corp: Form 10-Q for the period ended Mar 31, 2024

- Company: [Standex International Corp](/companies/sxi.md) (CIK 310354)
- Form: 10-Q
- Filed: 2024-05-03
- Accepted by EDGAR: May 3, 2024, 13:31 ET
- Period: 2024-03-31
- Accession: 0001437749-24-014596
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/310354/000143774924014596/sxi20240331_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/310354/000143774924014596/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-01-01 to 2024-03-31 | $177.3m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Revenue | 9 months, 2023-07-01 to 2024-03-31 | $540.4m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Cost of revenue | 3 months, 2024-01-01 to 2024-03-31 | $109.0m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2023-07-01 to 2024-03-31 | $327.9m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-01-01 to 2024-03-31 | $68.3m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2023-07-01 to 2024-03-31 | $212.6m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-01-01 to 2024-03-31 | $41.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-07-01 to 2024-03-31 | $128.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | $21.8m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-07-01 to 2024-03-31 | $74.6m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $949.0k | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-07-01 to 2024-03-31 | $3.2m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | $4.3m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-07-01 to 2024-03-31 | $15.6m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | $15.8m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-07-01 to 2024-03-31 | $53.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | $1.33 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-07-01 to 2024-03-31 | $4.50 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | $1.34 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-07-01 to 2024-03-31 | $4.55 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 11,849,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-07-01 to 2024-03-31 | 11,876,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-07-01 to 2024-03-31 | $64.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-07-01 to 2024-03-31 | $13.8m | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 9 months, 2023-07-01 to 2024-03-31 | $10.4m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 9 months, 2023-07-01 to 2024-03-31 | $31.8m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-03-31 | $138.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-03-31 | $419.2m | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-31 | $993.5m | us-gaap:Assets |
| Current liabilities | at 2024-03-31 | $122.3m | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2024-03-31 | $148.8m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2024-03-31 | $619.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 48,120 characters.

*Statements contained in this Quarterly Report that are not based on historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of forward-looking terminology such as “should,” “could,” “may,” “will,” “expect,” “believe,” “estimate,” “anticipate,” “intend,” “continue,” or similar terms or variations of those terms or the negative of those terms. There are many factors that affect the Company’s business and the results of its operations and that may cause the actual results of operations in future periods to differ materially from those currently expected or anticipated. These factors include, but are not limited to: the impact of pandemics and other global crises or catastrophic events on employees, our supply chain, and the demand for our products and services around the world; materially adverse or unanticipated legal judgments, fines, penalties or settlements; conditions in the financial and banking markets, including fluctuations in exchange rates and the inability to repatriate foreign cash; domestic and international economic conditions, including the impact, length and degree of economic downturns on the customers and markets we serve and more specifically conditions in the automotive, construction, aerospace, defense, transportation, food service equipment, consumer appliance, energy, oil and gas and general industrial markets; lower-cost competition; the relative mix of products which impact margins and operating efficiencies in certain of our businesses; the impact of higher raw material and component costs, particularly steel, certain materials used in electronics parts, petroleum based products, and refrigeration components; the impact of higher transportation and logistics costs, especially with respect to transportation of goods from Asia; the impact of inflation on the costs of providing our products and services; 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; our ability to increase manufacturing production to meet demand including as a result of labor shortages; the impact on our operations of any successful cybersecurity attacks; and potential changes to future pension funding requirements. In addition, any forward-looking statements represent management's estimates only as of the day made and should not be relied upon as representing management's estimates as of any subsequent date. While the Company may elect to update forward-looking statements at some point in the future, the Company and management specifically disclaim any obligation to do so, even if management's estimates change. Factors that may affect our operating results are described in the Risk Factors section in the Annual Reports we file with the SEC. Please refer to our most recent discussion of risk factors included in the fiscal year 2023 10-K filed with the SEC on August 5, 2023.*

### 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. Headquartered in Salem, New Hampshire, we have six operating segments aggregated into five reportable segments: Electronics, Engraving, Scientific, Engineering Technologies, and Specialty Solutions. Two operating segments are aggregated into Specialty Solutions. Our businesses work in close partnership with our customers to deliver custom solutions or engineered components that solve their unique and specific needs, an approach we call "Customer Intimacy".

Our long-term business strategy is to create, improve, and enhance shareholder value by building more profitable, focused industrial platforms through our Standex Value Creation System. This methodology employs four components: Balanced Performance Plan, Growth Disciplines, Operational Excellence, and Talent Management and provides both a company-wide framework and tools used to achieve our goals. We intend to continue investing organically and inorganically in high margin and growth businesses using this balanced and proven approach.

It is our objective to grow larger and more profitable business units through a commitment to both organic and inorganic initiatives. We have a particular focus on identifying and investing in businesses, new products and new applications that complement our existing products and will increase our overall scale, global presence and capabilities. We continue to execute on acquisitions where strategically aligned with our businesses and where the opportunity meets our investment metrics. We have divested, and likely will continue to divest, businesses that we feel are not strategic or do not meet our growth and return expectations.

As part of our ongoing strategy:

- On February 19, 2024, we acquired, through our subsidiary Standex Electronics Japan Corporation, privately-held, Japanese-based Sanyu Switch Co., Ltd (Sanyu). Sanyu designs and manufactures reed relays, test sockets, testing systems for semiconductor and other electronics manufacturing, and other switching applications. Its results are reported in the Electronics segment.
- On July 31, 2023, we acquired Minntronix, a privately held company. Minntronix designs and manufactures customized as well as standard magnetics components and products including transformers, inductors, current sensors, coils, chokes, and filters. The products are used in applications across cable fiber, smart meters, industrial control and lighting, electric vehicles, and home security markets. Its results are reported in the Electronics segment.
- In the third quarter of fiscal year 2023, we divested our Procon business for $75 million. This transaction reflects the continued simplification of our portfolio and enables greater focus on managing our larger platforms and pursuing growth opportunities. Proceeds were deployed towards organic and inorganic initiatives and returning capital to shareholders. Its results were reported within our Specialty Solutions segment.

As a result of our portfolio moves over the past several years, we have transformed Standex to a company with a more focused group of businesses selling customized solutions to high value end markets via a compelling customer value proposition. The narrowing of the portfolio allows for greater management focus on driving operational disciplines and positions us well to use our cash flow from operations to invest selectively in our ongoing pipeline of organic and inorganic opportunities.

The Company’s strong historical cash flow has been a cornerstone for funding our capital allocation strategy. We use cash flow generated from operations to fund investments in capital assets to upgrade our facilities, improve productivity and lower costs, invest in the strategic growth programs described above, including organic growth and acquisitions, and to return cash to our shareholders through payment of dividends and stock buybacks.

Restructuring expenses reflect costs associated with our efforts of continuously improving operational efficiency and expanding globally in order to remain competitive in our end user markets. We incur costs for actions to size our businesses to a level appropriate for current economic conditions, improve our cost structure, enhance our competitive position and increase operating margins. Such expenses include costs for moving facilities to locations that allow for lower fixed and variable costs, external consultants who provide additional expertise starting up plants after relocation, downsizing operations because of changing economic conditions, and other costs resulting from asset redeployment decisions. Shutdown costs include severance, benefits, stay bonuses, lease and contract terminations, asset write-downs, costs of moving fixed assets, and moving and relocation costs. Vacant facility costs include maintenance, utilities, property taxes and other costs.

Because of the diversity of the Company’s businesses, end user markets and geographic locations, management does not use specific external indices to predict the future performance of the Company, other than general information about broad macroeconomic trends. Each of our individual business units serves niche markets and attempts to identify trends other than general business and economic conditions which are specific to its business and which could impact its 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, we calculate 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 such 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.

### Results from Continuing Operations

*(In thousands, except percentages)*

|  | Three Months Ended March 31, 2024 | 2023 | Nine Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $177,267 | $184,332 | $540,441 | $552,721 |
| Gross profit margin | 38.5% | 38.5% | 39.3% | 38.3% |
| Income from operations | 21,842 | 88,517 | 74,591 | 142,613 |

*(In thousands)*

|  | Three Months Ended March 31, 2024 | Nine Months Ended March 31, 2024 |
| --- | ---: | ---: |
| Net sales, prior year period | $184,332 | $552,721 |
| Components of change in sales: |  |  |
| Organic sales change | (10,528) | (20,070) |
| Effect of acquisitions | 10,563 | 28,751 |
| Effect of business divestitures | (5,511) | (21,259) |
| Effect of exchange rates | (1,589) | 298 |
| Net sales, current period | $177,267 | $540,441 |

Net sales decreased in the third quarter of fiscal year 2024 by $7.1 million or 3.8%, when compared to the prior year quarter. Organic sales decreased $10.5 million, or 5.7%, due to transitory headwinds in several of our end markets, primarily from lower demand in our Electronics and Scientific segments, partially offset by project timing in our Engineering Technologies group and growth in the Hydraulics business. Organic sales included $25.5 million in the period attributed to fast growth markets. Foreign currency negatively impacted sales by $1.6 million, or 0.8%. The acquisitions of Minntronix and Sanyu positively impacted sales by $10.6 million, or 5.7%, partially offset by the impact on sales associated with the divestiture of Procon of $5.5 million, or 3.0%.

Net sales decreased in the nine months ended March 31, 2024 by $12.3 million or 2.2%, when compared to the prior year period. Organic sales decreased $20.1 million, or 3.6%, due to transitory headwinds in several of our end markets, primarily from lower demand in our Electronics, Specialty and Scientific segments and project timing in our Engineering Technologies group, partially offset by strong demand in the Engraving segment and pricing actions in the Engineering Technologies group. Organic sales included $66.4 million in the period attributed to fast growth markets. Foreign currency positively impacted sales by $0.3 million. The acquisitions of Minntronix and Sanyu positively impacted sales by $28.8 million, or 5.2%, offset by the impact on sales associated with the divestiture of Procon of $21.3 million, or 3.8%.

### Gross Profit Margin

Gross profit in the third quarter of fiscal year 2024 decreased to $68.3 million, or a gross margin of 38.5% as compared to $70.9 million, or a gross margin of 38.5%, in the third quarter of fiscal year 2023. Gross profit margin remained flat as productivity initiatives and contribution from the Minntronix acquisition were offset by the organic sales decreases and the impact of the divestiture of the Procon business.

Gross profit in the nine months ended March 31, 2024 increased to $212.6 million, or a gross margin of 39.3% as compared to $211.5 million, or a gross margin of 38.3%, in the prior year period. The gross profit margin increase was a result of pricing actions, productivity initiatives and contribution from the Minntronix acquisition, partially offset by the divestiture of the Procon business and organic sales decreases.

### Selling, General, and Administrative Expenses

Selling, General, and Administrative (“SG&A”) expenses for the third quarter of fiscal year 2024 were $41.8 million, or 23.6% of sales, compared to $43.0 million, or 23.3% of sales, during the prior year quarter. SG&A expenses during the quarter were primarily impacted by a reduction in selling and marketing expenses partially offset by a one-time stock-based compensation charge and increased research and development spending to drive future product initiatives.

Selling, General, and Administrative (“SG&A”) expenses for the nine months ended March 31, 2024 were $128.6 million, or 23.8% of sales, compared to $127.8 million, or 23.1% of sales, during the prior year period. SG&A expenses during the period were primarily impacted by a one-time stock-based compensation charge in the third quarter of the fiscal year 2024 and increased research and development spending and partially offset by a reduction in selling and marketing expenses.

### Restructuring Costs

We incurred restructuring expenses of $4.0 million and $7.3 million in the third quarter of fiscal year 2024 and the nine months ended March 31, 2024, respectively, primarily related to facility closures and global headcount reductions within our Engraving, Electronics and Engineering Technologies segments as well as the Corporate headquarters.

We expect to incur restructuring costs of approximately $0.4 million throughout the remainder of fiscal year 2024, as we continue to focus our efforts to reduce cost and improve productivity across our businesses.

### Acquisition Related Costs

We incurred acquisition related expenses of $0.5 million and $2.2 million in the third quarter of fiscal year 2024 and the nine months ended March 31, 2024, respectively. Acquisition related expenses typically consist of due diligence, integration, and valuation expenses incurred in connection with recent or pending acquisitions.

### Gain on Sale of Business

We recorded a pre-tax gain on sale of the Procon business of $62.1 million for fiscal year 2023. In the first quarter of fiscal year 2024, we recorded an additional $0.3 million gain on the sale related to closing cash adjustments. The sale transaction and financial results of Procon are classified as continuing operations in the Consolidated Financial Statements.

### Income from Operations

Income from operations for the third quarter of fiscal year 2024 was $21.8 million, compared to $88.5 million during the prior year quarter. The decrease of $66.7 million, or 75.3%, is primarily due to the gain on the divestiture of Procon in the third quarter of fiscal year 2023, organic sales decreases and increased investment in research and development spending, restructuring and acquisition related costs. The decreases are partially offset by cost reduction activities and productivity improvement initiatives.

Income from operations for the nine months ended March 31, 2024 was $74.6 million, compared to $142.6 million during the prior year period. The decrease of $68.0 million, or 47.7%, is primarily due to the gain on the divestiture of Procon in the third quarter of the fiscal year 2023, organic sales decreases and increased investment in research and development spending, restructuring and acquisition related costs. The decreases are partially offset by cost reduction activities and productivity improvement initiatives.

### Interest Expense

Interest expense for the third quarter of fiscal year 2024 was $0.9 million, a 32.9% decrease from interest expense of $1.4 million during the prior year quarter. Interest expense for the nine months ended March 31, 2024 was $3.2 million, a 22.2% decrease from interest expense of $4.2 million during the prior year period. Our effective interest rate for the nine months ended March 31, 2024 was 2.45%.

### Income Taxes

The Company's effective tax rate from continuing operations for the third quarter of fiscal year 2024 and for the nine months ended March 31, 2024 was 21.4% and 22.5%, respectively compared with 6.7% and 13.0% for the prior year quarter and prior year period, respectively. The tax rate was impacted in the current period by the following items: (i) a discrete tax expense related to a provision to return adjustments associated with federal research and development tax credits and the limitation on executive compensation, (ii) the jurisdictional mix of earnings and (iii) a discrete tax benefit related to foreign withholding taxes. The tax rate was impacted in the prior period by the following items: (i) a discrete tax benefit related to the partial release of a valuation allowance previously recorded against deferred tax assets and connected to capital loss carryforwards, resulting from the utilization of capital loss carryforward to offset capital gain from the sale of Procon (ii) a discrete tax expense related to provision to return adjustments as a result of a change in tax rate for the Company’s operations within China's tax jurisdiction, (iii) a discrete tax benefit related to provision to return adjustments associated with federal and state research and development tax credits, (iv) the jurisdictional mix of earnings and (v) foreign withholding taxes.

On July 31, 2023, we completed our acquisition of Minntronix, Inc. (“Minntronix”). We accounted for the Minntronix purchase under the acquisition method in accordance with ASC Topic 805, Business Combinations. Accordingly, the preliminary purchase price was allocated to the fair value of the assets acquired, including identifiable intangible assets, and the liabilities assumed as of the closing date. Goodwill resulting from the difference between the fair value of the assets acquired and the fair value of the liabilities assumed is not amortizable for book or tax purposes. Although the acquisition was nontaxable, the transaction gave rise to certain temporary differences for which deferred taxes have been recognized. The results of operations for the Minntronix acquisition have been included in our consolidated financial results beginning on the closing date.

On February 19, 2024, we completed our acquisition of Sanyu Switch Co., Ltd. (“Sanyu”). We accounted for the Sanyu purchase under the acquisition method in accordance with ASC Topic 805, Business Combinations. Accordingly, the preliminary purchase price was allocated to the fair value of the assets acquired, including identifiable intangible assets, and the liabilities assumed as of the closing date. Goodwill resulting from the difference between the fair value of the assets acquired and the fair value of the liabilities assumed is not amortizable for book or tax purposes. Although the acquisition was nontaxable, the transaction gave rise to certain temporary differences for which deferred taxes have been recognized. The results of operations for the Sanyu acquisition have been included in our consolidated financial results beginning on the closing date.

### 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.

|  | As of March 31, 2024 Total Backlog | Backlog under 1 year | As of March 31, 2023 Total Backlog | Backlog under 1 year |
| --- | ---: | ---: | ---: | ---: |
| Electronics | $116,150 | $106,603 | $156,806 | $144,741 |
| Engraving | 25,389 | 23,102 | 39,185 | 33,069 |
| Scientific | 2,809 | 2,809 | 3,078 | 3,078 |
| Engineering Technologies | 61,791 | 47,424 | 64,708 | 57,105 |
| Specialty Solutions | 19,236 | 19,236 | 26,958 | 26,541 |
| Total | $225,375 | $199,174 | $290,735 | $264,534 |

Total backlog realizable under one year decreased $65.4 million, or 24.7%, to $199.2 million at March 31, 2024, from $264.5 million at March 31, 2023.

Changes in backlog under one year are as follows (in thousands):

*(In thousands)*

|  | As of March 31, 2024 |
| --- | ---: |
| Backlog under 1 year, prior year period | $264,534 |
| Components of change in backlog: |  |
| Organic change | (74,600) |
| Effect of acquisitions | 16,623 |
| Effect of divestitures | (7,383) |
| Backlog under 1 year, current period | $199,174 |

31

### Segment Analysis

### Overall

Looking forward to the remainder of fiscal year 2024, we anticipate continued improvement in key financials metrics, supported by productivity initiatives.

In general, for the remainder of fiscal year 2024, we expect:

- improved demand in transportation markets from electric and hybrid vehicle programs with a ramp up of new business opportunities in Electronics and Engraving;
- vaccine and medication storage demand to remain stable;
- commercial aviation and defense end markets demand to increase based on current program expectations;
- space markets to remain attractive, with volume to slightly increase from fiscal year 2023 due to new product development for existing customers;
- refuse and dump end markets to improve;
- slightly lower demand levels in food service equipment markets;
- continued market softness in China and Europe, including inventory destocking, affecting general industrial and appliances end markets served by our Electronics Group.

### Electronics Group

*(In thousands, except percentages)*

|  | Three Months Ended March 31,% 2024 | 2023 | Change | Nine Months Ended March 31,% 2024 | 2023 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $80,431 | $78,211 | 2.8% | $241,538 | $225,966 | 6.9% |
| Income from operations | 15,700 | 17,047 | (7.9%) | 47,884 | 52,160 | (8.2%) |
| Operating income margin | 19.5% | 21.8% |  | 19.8% | 23.1% |  |

Net sales in the third quarter of fiscal year 2024 increased $2.2 million, or 2.8%, when compared to the prior year quarter. The acquisition of Minntronix in the first quarter of fiscal year 2024 added $8.6 million, or 11.0%, in sales for the third quarter of fiscal year 2024. The acquisition of Sanyu in the third quarter of fiscal year 2024 added $2.0 million, or 2.5% in sales for the third quarter of fiscal year 2024. The organic sales decrease of $7.3 million, or 9.3%, and foreign currency impacts of $1.0 million, or 1.3% also negatively affected net sales compared to the prior year quarter. Organic sales were impacted by continued softness in China and Europe, primarily in the appliances and general industrial end markets.

Income from operations in the third quarter of fiscal year 2024 decreased by $1.3 million, or 7.9%, when compared to the prior year quarter. The operating income decrease was the result of lower organic sales and a change in product mix, partially offset by contribution from the recent acquisitions and productivity initiatives.

Net sales in the nine months ended March 31, 2024 increased $15.6 million, or 6.9%, when compared to the prior year period. The acquisitions of Minntronix and Sanyu in the fiscal year 2024 added $28.8 million, or 12.7%, in sales for the nine months ended March 31, 2024. The organic sales decrease of $12.8 million, or 5.7%, and foreign currency impacts of $0.4 million, or 0.2% also negatively affected net sales compared to the prior year period. Organic sales were impacted by continued softness in China and Europe, primarily in appliances and general industrial end markets.

Income from operations in the nine months ended March 31, 2024 decreased by $4.3 million, or 8.2%, when compared to the prior year period. The operating income decrease was the result of lower sales, a change in product mix and foreign currency impacts, partially offset by contributions from the recent acquisitions and productivity initiatives.

In the fourth quarter of fiscal year 2024, on a sequential basis, we expect similar revenue and slightly lower to similar adjusted operating margin due to unfavorable mix.

### Engraving Group

*(In thousands, except percentages)*

|  | Three Months Ended March 31,% 2024 | 2023 | Change | Nine Months Ended March 31,% 2024 | 2023 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $36,297 | $36,909 | (1.7%) | $117,936 | $109,622 | 7.6% |
| Income from operations | 6,260 | 5,353 | 16.9% | 22,765 | 17,580 | 29.5% |
| Operating income margin | 17.2% | 14.5% |  | 19.3% | 16.0% |  |

Net sales in the third quarter of fiscal year 2024 decreased by $0.6 million, or 1.7%, when compared to the prior year quarter. Organic sales decreased by less than $0.1 million, or 0.2%, due to fewer new platform rollouts in North America. Foreign currency negative impacts on net sales were $0.5 million, or 1.5%.

Income from operations in the third quarter of fiscal year 2024 increased by $0.9 million, or 16.9%, when compared to the prior year quarter. The operating income increase was driven by organic sales increases and previously announced productivity initiatives.

Net sales in the nine months ended March 31, 2024 increased by $8.3 million, or 7.6%, when compared to the prior year period. Organic sales increased by $7.9 million, or 7.2%, due to strong demand in Europe and growth in soft trim applications in Asia, partially offset by fewer platform rollouts in North America. Foreign currency positive impacts contributed $0.4 million, or 0.4%.

Income from operations in the nine months ended March 31, 2024 increased by $5.2 million, or 29.5%, when compared to the prior year period. The operating income increase was driven by organic sales increases and ongoing productivity initiatives.

In the fourth quarter of fiscal year 2024, on a sequential basis, we expect slightly lower revenue and slightly to moderately lower operating margin due to unfavorable project timing in North America and Europe.

### Scientific

*(In thousands, except percentages)*

|  | Three Months Ended March 31,% 2024 | 2023 | Change | Nine Months Ended March 31,% 2024 | 2023 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $16,925 | $18,898 | (10.4%) | $51,410 | $56,646 | (9.2%) |
| Income from operations | 4,896 | 4,561 | 7.3% | 14,074 | 12,449 | 13.1% |
| Operating income margin | 28.9% | 24.1% |  | 27.4% | 22.0% |  |

Net sales in the third quarter of fiscal year 2024 decreased by $2.0 million, or 10.4%, when compared to the prior year quarter, reflecting general market softness, notably affecting purchases by retail pharmacies.

Income from operations in the third quarter of fiscal year 2024 increased $0.3 million, or 7.3%, when compared to the prior year quarter. The increase is driven by lower freight costs and productivity initiatives offset by lower volume.

Net sales in the nine months ended March 31, 2024 decreased by $5.2 million, or 9.2%, when compared to the prior year period, reflecting general market softness including purchases by retail pharmacies.

Income from operations in the nine months ended March 31, 2024 increased $1.6 million, or 13.1%, when compared to the prior year period. The increase is primarily driven by productivity initiatives and lower freight costs, partially offset by lower volume.

In the fourth quarter of fiscal year 2024, on a sequential basis, we expect slightly higher revenue and similar operating margin.

### Engineering Technologies Group

*(In thousands, except percentages)*

|  | Three Months Ended March 31,% 2024 | 2023 | Change | Nine Months Ended March 31,% 2024 | 2023 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $20,098 | $18,052 | 11.3% | $58,205 | $59,244 | (1.8%) |
| Income from operations | 3,524 | 2,351 | 49.9% | 9,946 | 7,957 | 25.0% |
| Operating income margin | 17.5% | 13.0% |  | 17.1% | 13.4% |  |

Net sales in the third quarter of fiscal year 2024 increased by $2.0 million, or 11.3%, when compared to the prior year quarter. The organic sales increase of $2.0 million was driven by improvement in the aviation end markets, offset by lower defense sales caused by delays in government funding.

Income from operations in the third quarter of fiscal year 2024 increased by $1.2 million, or 49.9%, when compared to the prior year quarter reflecting higher volume in aviation and pricing and productivity initiatives, partially offset by investments in research and development.

Net sales in the nine months ended March 31, 2024 decreased by $1.0 million, or 1.8%, when compared to the prior year period. Organic sales decreased by $1.3 million, or 2.2%, partially offset by foreign currency impacts of $0.3 million, or 0.4%, as compared to the prior year period. The net sales decrease was due to project timing partially offset by pricing actions, an increase in new product development in the fast growth commercial space market, and higher sales to the aviation and oil and gas markets.

Income from operations in the nine months ended March 31, 2024 increased by $1.9 million, or 25.0%, when compared to the prior year period. The increase was due to the impact of pricing and productivity initiatives, partially offset by research and development and sales declines due to project timing.

In the fourth quarter of fiscal year 2024, on a sequential basis, we expect moderately to significantly higher revenue and moderately higher operating margin due to favorable project timing.

### Specialty Solutions Group

*(In thousands, except percentages)*

|  | Three Months Ended March 31,% 2024 | 2023 | Change | Nine Months Ended March 31,% 2024 | 2023 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $23,516 | $32,262 | (27.1%) | $71,352 | $101,243 | (29.5%) |
| Income from operations | 4,668 | 7,151 | (34.7%) | 14,250 | 18,944 | (24.8%) |
| Operating income margin | 19.9% | 22.2% |  | 20.0% | 18.7% |  |

Net sales in the third quarter of fiscal year 2024 decreased by $8.7 million, or 27.1%, when compared to the prior year quarter. Organic sales for the group decreased $3.2 million, or 10.0%, as compared to the prior year quarter, reflecting a sales normalization in the Display Merchandising business partially offset by an increase in the Hydraulics business. The divestiture of Procon in the third quarter of fiscal year 2023 negatively impacted the group by $5.5 million, or 17.1%.

Income from operations in the third quarter of fiscal year 2024 decreased $2.5 million or 34.7%, when compared to the prior year quarter, due to the Procon divestiture and lower volume in the Display Merchandising business, partially offset by higher volume in the Hydraulics business.

Net sales in the nine months ended March 31, 2024 decreased by $29.9 million, or 29.5%, when compared to the prior year period. Organic sales for the group decreased $8.6 million, or 8.5%, as compared to the prior year period, reflecting organic growth decreases in the Display Merchandising business and the Hydraulics business, due to an ongoing industry-wide chassis shortage. The divestiture of Procon in the third quarter of fiscal year 2023 negatively impacted the group by $21.3 million, or 21.0%.

Income from operations in the nine months ended March 31, 2024 decreased $4.7 million or 24.8%, when compared to the prior year period. The decrease is due to the Procon divestiture and lower volume in the Display Merchandising and Hydraulics business, partially offset by improved operating performance in the Display Merchandising business.

In the fourth quarter of fiscal year 2024, on a sequential basis, we expect moderately higher revenue and operating margin due to improved end market demand and leverage on higher sales.

### Corporate and Other

*(In thousands, except percentages)*

| Income (loss) from operations: | Three Months Ended March 31,% 2024 | 2023 | Change | Nine Months Ended March 31,% 2024 | 2023 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Corporate | $(8,522) | $(8,520) | 0.0% | $(24,956) | $(25,376) | (1.7%) |
| Restructuring | (4,037) | (2,237) | 80.5% | (7,303) | (3,330) | 119.3% |
| Acquisition related costs | (537) | (21) | 2457.1% | (2,233) | (487) | 358.5% |
| Gain on sale of business | - | 62,105 | (100.0%) | 274 | 62,105 | (99.6%) |
| Other operating income (expense), net | (110) | 727 | (115.1%) | (110) | 611 | (118.0%) |

Corporate expenses in the third quarter of fiscal year 2024 remained flat when compared to the prior year quarter. Corporate expenses in the nine months ended March 31, 2024 decreased by 1.7% when compared to the prior year period. Corporate expenses in fiscal year 2024 reflect the impact of a charge due to the CEO reaching retirement eligibility under the stock compensation plan largely offset by reductions in professional service fees and incentive compensation. We recorded a charge of $0.1 million in other operating income (expense), net for settlement of an environmental remediation claim in the third quarter of fiscal year 2024. In fiscal year 2023, we received a refund from our insurance provider as a recoupment related to a previously recorded litigation matter and incurred a $0.3 million charge related to environmental remediation.

The restructuring, gain on sale of business and acquisition related costs have been discussed above in the Company Overview.

### Discontinued Operations

In pursuing 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. Net loss from discontinued operations was $0.1 million and $0.4 million for the three and nine months ended March 31, 2024, respectively. Net loss from discontinued operations was less than $0.1 million and $0.1 million for the three and nine months ended March 31, 2023, respectively.

### Liquidity and Capital Resources

At March 31, 2024, our total cash balance was $138.8 million, of which $110.5 million was held by foreign subsidiaries. The amount and timing of cash repatriation is dependent upon foreign exchange rates and each business unit’s operational needs including requirements to fund working capital, capital expenditure, and jurisdictional tax payments. The repatriation of cash balances from certain of our subsidiaries could have adverse tax consequences or be subject to capital controls; however, those balances are generally available without legal restrictions to fund ordinary business operations.

Net cash provided by continuing operating activities for the nine months ended March 31, 2024, was $64.6 million compared to net cash provided by continuing operating activities of $50.4 million in the prior year. We generated $84.2 million from income statement activities and used $11.1 million of cash to fund working capital and other balance sheet increases. Cash flow used in investing activities for the nine months ended March 31, 2024 totaled $54.0 million and primarily consisted of $29.2 million for the acquisition of Minntronix in the first quarter of fiscal year 2024, $18.5 million for the acquisition of Sanyu in the third quarter of fiscal year 2024, and $13.8 million used for capital expenditures offset by $7.8 million proceeds from the prior divestiture of the Procon business. Cash used for financing activities for the nine months ended March 31, 2024 totaled $65.8 million and consisted primarily purchases of stock of $31.8 million, repayments of debt of $25.0 million and cash paid for dividends of $10.4 million.

During the third quarter of fiscal year 2023, the Company entered into a Third Amended & Restated Credit Agreement which renewed the existing Credit Agreement for an additional five-year period (“credit agreement”, or “facility”) with a borrowing limit of $500 million. The facility can be increased by an amount of up to $250 million, in accordance with specified conditions contained in the agreement. The facility also includes a $10 million sublimit for swing line loans and a $35 million sublimit for letters of credit.

Under the terms of the Credit Facility, we 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 March 31, 2024, the Company used $2.7 million against the letter of credit sub-facility and had the ability to borrow $347.3 million under the facility based on our current trailing twelve-month EBITDA. The facility contains customary representations, warranties and restrictive covenants, as well as specific financial covenants. The Company’s current financial covenants under the facility are as follows:

*Interest Coverage Ratio* The Company is required to maintain a ratio of Earnings Before Interest and Taxes, as Adjusted (“Adjusted EBIT per the Credit Facility”), to interest expense for the trailing twelve months of at least 2.75:1. Adjusted EBIT per the Credit Facility specifically excludes extraordinary and certain other defined items such as cash restructuring and acquisition related charges up to the lower of $20.0 million or 10% of EBITDA. The facility also allows for unlimited non-cash purchase accounting and goodwill adjustments. At March 31, 2024, the Company’s Interest Coverage Ratio was 26.12:1.

*Leverage Ratio* The Company’s ratio of funded debt to trailing twelve month Adjusted EBITDA per the Credit Facility, calculated as Adjusted EBIT per the Credit Facility plus depreciation and amortization, may not exceed 3.5:1. Under certain circumstances in connection with a Material Acquisition (as defined in the Facility), the Facility allows for the leverage ratio to go as high as 4.0:1 for a four-fiscal quarter period. At March 31, 2024, the Company’s leverage ratio was 0.63:1.

As of March 31, 2024, we had borrowings under our facility of $150.0 million. In order to manage our interest rate exposure on these borrowings, we are party to $150.0 million of active floating to fixed rate swaps. These swaps convert our interest payments from SOFR to a weighted average fixed rate of 0.85%. The effective rate of interest for our outstanding borrowings, including the impact of the interest rate swaps, was 2.45%.

Our primary cash requirements in addition to day-to-day operating needs include interest payments, capital expenditures, acquisitions, share repurchases, and dividends. Our primary sources of cash for these requirements are cash flows from continuing operations and borrowings under the facility. We expect fiscal year 2024 capital spending to be between $28.0 million and $32.0 million. We expect that fiscal year 2024 depreciation and amortization expense will be between $20.0 million and $22.0 million and $8.0 million and $9.0 million, respectively.

The following table sets forth our capitalization:

*(In thousands)*

|  | March 31, 2024 | June 30, 2023 |
| --- | ---: | ---: |
| Long-term debt | $148,768 | $173,441 |
| Less cash and cash equivalents | (138,799) | (195,706) |
| Net (cash) debt | 9,969 | (22,265) |
| Stockholders' equity | 618,982 | 607,449 |
| Total capitalization | $628,951 | $585,184 |

We sponsor a number of defined benefit and defined contribution retirement plans. The U.S. pension plan is frozen for substantially 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. Obligations under the unfunded benefit plan operated by the Sanyu business in Japan have been transferred to us as of the date of acquisition in the third quarter of fiscal year 2024.

The fair value of the Company's U.S. defined benefit pension plan assets was $147.4 million at March 31, 2024, as compared to $142.1 million at the most recent measurement date, which occurred as of June 30, 2023. The next measurement date to determine plan assets and benefit obligations will be on June 30, 2024.

The Company expects to pay $1.7 million in contributions to its defined benefit plans during the remainder of fiscal year 2024. Contributions of $7.0 million and less than $0.1 million were made during the nine months ended March 31, 2024 and 2023, respectively. There are required contributions of $9.8 million to the United States funded pension plan for fiscal year 2024. In the third quarter of fiscal year 2024, we contributed $6.9 million and the remaining $1.4 million will be contributed in the fourth quarter of fiscal year 2024. The Company expects to make contributions during the remainder of fiscal year 2024 of less than $0.1 million and $0.3 million to its unfunded defined benefit plans in the U.S. and Germany, respectively. There are no required contributions to the plans in Japan. Any subsequent plan contributions will depend on the results of future actuarial valuations.

We have an insurance program in place to fund supplemental retirement income benefits for three retired executives. Current executives and new hires are not eligible for this program. At March 31, 2024, the underlying policies had a cash surrender value of $11.7 million and are reported net of loans of $5.0 million for which we have the legal right of offset, these amounts are reported net on our balance sheet.

### 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. 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 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).

*Defined Benefit Pension Plans –* We record expenses related to these plans based upon various actuarial assumptions such as discount rates, mortality rates, and assumed rates of returns. The Company’s pension plan is frozen for substantially all eligible U.S. employees and participants in the plan ceased accruing future benefits.

*Environmental Matters –* To the best of our knowledge, we believe that we are presently in substantial compliance with all existing applicable environmental laws and regulations and do not anticipate any instances of non-compliance that will have a material effect on our future capital expenditures, earnings or competitive position.

*Seasonality –* We are a diversified business with generally low levels of seasonality.

*Employee Relations –* The Company has labor agreements with several union locals in the United States and several European employees belong to European trade unions.

### Critical Accounting Policies

The condensed consolidated financial statements include the accounts of Standex International Corporation and all of its 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 condensed consolidated financial statements. Although we believe that materially different amounts would not be reported due to the accounting policies adopted, the application of certain 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. Our Annual Report on Form 10-K for the year ended June 30, 2023 lists a number of accounting policies which we believe to be the most critical.

## Market risk

As filed, 4,815 characters.

### 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 Rate Risk

We are exposed to both transactional risk and translation risk associated with exchange rates. The transactional risk is mitigated, in large part, by natural hedges developed with locally denominated debt service on intercompany accounts. We also mitigate certain of our foreign currency exchange rate risks by entering into forward foreign currency contracts from time to time. The contracts are used as a hedge against anticipated foreign cash flows, such as loan payments, customer remittances, and materials purchases, and are not used for trading or speculative purposes. The fair values of the forward foreign currency exchange contracts are sensitive to changes in foreign currency exchange rates, as an adverse change in foreign currency exchange rates from market rates would decrease the fair value of the contracts. However, any such losses or gains would generally be offset by corresponding gains and losses, respectively, on the related hedged asset or liability. At March 31, 2024 the fair value, in the aggregate, of the Company’s open foreign exchange contracts was a liability of less than $0.1 million.

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 March 31, 2024, would not result in a material change in our operations, financial position, or cash flows. We hedge our most significant foreign currency translation risks primarily through cross currency swaps and other instruments, as appropriate.

### Interest Rate Risk

The Company’s effective interest rate on borrowings was 2.45% at March 31, 2024. 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 March 31, 2024, we have $150.0 million of active floating to fixed rate swaps with terms through fiscal year 2025. These swaps convert our interest payments from SOFR to a weighted average rate of 0.85%. At March 31, 2024, the fair value, in the aggregate, of the Company’s interest rate swaps was assets of $6.0 million. A 25-basis point increase in interest rates would not materially change our annual interest expense as most of our outstanding debt is currently converted to fixed rate debts by means of interest rate swaps.

### 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 March 31, 2024, 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. 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.

## Controls and procedures

As filed, 1,312 characters.

At the end of the period covered by this Report, the management of the Company, including the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2024 in ensuring that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's ("SEC") rules and forms, and 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 was no change in the Company's internal control over financial reporting during the quarterly period ended March 31, 2024 that has materially affected or is reasonably likely to materially affect the Company's internal control over financial reporting.

Filed May 3, 2024.
Source: SEC EDGAR, the filing index for accession 0001437749-24-014596. Last ingested by Listed: Nov 4, 2026, 11:15 ET. No prices; not investment advice.