What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2021-08-13 compared with 2020-08-25 · 220 added, 297 removed, 340 unchanged (60% of the section changed)

1 unchanged sentence

Related Stockholder Matters and Issuer Purchases of Equity Securities

The principal market in which the Common Stock of Standex is traded is the New York Stock Exchange under the ticker symbol “SXI”.

The high and low sales prices for the Common Stock on the New York Stock Exchange and the dividends paid per Common Share for each quarter in the last two fiscal years are as follows:

Common Stock Price Range

Dividends Per Share

Year Ended June 30

First quarter

Second quarter

Third quarter

Fourth quarter

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, 

18 unchanged sentences

Selected Consolidated Financial Data

Selected financial data for the five years ended June 30, is as follows:

See Item 7 for discussions on comparability of the below.

SUMMARY OF OPERATIONS (in thousands)

Engineering Technologies

Specialty Solutions

Operating income (loss)

Engineering Technologies

Specialty Solutions

Restructuring (1)

Acquisition related expenses

Other operating income (expense), net

Corporate and Other

Interest expense

Other non-operating (loss) income

Provision for income taxes

Income from continuing operations

Income/(loss) from discontinued operations

(1) See discussion of restructuring activities in Note 15 of the consolidated financial statements.

PER SHARE DATA

Income from continuing operations

Income/(loss) from discontinued operations

Income from continuing operations

Income/(loss) from discontinued operations

Dividends declared

BALANCE SHEET (in thousands)

Accounts receivable

Accounts payable

Long-term debt

Net debt (cash)

Stockholders' equity

KEY STATISTICS

Gross profit margin

Operating income margin

Not Applicable

Item 7. 

Management's Discussion and Analysis of Financial Condition and Results of Operations

We are a diversified industrial manufacturer with leading positions in a variety of products and services that are used in diverse commercial and industrial markets. As of the end of the fiscal third quarter 2020, we had nine operating segments aggregated into five reportable segments. 

During the third quarter of 2020, we announced the divestiture of our Refrigerated Solutions Group (an accumulation of our Master-Bilt and NorLake operating segments) consistent with our strategy to focus our financial assets and managerial resources on our higher growth and operating margin businesses.

The divestiture of the Refrigerated Solutions Group was completed and consideration was exchanged in April of fiscal year 2020.

Subsequent to the disposition of the Refrigeration Solutions Group, we reviewed the quantitative and qualitative characteristics of our remaining businesses and determined that we now have seven operating segments that aggregate to five reportable segments.

All periods presented have been revised accordingly to reflect the new reportable segments.

Our new reportable segment structure is as follows:

Electronics operating segment

Engraving operating segment

Scientific operating segment

Engineering Technologies Group operating segment

Specialty Solutions –

an aggregation of our Federal, Procon, and Hydraulics operating segments. 

Our segments differentiate themselves  by collaborating with our customers in order to develop and deliver custom solutions or engineered components that solve problems for our customers or otherwise meet their needs (a business model we refer to as “Customer Intimacy”). 

Overall management, strategic development and financial control are led by the executive staff at our corporate headquarters located in Salem, New Hampshire.

Our long-term strategy is to enhance shareholder value by building larger, more profitable “Customer Intimacy”

focused industrial platforms through a value creation system that assists management in meeting specific corporate and business unit financial and strategic performance goals in order to create, improve, and enhance shareholder value.

In so doing, we expect to focus our financial assets and managerial resources on our higher growth and operating margin businesses while considering divestiture of those businesses that we feel are not strategic or do not meet our growth and return expectations. 

The Standex Value Creation System is a methodology which provides standard work and consistent tools used throughout the company in order to achieve our organization’s goals.

The Standex Value Creation System employs four components:

Balanced Performance Plan, Growth Disciplines, Operational Excellence, and Talent Management.

The Balanced Performance Plan process aligns annual goals throughout the company and provides a standard reporting, management and review process. 

It is focused on setting, tracking and reviewing annual and quarterly targets that support our short and long-term goals. 

The Growth Disciplines use a standard work playbook of tools and processes including market maps, market tests and growth laneways to identify explore and execute on opportunities that expand the business organically and through acquisitions. 

Operational Excellence also employs a standard work playbook of tools and processes, based on LEAN, to improve operating execution (effectiveness), eliminate waste (efficiency) and thereby improve profitability, cash flow and customer satisfaction. 

Finally, Talent Management is an organizational development process that provides training, development, and succession planning for employees throughout our worldwide organization. 

The Standex Value Creation System ties all disciplines together under a common umbrella by providing standard playbook of tools and processes to deliver our business objectives.

Through the use of our Standex Value Creation System, we have developed a balanced approach to value creation. 

While we intend to continue investing acquisition capital in high margin and growth segments such as Electronics and Engraving, we will continue to support all of our businesses as they enhance value through deployment of our GDP+ and OpEx playbooks. 

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. 

6 unchanged sentences

As part of our ongoing strategy:

Subsequent to the end of the fiscal year, during July of 2020, we acquired Renco Electronics, a designer and manufacturer of customized standard magnetics components and products including transformers, inductors, chokes and coils for power and RF applications. 

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.  

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 will be reported within our Electronics segment beginning in fiscal year 2021.

Renco’s results are reported within our Electronics segment beginning in fiscal year 2021.

During the third quarter of fiscal year 2020, we initiated a program and signed an agreement to divest our Master-Bilt and NorLake businesses (together our Refrigerated Solutions Group or RSG). 

This divestiture allows us to continue the simplification of our portfolio and enables us to focus more clearly on those of our businesses that sell differentiated products and which have higher growth and margin profiles. 

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. 

6 unchanged sentences

Asset Impairment Charge

Operating Income/(Loss) after impairment charge

During the first quarter of 2019, the Company decided to divest its Cooking Solutions Group, which consisted of three operating segments, Associated American Industries, BKI, and Ultrafryer, along with a minority interest investment. 

Operating Income/(Loss) without impairment charge

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. 

1 unchanged sentence

Results of the Cooking Solutions Group in current and prior periods have been classified as discontinued operations in the Consolidated Financial Statements. 

In April 2019, we acquired Ohio-based Genius Solutions Engineering Company (d/b/a GS Engineering), a provider of specialized “soft surface”

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 brings us critical proprietary technologies that offer significant advantages in creating tools for “soft surface”

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 current industry-leading capabilities in texturing molds and tools used to create “hard surface”

This technology also complements and enables us to improve our existing nickel shell technology that produces soft surface tooling.

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”

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. 

In September 2018, we acquired New Hampshire-based Regional Mfg.

In September 2018, fiscal year 2019, we acquired New Hampshire-based Regional Mfg.

Specialists, Inc.

(now named Agile Magnetics, Inc.), a provider of high-reliability magnetics. 

(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.

3 unchanged sentences

Agile operates one manufacturing facility in New Hampshire and its results are reported within our Electronics segment. 

In August 2018, we acquired Michigan-based Tenibac-Graphion, Inc., a provider of chemical and laser texturing services. 

The combination of Tenibac and Standex Engraving expands services available to customers, increases responsiveness to customer demands, and drives innovative approaches to solving customer needs. 

The combined customer base now has access to the full line of mold and tool services, such as the Architexture design consultancy, chemical and laser engraving, tool finishing, and tool enhancements. 

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. 

We acquired Italy-based Piazza Rosa Group (“Piazza Rosa”) in July 2017. 

The privately held company is a leading provider of mold, tool treatment and finishing services for the automotive and consumer products markets. 

The combination of these competencies with Standex Engraving's worldwide presence and texturizing capabilities creates a global tool finishing service leader and provides additional opportunities in the broader surface engineering market.

The Piazza Rosa Group’s results are reported within our Engraving segment. 

As a result of these portfolio moves, we have transformed Standex to a company with end market exposure that is no longer dependent on sales of standard products to the food service industry and into a more focused group of businesses selling customized solutions to high value end markets via a compelling customer value proposition. 

The narrowing of the portfolio allows for greater management focus on driving operational disciplines and positions us well to withstand the COVID-19 crisis and invest selectively in our ongoing pipeline of organic and inorganic opportunities.

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 or engineered components. 

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. 

6 unchanged sentences

The Company’s strong historical cash flow has been a cornerstone for funding our capital allocation strategy. 

We use cash flow generated from operations to fund the strategic growth programs described above, including acquisitions and investments for organic growth, investments in capital assets to upgrade our facilities, improve productivity and lower costs, and to return cash to our shareholders through payment of dividends and stock buybacks. 

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 the Company’s efforts of continuously improving operational efficiency and expanding globally in order to remain competitive in our end-user markets. 

16 unchanged sentences

Impact of COVID-19 Pandemic on the Company

Given the global nature of our business and the number of our facilities in China, we were impacted by COVID-19 related issues beginning in February of our third quarter. 

We took immediate, and effective action to protect our health and safety, continue to serve our customers, support our communities and manage our cash flows.  Our priority was and remains the health and safety of all of our employees. 

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 continue operations. 

We were deemed an essential business in most plants and had limited shutdowns in our facilities. Shutdowns that have occurred have been primarily centered around our sites in China, India, Italy, and Mexico. 

Despite most businesses remaining operational, we have experienced revenue losses due to the impact that the pandemic has had on our customers.

Given the impact that the pandemic created on our backlog and incoming order rate, we took actions to identify and implement cost savings and restructuring actions with each of our operating units as well as our corporate headquarters. 

Actions identified include reducing outside discretionary spend, the natural elimination of travel and trade show expenses that were a result of COVID-19 related curtailments, implementation of rolling furloughs in several businesses where appropriate, and the elimination of certain salaried and hourly positions.

The costs, including restructuring charges, for many of these items occurred in our fourth quarter of fiscal year 2020. 

As we look forward into fiscal year 2021 and beyond, the impact of the pandemic on our businesses remains uncertain, however, we have identified further cost reduction actions and stand ready to implement these plans as circumstances in individual businesses or countries require. 

We exited the fourth quarter with $118.8 million in cash and $200.0 million of borrowings under our revolving credit facility. 

Our leverage ratio covenant, as defined in our revolving credit agreement, was 1.47 to 1 and allowed us the capacity to borrow an additional $203.6 million at June 30, 2020. 

As interest rates declined during the third quarter, we took the opportunity to revisit our fixed to floating debt ratio and entered into $125 million of new interest rate swaps to lock in additional fixed rate debt financing. 

We also extended an expiring $25 million swap for another five years.

The cumulative impact of these items is a reduction in our effective interest rate by approximately 50 basis points or $1 million per year going forward. 

Finally, we are reviewing our ability to participate in any governmental assistance programs available to us in each of our global locations, and we will participate in these programs as available and appropriate. 

For instance, we have elected to take advantage of provisions in the United States Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which allows for deferral until December 31, 2020 of defined benefit pension plan contributions due during calendar year 2020.

Prior to passage of the CARES Act, we were required to make payments of $1.5 million in the fourth quarter of fiscal year 2020 and an additional $3.2 million in the first two quarters of fiscal year 2021, which we will now defer until December of fiscal year 2021. We believe that the we have sufficient liquidity around the world and access to financing to execute on our short and long-term strategic plans. 

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. 

Consolidated Results from Continuing Operations (in thousands):

2 unchanged sentences

Acquisition related expenses

Loss on sale of business

Income from operations

3 unchanged sentences

Effect of exchange rates

Effect of business divestitures

Organic sales change

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 recent acquisitions accounted for $11.6 million or 1.8% of the increase, while organic sales accounted for a decrease of $40.9 million or 6.4%. 

Changes in foreign exchange rates contributed to sales declines of $6.1 million or 1.0%.

The organic sales decreases occurred in all of our segments and was primarily a result of both direct and indirect impacts of the pandemic driven economic slowdown.

Net sales for the fiscal year 2019 increased by $44.4 million, or 7.5%, when compared to the prior year. 

Incremental sales from our recent acquisitions accounted for $29.1 million or 4.9% of the increase, while organic sales gains accounted for $27.3 million or 4.6%. 

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 increases occurred in all of our segments except the Specialty Solutions Group. 

Gross Profit Margin

Gross margin in fiscal year 2020 declined to 35.6% as compared to 36.7% in 2019 primarily due to the pandemic related organic sales decline during the second half of the year.

Gross Margins are anticipated to improve in the coming fiscal year as cost reduction activities identified in the second half of fiscal year 2020 have now been implemented. 

Gross margin in fiscal year 2019 declined to 36.7% as compared to 38.0% in 2018 as a result of incremental purchase accounting, material and wage inflation, manufacturing inefficiencies, country specific site performance and an asset impairment charge all recorded in 2019.

Restructuring Charges and Acquisition Related Expenses

During fiscal year 2020, we incurred restructuring expenses of $4.7 million primarily related to restructuring efforts that are intended to improve profitability, streamline production and reduce our cost base to a level commensurate with a post-pandemic operating environment.

These efforts include approximately $1.1 million related to the announced closure of a Specialty Solutions pump rotor production facility in Ireland.

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.

Acquisition related expenses in fiscal year 2020 were $1.8 million.

These expenses were comprised primarily of $1.2 million for deferred compensation payments earned by the Horizon Scientific seller during the year.

Because these payments are contingent on the seller remaining an employee of the Company, they are treated as compensation expense.

We made the third and final scheduled payment to the seller during the first quarter of fiscal year 2020 and this arrangement has now been settled. 

Other acquisition related expenses consist of due diligence, integration, and valuation expenses incurred in connection with both completed and terminated acquisitions during the year. 

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 2020 were $148.5 million, or 24.6% of sales compared to $150.3 million, or 23.5% of sales during the prior year.

SG&A expenses were impacted by on-going expenses related to our recent acquisitions of $1.7 million offset by a decrease in variable distribution and selling expenses primarily as a result of organic sales declines. 

Selling, general, and administrative expenses, (“SG&A”) for the fiscal year 2019 were $150.3 million, or 23.5% of sales compared to $140.7 million, or 23.6% of sales during the prior year.

SG&A expenses were impacted by on-going expenses related to our fiscal year 2019 acquisitions of $7.4 million and an increase in distribution and selling expenses due to sales mix.

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.

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 $19.0 million decrease, or 23.8%, is primarily due to the impact of volume related losses triggered by the COVID-19 pandemic along with material inflation, partially offset by cost reduction activities and productivity improvement initiatives implemented in all of our businesses. 

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 $1.4 million increase, or 1.7%, is primarily due to organic sales increases, business mix and lower restructuring costs, which more than offset by material and wage inflation pressures.

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.

Our effective interest rate of 2.59% was 129 basis points or 33% lower than the 2019 effective interest rate of 3.88%.

Interest expense for the fiscal year 2019 was $10.8 million, an increase of $2.8 million as compared to the prior year. 

Increased interest expense was a result of higher borrowing costs and an increase in average outstanding borrowings for the year, primarily to fund acquisition activity. 

On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”

or “TCJA”) was passed which, among other things, reduces the federal corporate tax rate to 21.0% effective for taxable years starting on or after January 1, 2018.

For the years ended June 30, 2020 and 2019, the Company recorded federal taxes using a federal rate of 21.0%.

The provision for fiscal year ending June 30, 2020 and 2019 was impacted by several law changes implemented by the Act such as the, interest deduction limitation and Global Intangible Low Taxed Income (GILTI). 

As allowed under US GAAP, the Company has elected to treat any taxes due on future U.S.

inclusions in taxable income under the GILTI provision as a current-period expense when incurred. 

The Company will continue to monitor guidance regarding these changes for how it will impact the financial statements in later periods.

The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2020 was $13.1 million, or an effective rate of 24.3% compared to $18.7 million, or an effective rate of 27.9% for the year ended June 30, 2019, and $38.1 million, or an effective rate of 55.4% for the year ended June 30, 2018.

Decreased interest expense was a result of lower borrowings and a lower effective interest rate. 

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.

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.

1 unchanged sentence

(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.

965 toll tax of $0.8 million, (ii) a tax provision of $0.3 million related to the elimination of the performance based compensation exception for executive compensation under Sec.

162(m) of the Internal Revenue Code, and (iii) a tax provision related to expected foreign withholding taxes on cash repatriation of $2.1 million.

The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2018 was impacted by the following items:

(i) a tax provision related to the impact of the Sec.

965 toll tax of $11.7 million, (ii) a tax provision related to a revaluation of deferred taxes due to the federal rate reduction of $1.3 million, and (iii) a tax provision related to expected foreign withholding taxes on cash repatriation of $7.8 million.

Capital Expenditures

1 unchanged sentence

In general, we anticipate our capital expenditures over the long-term will be approximately 3% to 4% of net sales. 

During 2020, capital expenditures decreased to $19.3 million or 3.2% of net sales, as compared to $32.5 million, or 5.1%, of net sales in the prior year. 

In response to reduced activity levels brought on by the COVID-19 pandemic, beginning in the third quarter, we reduced our capital expenditures to only necessary maintenance, safety and the highest priority growth initiatives. 

Capital spending in 2019 included $5.8 million for a new Electronics facility in Cincinnati which replaced a legacy facility sold for $1.4 million in fiscal year 2018. 

We expect 2021 capital spending to be between $28 million and $30 million which includes $3.7 million allocated to begin construction for a new Electronics facility in Germany to replace a legacy facility sold in fiscal year 2019.

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 includes all active or open orders for goods and services. 

Backlog also includes any future deliveries based on executed customer contracts, so long as such deliveries are based on agreed upon delivery schedules. 

With the exception of our Engineering Technologies group, backlog has limited value as an indicator for the Company’s businesses because of our relatively short delivery periods and rapid inventory turnover. 

Due to the nature of long-term agreements in the Engineering Technologies group, the timing of orders and delivery dates can vary considerably resulting in significant backlog changes from one period to another. 

Backlog orders are not necessarily an indicator of future sales levels because of variations in lead times and customer production demand pull systems.

Customers may delay delivery of products or cancel orders prior to shipment, subject to possible cancellation penalties. 

In general, the majority of net realizable backlog beyond one year comes from the Engineering Technologies group. 

Backlog 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): 

5 unchanged sentences

Specialty Solutions

Backlog realizable within one year decreased $30.8 million, or 16.8% to $152.3 million at June 30, 2020 from $183.1 million at June 30, 2019. 

We experienced backlog declines in all segments as a result of the general, global economic slowdown brought about by the COVID-19 pandemic. 

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.

Changes in backlog under 1 year are as follows (in thousands):

As of June 30, 2021

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)

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;

recovery in the food service market in our Specialty Solutions segment.

2021 compared to 2020

3 unchanged sentences

Operating income margin

Net sales in fiscal year 2020 decreased $18.8 million, or 9.2%, when compared to the prior year as organic sales declined $20.3 million, or 9.9%.

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 current COVID-19 impact.

The incremental sales impact of the Agile Magnetics acquisition, which was acquired in September of fiscal year 2019, was $3.1 million during the year and foreign exchange rates unfavorably affected sales by $1.6 million or 0.8%.

Given the diversity of markets and geographies served by the Electronics business, the COVID-19 pandemic could have differing impact on our future incoming order rate and sales performance in various regions.

Income from operations in the fiscal year 2020 decreased $11.5 million, or 27.8%, when compared to the prior year.

The operating income decline was due to the margin loss on the lower organic sales, inflationary cost increases, particularly rhodium costs, and incremental costs related to the current COVID-19 environment, which more than offset cost saving initiatives implemented throughout the year. Looking forward, we have fixed our most significant material cost for the first six months of fiscal year 2021, and, for this portion of the year, we expect material costs in line with those experienced in the fourth quarter of 2020.

Net sales in fiscal year 2019 increased $7.8 million, or 4.0%, when compared to the prior year with organic sales growth contributing $2.6 million, or 1.3%.

The sales impact of the Agile Magnetics acquisition was $9.3 million and foreign exchange rates unfavorably affected sales by $4.2 million or 2.1%. 

Income from operations in the fiscal year 2019 decreased $4.3 million, or 9.4%, when compared to the prior year.

The operating income decline was due to government mandated wage increases in our Mexico operation, material cost increases, acquisition purchase accounting of $0.3 million, and India facility start-up costs, partially offset by cost saving initiatives.

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.

2021 compared to 2020

3 unchanged sentences

Operating income margin

Net sales in fiscal year 2020 decreased by $6.0 million or 4.0% compared to the prior year.

The effect of acquisitions generated $8.5 million or 5.7% of additional sales for fiscal year 2020 which have been partially offset by foreign exchange declines of $3.6 million for the year.

Organic sales declines of $10.9 million, or 7.3%, were a result of the timing of automotive projects, slower incoming workloads as a result of pandemic related delays, and the closure of unprofitable sites as part of our previously announced restructuring. We expect sales growth in fiscal year 2021 due to an increase in the number of new automotive launches along with the continued introduction of our soft skin and tool finishing offerings throughout our global sales network.

Income from operations in fiscal year 2020 decreased by $3.5 million, or 14.6%, when compared to the prior year.

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.

Income from operations in fiscal year 2020 decreased by $3.5 million, or 14.6%, when compared to the prior year.

The decrease was primarily a result of organic sales declines for the year.

In response to the global economic slowdown, we have implemented cost savings and restructuring actions that we expect to generate approximately $3.0 million of annual savings beginning in fiscal year 2021.

Net sales in fiscal year 2019 increased by $13.4 million or 9.8% compared to the prior year.

Growth was driven by two acquisitions which contributed $19.8 million or 14.5%. 

Organic sales were nearly flat as compared to prior year while currency negatively impacted sales by 4.8%. 

Income from operations in fiscal year 2019 decreased by $5.6 million, or 19.0%, when compared to the prior year.

The decrease was primarily due to an unfavorable geographic mix, lower automotive sales in North America, reduced demand at our higher profit China facilities due to concerns regarding trade conflicts, and purchase accounting costs associated with the Tenibac and GS acquisitions.

2021 compared to 2020

3 unchanged sentences

Operating income margin

Net sales in fiscal year 2020 remained relatively flat when compared to the prior year. 

We experienced decreased sales volume in our clinical laboratories, physicians’

offices, hospitals and academic laboratories markets, primarily due to impacts of the COVID-19 pandemic and the economic downturn.

This was largely offset by sales in the pharmaceutical market.

Moving forward we anticipate higher sales volume in our pharmaceutical market, partially offset by declines in the clinical laboratories, physicians’

offices, hospitals and academic laboratories markets.

We have and will continue to enact measures to prepare for any anticipated increase in demand for medication and vaccine storage, working with channel partners as well as Federal, State and Local governments as applicable.

Income from operations in fiscal 2020 increased by $0.1 million, or 0.5% when compared to the prior year as modest sales declines were overcome with cost controls of labor and discretionary spending as well as stronger sales in our pharmaceutical market.  

Net sales in fiscal year 2019 increased by $5.5 million, or 10.6% compared to the prior year as volume increased for sales to pharmaceutical customers and national clinical distributors.

Income from operations in fiscal year 2019 increased $2.2 million or 19.6% when compared to the prior year.

Operating income margins in fiscal 2019 were impacted by increased sales volume and price increases which were partially offset by an increase in tariffs enacted on product imported from Asia.

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.  

Engineering Technologies

4 unchanged sentences

Operating income margin

Net sales in fiscal year 2020 decreased $1.2 million or 1.2% when compared to the prior year.

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:

43% aviation, 30% space, 12% energy, 9% defense, and 6% other markets.

The decline in aviation sales of 8% from the prior year was primarily in the aircraft engine segment, as a result of both the grounding of the Boeing MAX 737 aircraft and impacts of the COVID-19 pandemic on the aviation industry in general.

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.

In fiscal year 2021, we anticipate aviation and energy markets to see year over year declines as these industries continue to be impacted by the global pandemic, while the defense market should increase through higher volume in production and development work.

Additionally, we anticipate the space market to see a year over year decline due to project timing and the cyclical nature of the market.

Income from operations in fiscal year 2020 increased $2.8 million or 25.6% when compared to the prior year. 

Income from operations in fiscal year 2020 increased $2.8 million or 25.6% when compared to the prior year.

The increase in operating income was driven by improved manufacturing efficiencies, cost reduction programs implemented during the year, and a favorable product mix.

The focus in fiscal year 2021, will be to drive productivity initiatives to improve margin levels in the key sectors despite the forecasted volume declines.

Net sales in fiscal year 2019 increased $14.5 million or 16.0% when compared to the prior year.

Sales distribution by market in 2019 was as follows:

46% aviation, 26% space, 13% energy, 8% defense, 5% medical, and 2% other markets.

Aviation sales grew 9.0% from the prior year due to sales on new aircraft and engine platforms.

Space market sales increased 13.5% from the prior year driven by higher sales in the manned space segment on new development programs. 

Growth in 2019 was also driven by increased sales in the oil and gas and defense markets. 

Income from operations in fiscal year 2019 increased $4.7 million or 71.7% when compared to the prior year.

The increase in operating income was driven by higher sales volume, improved manufacturing efficiencies on production programs, and price increases in the Aviation segment, partially offset by an asset impairment charge of $1.2 million due to a customer contract termination. 

Specialty Solutions

4 unchanged sentences

Operating income margin

Net sales for fiscal year 2020 decreased $9.3 million, or 7.6% when compared to the prior year as organic sales declined by $8.8 million or 7.1% and foreign exchange rates unfavorably affected sales by $0.6 million or 0.5%.

Decreased sales volume are primarily due to impacts of the COVID-19 pandemic which created market downturns in the beverage, convenience store and dump markets. 

Income from operations for fiscal year 2020 decreased $0.5 million, or 2.4%, when compared to the prior year, primarily due to decreased sales volume in each of our groups.

The sales volume decrease was offset in our Hydraulics and Display Merchandising groups by favorable mix, cost control of labor, and the implementation of identified manufacturing efficiencies.

Moving forward we anticipate a continued reduction in sales volume over the first half of the fiscal year as customers continue to curtail spending in order to overcome the impact of the pandemic, but that our cost reduction and footprint consolidation activities implemented in the fourth quarter of 2020 will partially offset the impact of volume declines on operating income.

Net sales for fiscal year 2019 increased $3.2 million, or 2.7% when compared to the prior year due organic sales increases of $4.0 million, or 3.4%. 

Foreign exchange rates unfavorably affected sales in fiscal year 2019 compared to the prior year by $0.8 million or 0.7%. 

The increase in organic sales is primarily due to new product introductions in the Hydraulics business during the year and market share gains in the refuse OEM marketplace.

Income from operations for fiscal year 2019 increased $0.3 million, or 1.7%, when compared to the prior year.

The operating income increase was driven by the revenue growth in the refuse market of our Hydraulics market partially offset by higher material costs and higher manufacturing overhead as a result of sales volume in our display merchandising and pump businesses. 

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. 

Corporate, Restructuring and Other

2 unchanged sentences

(in thousands except

Loss on sale of business

Restructuring

Other Operating Expenses

Corporate expenses increased by 19.7% in fiscal year 2020 primarily due to increased stock-based compensation, management transition, and benefit expenses in the first two quarters of fiscal year 2020.

Corporate expenses declined by 6.4% in fiscal year 2019 primarily due to reduced incentive compensation expenses and cost containment activities.

The restructuring and acquisition-related costs have been discussed above in the Company Overview.

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 pursuing our business strategy, the Company continues to divest certain businesses and record activities of these businesses as discontinued operations.

Results of the Cooking Solutions Group and Refrigerated Solutions Group in current and prior periods have been classified as discontinued operations in the Consolidated Financial Statements and excluded from the results from continuing operations. 

Activity related to discontinued operations for twelve months ended June 30, 2020, 2019 and 2018 is as follows (in thousands):

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):

Year Ended June 30,

1 unchanged sentence

Transaction fees

Income (loss) from Discontinued Operations

Non-operating Income (Expense)

Profit (loss) before taxes

2 unchanged sentences

Liquidity and Capital Resources

At June 30, 2020, our total cash balance was $118.8 million, of which $77.6 million was held outside of the United States. 

Due to changes in the U.S.

tax law, we began repatriating foreign earnings in fiscal year 2019, and, during fiscal years 2020 and 2019, we returned $39.2 million and $51.5 million of our cash previously held outside of the United States, respectively. 

During fiscal year 2021, we anticipate returning an additional $35.0 million of foreign cash however, the amount and timing of cash repatriation during 2021 will be dependent upon each business unit’s operational needs including requirements to fund working capital, capital expenditure, and jurisdictional tax payments. 

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.

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.

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.

2 unchanged sentences

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. 

Net cash provided by continuing operating activities for the year ended June 30, 2019 was $72.9 million compared to net cash provided by continuing operating activities of $48.6 million in the prior year.

We generated $78.1 million from income statement activities and used $5.2 million of cash to fund working capital increases.

Cash flow used in investing activities for the year ended June 30, 2019 totaled $157.6 million. 

Uses of investing cash consisted primarily of capital expenditures of $32.5 million along with $127.9 million for the acquisition of Tenibac, Agile Magnetics, and GS Engineering.

Cash used by financing activities for the year ended June 30, 2019 were $38.2 million and included cash paid for dividends of $9.8 million and stock repurchases of $33.4 million offset by net borrowings of $4.8 million.

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. 

1 unchanged sentence

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 $194.8 million at June 30, 2020, as compared to $186.2 million as of June 30, 2019. 

We participate in two multi-employer pension plans and sponsor six defined benefit plans including two in the U.S.

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. 

2 unchanged sentences

Our primary U.S.

defined benefit plan is not expected to be 100% funded under ERISA rules at June 30, 2020. The Company has elected to take advantage of provisions in the United States Coronavirus Aid, Relief, and Economic Security (“CARES”) Act which allows for deferral until December 31, 2020 of defined benefit pension plan contributions due during calendar year 2020. 

Prior to passage of the CARES Act, the Company was required to make U.S.

defined benefit pension payments of $1.5 million in the fourth quarter of fiscal year 2020 which will now be deferred until December.

Including deferred payments, we expect to contribute $10.0 million to all of our Company sponsored defined benefit plans during fiscal year 2021.

defined benefit plan is not expected to be 100% funded under ERISA rules at June 30, 2021. 

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. 

24 unchanged sentences

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 that fiscal year 2021 depreciation and amortization expense will be between $20.0 and $22.0 million and $11.0 and $12.0 million, respectively.

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:

4 unchanged sentences

Stockholders’

equity decreased year over year by $2.7 million, primarily as a result of $21.2 million of cash returned to shareholders in the form of dividends and stock repurchases offset by current year net income of $20.2 million. 

The Company's net debt to capital percentage changed to 14.8% as of June 30, 2020 from 18.4% in the prior year. 

Contractual obligations of the Company as of June 30,2020 are as follows (in thousands):

Payments Due by Period

Contractual Obligations

Long-term debt obligations

Operating lease obligations

Estimated interest payments (1)

Post-retirement benefit payments (2)

Estimated interest payments are based upon effective interest rates as of June 30, 2020 , and exclude any interest rate swaps which are assets to us.

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, 2020 , we had $8.6 million of non-current liabilities for uncertain tax positions.

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.

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.

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.

Off Balance Sheet Items

At June 30, 2020, and 2019, the Company had standby letters of credit outstanding, primarily for insurance and trade financing purposes, of $7.3 million and $7.6 million, respectively.

We had no other material off balance sheet items at June 30, 2020.

Other Matters

Inflation –

Certain of our expenses, such as wages and benefits, occupancy costs and equipment repair and replacement, are subject to normal inflationary pressures.

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.

1 unchanged sentence

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.

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.

5 unchanged sentences

We record expenses related to these plans based upon various actuarial assumptions such as discount rates and assumed rates of returns. 

The Company’s pension plan is frozen for substantially all eligible U.S.

The Company’s pension plan is frozen for all eligible U.S.

employees and participants in the plan ceased accruing future benefits. 

4 unchanged sentences

Employee Relations –

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

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

7 unchanged sentences

We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings, whereby the cumulative impact of all prior periods is recorded in retained earnings or other impacted balance sheet line items upon adoption.

The comparative information has not been adjusted and continues to be reported under ASC 605.

The impact on the Company’s consolidated income statements, balance sheets, equity or cash flows as of the adoption date as a result of applying ASC 606 have been reflected within those respective financial statements.

9 unchanged sentences

In general, the Company recognizes revenue at the point in time control transfers to their customer based on predetermined shipping terms.

Revenue recognized under long-term contracts within the Engineering Technologies and Engraving groups for highly customized customer products that have no alternative use and in which the contract specifies the Company has a right to payment for its costs, plus a reasonable margin are recognized over time.

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.

2 unchanged sentences

Collectability of Accounts Receivable –

Accounts Receivable are reduced by an allowance for amounts that may become uncollectible in the future. 

Our estimate for the allowance for doubtful accounts related to trade receivables includes evaluation of specific accounts where we have information that the customer may have an inability to meet its financial obligation together with a general provision for unknown but existing doubtful accounts.

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 –

5 unchanged sentences

The Company’s annual test for impairment is performed using a May 31st measurement date.

We have identified our reporting units for impairment testing as our seven operating segments, which are aggregated into our five reporting segments as disclosed in Note 17 –

Industry Segment Information. 

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). 

9 unchanged sentences

Therefore, no impairment charges were recorded in connection with our annual assessment during the fourth quarter of fiscal year 2021. 

In connection with the planned divestiture of the Refrigerated Solutions Group, we performed an interim assessment of our goodwill balances and compared the fair value of each reporting unit, Master-Bilt and NorLake, to its carrying value in the third quarter of fiscal year 2020. 

This resulted in an asset impairment charge of $7.7 million in discontinued operations, which represented the full amount of goodwill associated with both reporting units.

In addition, due to the impact that the COVID-19 pandemic has on our projected operating results, cash flow, and market capitalization, we completed an interim goodwill impairment assessment for our remaining reporting units.

As a result of our assessment in the third quarter, the Company determined that the fair value of its reporting units, with the exception of RSG, substantially exceeded their respective carrying values. 

Therefore, no additional impairment charges were recorded in connection with our third quarter 2020 assessment. 

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 –

11 unchanged sentences

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. 

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. 

3 unchanged sentences

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.

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.

1 unchanged sentence

All changes that do not qualify as measurement period adjustments are included in current period earnings.

Leases - Effective July 1, 2019, we adopted ASU 2016-02, Leases (Topic 842), using the modified retrospective approach and utilizing the effective date as its date of initial application.

As a result, prior periods are presented in accordance with the previous guidance in ASC 840, Leases (“ASC 840”).

We have elected to apply the ‘package of practical expedients’

which allow us to not reassess i) whether existing or expired arrangements contain a lease, ii) the lease classification of existing or expired leases, or iii) whether previous initial direct costs would qualify for capitalization under the new lease standard.

At the inception of an arrangement, we determined whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement.

Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and short-term and long-term lease liabilities, as applicable.

We do not have material financing leases.

Operating lease liabilities and their corresponding right-of-use assets are initially recorded based on the present value of lease payments over the expected remaining lease term.

The interest rate implicit in lease contracts is typically not readily determinable.

As a result, we utilize our incremental borrowing rate to discount lease payments, which reflects the fixed rate at which we could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

To estimate our incremental borrowing rate, a credit rating applicable to the Company is estimated using a synthetic credit rating analysis since we do not currently have a rating agency-based credit rating

We have elected not to recognize leases with an original term of one year or less on the balance sheet.

We typically only include an initial lease term in our assessment of a lease arrangement.

Options to renew a lease are not included in the Company’s assessment unless there is reasonable certainty that the Company will renew.

Recently Issued Accounting Pronouncements

15 unchanged sentences

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 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. 

1 unchanged sentence

However, any such losses or gains would generally be offset by corresponding gains and losses, respectively, on the related hedged asset or liability. 

At June 30, 2020 and 2019, the fair value, in the aggregate, of the Company’s open foreign exchange contracts was a liability of $2.5 million and $3.1 million respectively. 

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. 

5 unchanged sentences

Our interest rate exposure is limited primarily to interest rate changes on our variable rate borrowings, and is mitigated by our use of interest rate swap agreements to modify our exposure to interest rate movements. 

At June 30, 2020, we have $200.0 million of active floating to fixed rate swaps with terms ranging from two to five years. 

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, 2020 and 2019, the fair value, in the aggregate, of the Company’s interest rate swaps were liabilities of $6.7 million and $1.4 million respectively.

A 25-basis point increase in interest rates would not change our annual interest expense as all of our outstanding debt is currently converted to fixed rate debts by means of interest rate swaps.

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.

Concentration of Credit Risk

7 unchanged sentences

While Standex considers our relationship with our suppliers to be good, there can be no assurances that we will not experience any supply shortage.

The Engineering Technologies, Specialty Solutions, and Electronics segments are all sensitive to price increases for steel products, other metal commodities and petroleum based products. 

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. 

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity